CrossBorder Collaboration for Global Competition

1
Cross-Border Collaboration for Global Competition

• UNCWCSB
• Based on BGB Ch. 6 and other sources
• Prof. Carlos L. Rodriguez

2
International Strategic Alliances

• A formal and mutually agreed commercial
  collaboration between companies
• The partners pool, exchange or integrate specific
  business resources, yet they remain separate
  businesses, making alliances distinct from
  mergers and acquisitions
• IJVs are one of four forms/modes of investment

3
A diverse menu of alternatives...
Joint Venture (Equity Participation)
High
Co-production/ Buyback
R D Consortia
Cross Licensing
Level of Interaction
Franchising
Strategic Alliances
Patent Licensing
Cooperation Agreement
Low
Competition
Cooperation
Type of Arrangement
4
Strategic Alliances

• Constellations of firms
• Especially in international competition, firms
  manage not only their own resources, but also the
  resources obtained through partnerships
• In a sense, a critique of Porters traditional
  approach to the 5 Forces model and of the
  strategizing perspective
• Networking/collaborating (including with
  competitors!) as important as building defenses
  against the forces of competition or preempting
  competitors...

5
An increasing number of Intl SAs

• Why?
• RD costs (technology transfer)
• Shorter product life cycles
• Global economies of scale and scope
• Global standards / Industry Convergence (multiple
  technologies)
• But its no longer (only...) under the
  traditional model
• MNE contributes products/technology Foreign co.
  contributes local knowledge/relationships
• Alliances between the MNEs themselves are
  increasingly common

6
But there are risks involved...

• Asymmetrical benefits
• One partner learns the other partners
  proprietary knowledge, but doesnt share theirs
  (creating a competitor)
• One partner forcing the other into dependency
• Alliances may help partners hide their
  problems/postpone necessary measures
• Costlier and more complex organization, to make
  sure
• Benefits are fairly shared
• National and corporate culture differences dont
  become unmanageable
• Monitoring doesnt become too costly

7
Management Challenges

• Pre-Alliance (Alliance Building)
• Partner selection / Understanding partner
  dynamics
• Escalation of Commitment
• Definition of goals (while keeping flexibility
  for broadening the scope...)
• Post-Alliance (Alliance Management)
• Critical Managing the Knowledge Flows
• Structuring the alliance, its boundaries and
  governance mechanisms

8
The also critical issue of Alliance Control

• Two possibilities
• One parent dominates the ventures decision
  making (but is this a joint venture?)
• Parents are both involved in decision making
• Shared or Split

9
Popular View Says JVs are

• A transitional organization form.
• Less profitable.
• Impossible to manage.
• A sure way to lose ones technology.
• Only undertaken as a last resort.

10
Objective Reality

• Average age of international JVs nearly 10 years
  (similar to greenfield startups longer than
  acquisitions).
• Profitability identical with other organizational
  alternatives.
• Managing has become easier, so usage up. 40 of
  all investments in Asia Pacific are JVs.