Ch. 7 Global Alliances and Strategy Implementation.

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Ch. 7 Global Alliances and Strategy Implementation. 1 Ch. 7 Global Alliances and Strategy Implementation. Strategic alliances are partnerships between 2 or more firms that decide they can better pursue their mutual goals by combining their resources as well as their existing distinctive competitive advantages Alliances are also known as cooperative strategies Cooperative strategies are transition mechanisms that propel the partners’ strategies forward in a turbulent environment faster than would be possible for each company alone A joint venture is a new independent entity that is collectively created and owned by 2 or more parent companies SoftCorp and TechGig, upcoming software companies in San Diego, have decided to create a new and independent telecommunications company, ST-source. Each parent firm has agreed to have 50 percent equity in the new company. This is an example of a joint venture An international joint venture refers to a JV among companies in different countries The partner’s local contacts and markets will be utilized is the most beneficial aspect of an international joint venture Trout Corp., Kirgo Ltd., and Sturgeon Inc., three of the leading construction companies in the U.S., have decided to join hands and create a new cement manufacturing company. According totheir agreement, Trout Corp. will have 50 percent equity, Kirgo Ltd. will have 20 percent equity, and Sturgeon Inc. will have 30 percent equity. In this given scenario, Sturgeon Inc. is referred to as a minority JV partner Alliances in which 2 or more partners have different relative ownership shares in the new venture are called equity strategic alliance

Ch. 7 Global Alliances and Strategy Implementation. 2 France's Thomson Electronics combined with China's TCL to form TCL-Thomson Electronics. Thomson owns 33% and TCL owns the remaining 67% of TCL-Thomson Electronics. This is best described an equity strategic alliance Alliances that are carried out thru contract rather than ownership sharing are called non equity strategic alliances Runnerz Inc., a leading manufacturing and retail company that designs and develops footwear and apparel, has signed a contract with a particular courier service for managing the delivery process. The courier service is required to deliver goods from the factory to the warehouse, to customers, and also to collect customer payments for the goods. This is a typical example of a non-equity strategic alliance Global strategic alliance can be formed between a company and a foreign govt Testing marketing campaigns overseas is not a typical reason for forming cross border alliances Gaining rapid entry into a new and consolidating market is a motivation for companies to form cross border alliances Form of governance chosen has the max influence on the success of multinational firm alliances JV are often the chosen form of multinational firm alliances bc they provide greater control of proprietary tech Cross border allies often have difficulty collaborating effectively, esp. in competitively sensitive areas. This generally leads to mistrust and secrecy Accelerating diffusion of industry standards and new tech to create barriers to entry is a competitive aspect of strategic alliances Assimilating network resources to acquire new skills and capabilities is a value creation strategy Employee leadership most significantly affects all other variables necessary for the successful implementation of a global alliance Parent companies use the IJV control process in order to ensure that the mgt of the JV conforms to its own interests

Ch. 7 Global Alliances and Strategy Implementation. 3 The most important single factor determining IJV success or failure is the choice of a partner Staffing friction can be simplified by increasing the autonomy of the IJV Where ownership is divided among several partners, the parent organizations are more likely to delegate the operational running of the IJV to local JV management The need for knowledge mgt in IJV’s primarily stems from cultural and system differences between partners The process of transfer can be defined as managing the flow of existing knowledge between parents and from the parents to the IJV Knowledge mgt process transferring existing knowledge transforming and creating of knowledge harvesting knowledge from the IJV to the parents Culture variables is frequently overlooked when deciding on entry strategies and alliances, particularly when the target country is perceived to be similar to the home country Organizational formality is a cultural difference that can significantly affect cross-border alliances E-commerce enablers help small and medium sized companies to go global without the internal capabilities to carry out global activities Alliances can be formed for various purposes eg sharing tech, marketing or production joint ventures Working partnerships between 2 or more companies across national boundaries and increasingly across industries are referred to as global strategic alliances

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Ch. 7 Global Alliances and Strategy Implementation. 4 A major benefit of cross-border alliances is that they facilitate the access to specific markets where regulations favor domestic companies MNCs often partner with local small enterprises to capture new ideas and innovations Most important single factor determining IJV success or failure is the choice of a partner Guanxihu refers to a bond between specially connected firms that generates preferential treatment for members of the network What motivates a company to develop a cross-border alliance? Common motivations for developing a cross-border alliance include avoiding import barriers, licensing requirements, and other protectionist legislation. These alliances can also share the costs and risks of developing new products and processes. They provide access to specific markets where regulations favor domestic companies, reduce political risk when entering a new market, enable rapid entry into a new or consolidating industry, and leverage synergies. What is the "dual nature" of strategic alliances? Alliances serve both a cooperative and a competitive role. Ventures start on the surface as cooperative agreements. There is a dynamic tension under the surface, as venture partners have the potential to become new competitors––competitors with significant knowledge of their partner's operations and strategy Describe the process of knowledge management in international joint ventures Knowledge management is the conscious and active management of creating, disseminating, evolving, and applying knowledge to strategic ends. The process consists of several components: Transfer: managing the flow of existing knowledge between parents and from parents to IJV. Transformation: managing the creation of knowledge and transformation within the IJV.

Ch. 7 Global Alliances and Strategy Implementation. 5 Harvest: managing the flow of the transformed and newly created knowledge back to parent

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