CHAPTER 7 Global Alliances and Strategy Implementation

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CHAPTER 7- Global Alliances and Strategy
Implementation
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Categories of Alliances

• Joint ventures two or more companies create an
  independent company
• Equity strategic alliances in which two or more
  partners have different relative ownership shares
  (equity percentages) in the new venture
• Non-equity strategic alliances when agreements
  are carried out through contract rather than
  ownership sharing

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Global and Cross-Border Motivations and Benefits

• To avoid protectionist legislation
• To share the costs and risks of the research
• To gain access to specific markets
• To reduce political risk

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INDIA
How Mumbai is shaping India's future--and our own
18.4 million people and counting, the city,
formally known as Bombay, is projected by 2015
to be the planet's second most populous
metropolis, after Tokyo.
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INDIA

• one bus for every 1,300 people
• two public parking spots for every 1,000 cars
• 17 public toilets for every million people
• one hospital for 7.2 million people in the
  northern slums
• At least one-third of the population lacks clean
  drinking water
• 2 million do not have access to a toilet.

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Guidelines for successful Alliances

• Choose a partner with compatible strategic goals
• and objectives
• Seek alliances with complementary skills,
  products
• and markets
• Work out with the partner how you will each deal
• with proprietary technology or competitively
  sensitive
• information
• Recognize that most alliances last only a few
  years

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AutoAlliance International between Ford Motor
Company and Mazda Cingular between SBC (now
ATT Inc.) and BellSouth Equilon between Texaco
and Royal Dutch Shell Northwest Airlines and
KLM Royal Dutch Airlines LG.Philips Components
between LG Group and Royal Philips Electronics
NUMMI between General Motors and Toyota Sony
Ericsson between Sony and Ericsson
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Verizon Wireless between Verizon Communications
and Vodafone CW Television Network between CBS
Corporation and Time Warner The Baseball
Network between ABC, NBC, and Major League
Baseball The Prime Time Entertainment Network
from the Prime Time Consortium, a joint venture
between Warner Bros. Domestic Television and the
Chris-Craft group of independent stations.
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The XFL between NBC and World Wrestling
Entertainment The Nokia Siemens Networks
between Nokia and Siemens AG Shell-Mex and BP
between Royal Dutch Shell and British Petroleum
(1931-1975) Equity strategic alliance between
French beverage and yogurt giant, Danone, and
Chinas Wahaha Group Atlas Air Worldwide
Holdings, Inc. Unit Enters Joint Venure for New
Cargo Warehouse At South Korea's Incheon
International Airport." 14 June 2007. 17 June
2007
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Comparative Management in Focus Russian
Federation

• Russia is a market where companies are
  considering joint ventures
• Becoming more politically stable
• New land, new legal system, new labour laws
• Rouble is more stable
• Underexploited natural resources
• Skilled and education population of 145 million

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Comparative Management in Focus Russian
Federation

• There are still roadblocks
• Possible repeat of the economic collapse of 1998
• Lack of debt and equity capital
• Non-convertibility of the currency

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Implementation

• Form paradigm-busting arrangements with suppliers
• Know a countrys culture before you hit the beach
• Maximize autonomy
• Tweak the standard menu only slightly from place
  to place
• Keep pricing low to build market share

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Managing Performance

• IJVs are like a marriage the more issues that
  can
• be settled before the merger, the less likely it
  will
• be to break up

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Managing Performance

• Three complementary and interdependent dimensions
  of IJV control
• Focus of IJV control the scope of activities
  over which parents exercise control
• Extent or degree of IJV control achieved by the
  parents
• Mechanisms of IJV control used by the parents

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Knowledge Management

• Knowledge Management is the conscious and active
• management of creating, disseminating, evolving
• and applying knowledge to strategic ends

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Knowledge Management Process TTH
Transfer managing the flow of existing knowledge
between parents and from the parents to the IJV

• Transformation managing the transformation and
  creation of knowledge within the IJV through its
  independent activities

• Harvest Managing the flow of transformed and
  newly created knowledge from the IJV back to the
  parents

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E-Commerce Impact

• Due to the complexity of global trade, many firms
  decide to implement their global e-commerce
  strategy by outsourcing the necessary tasks to
  companies which specialize in providing the
  technology to organize transactions and follow
  through with the regulatory requirements. These
  specialists are called e-commerce enablers.

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CHAPTER 7 GLOBAL ALLIANCES AND STRATEGY
IMPLEMENTATION-CHAPTER QUESTIONS

• Discuss the reasons that companies embark on
  cross-border strategic alliances. What other
  motivations may prompt such alliances?
• Discuss the problems inherent in developing a
  cooperative alliance in order to enhance
  competitive advantage while incurring the risk of
  developing a new competitor.
• Why are there an increasing number of mergers
  with companies in different industries? Give some
  examples. What industry do you think will be the
  next for global consolidation?
• 4. What are the common sources of incompatibility
  in cross-border alliances? What can be done in
  order to minimize them?