SELECTING PARTNERS FOR
SUCCESSFUL INTERNTIONAL
ALLIANCES
Authors:
M.Tina Dacin
Michael A.Hitt
Edward Levitas
EXAMINATION OF
U.S. AND KOREAN FIRMS
Maria Paccagnani
Chiara Porcaro
Roberta Vilonna
Alliances are the best strategies for firms
to enter international markets, but it can
represent a challenge for them because
there is an high risk to fail, due to several
factors. In order to avoid it, managers
have to prepare their firms to be willing
to cooperate and make the right
decisions, before entering in an alliance.
One of the main point to be
considered is the PARTNER
SELECTION and the criteria
used in its research.
Understanding these criteria can
reduce the likelihood of failure and
build up a successful alliance.
Risk to fail
Despite their spread (the number of joint
ventures in the U.S. grew by 423% over the period
1986-1995) about 50-60% of alliances fail,
due to partner’s incompatibilities in term
of goals, skills, decision- making
process approach and orientation.
The right partner’s research
The right partner’s research can be a
demanding work in term of time, but it
represents the first step to create an
alliance and limits the probability to
select a partner without the capabilities
needed.
Often firms select their partners, basing on
previous working experiences or after a
long courtship to assess partner’s desires
and orientation.
However, under market pressure,
managers don’t spend an adequate time
and don’t pay attention in partner
selection, so that the alliances go out of
business.
Take care of these aspects prior to
consolidate an alliance lead firms to
establish a long term relationship,
especially in those set among firms from
different countries.
The cultural context in which firms are
involved, the national economic growth,
different government policies,
infrastructures and different orientation
can affect the outcome of an alliance.
SO …
Managers have to bear in mind all these
features, when they start a new business
with another firm.
Examining different approaches used by
U.S and Korea in partner selection can
higlight the difficulty to cooperate in a
cross-boarder alliance.
CROSS-BOARDER ALLIANCES
Firms from developed countries can encounter
some problems in forming alliances with firms
set in developing countries.
Firms from NICs (New Industrialized Countries) such as
South Korea, Taiwan , Hong Kong, Singapore,
Mexico and Brazil, differ for their cultural
heritage, different ideologies and perspectives
respect to industrialized countries.
In some cases, the alliances between NICs
and developed countries are unsuccessful
because of their different aims. If firms
from developed countries can exploit local
knowledges, customs and business
practices typical of developed ones, on the
contrary, firms from NICs aren’t allowed
to gain experiences, or they don’t possess
capabilities needed.
Main features affecting the Partner Selection:
First: CULTURAL HERITAGE
Differences in the culture of origin can
produce different strategic orientations
that may cause the alliance failure.
e.g. diverse decision-making processes
used by two firms
Second: ECONOMIC DEVELOPMENT
Firm from developed and developing
countries can have different targets and
motives
e.g. the one decide to establish an alliance
in order to find new markets to sell
products, but firms from NICs seek access
to technologies and export opportunities.
Third: GOVERNMENT POLICIES
Government support with industrial
policies can influence also the firm
development and regulations can constrain
the pool of available partners and
influence the decisions to be made.
THE CASE OF
KOREA
Korea
We speak about Korea but we are evaluating
only the the southern part of the Korean
Peninsula: SOUTH KOREA
In fact:
South Korea
is a presidential republic and is a developed
country with the II highest standard of living in
Asia and the world's 12th largest economy.
The economy is export-driven with production
focusing on electronics, automobiles, ships,
machinery, petrochemicals and robotics.
North Korea
is a dictatorship, totalitarian and Stalinist
country.
The means of production are owned by the state
through state-run enterprises and collectivized farms
Historical Aspects
The 21st century has been referred to as the
century of Pacific Asia.
Korea has emerged as a major participant in the
world market since world war II and, as a result,
competition between US and Korean firms in
global markets is increasing.
No other country has developed so rapidly from
a development aid recipient to one of the major
donors.
Samsung, LG and Hyundai are among the
twelve top companies in the world
Economic expansion
• Korean economic expansion is related to the
evolution of Korean Chaebols (large business
groupings) and is vigorously supported by
government policies.
• Alliances with Korean firms can be seen as an
entrance into other Asian markets allowing firms to
improve their existing partnerships.
• No other country has developed so rapidly from a
development aid recipient to one of the major donors.
Given these factors, Korean firms are likely
candidates for cross-border alliances.
Focusing on Korea, peculiarities:
• Korean culture is strongly influenced by
Confucian ideology.
• Koreans’ standard of success and failure are
more closely associated with approval or
disapproval of others than with inner personal
standards or goals.
• American culture is individualistic.
Korean culture is more concerned with the
interests of the community.
• Defined relationships between business and
government.
Korean managers have had to:
 develop the requisite partnering skills needed
to be effective in collaborative ventures.
 by working in Chaebol networks and their
linkages to the system of state government,
Korean managers have developed internal
capabilities for network.
 research suggests that Korean managers have
a stronger long-term orientation than US
managers.
Partner selection criteria
There are differences in the criteria used by US
and Korean executives in strategic decision
making.
Firms from different countries tend to
approach strategic problems in different
ways.
Based on differences in history, cultural and
economic factors.
Partner selection criteria
(for Korea):
1-Technical capabilities
2-Industry Attractiveness
3-Special skills you can learn from partner
4-Willingness to share expertise
5-Capabilities to provide quality
-Industry Attractiveness
-Special skills you can learn from partner
-Willingness to share expertise
-Capabilities to provide quality
are of course relevant but the most important
criteria are the Technical capabilities:
Korean executives in fact place significant
emphasis on the financial health of a partner
and the peculiar characteristic is that they are
specifically searching for partners that have
technical capabilities that their firms may not
possess but wishes to learn.
Strategic alliances…a positive example:
“CORNING AND SAMSUNG ”
is an American manufacturer of
glass, ceramics and related
materials, primarily for industrial
and scientific applications.
is a South Korean multinational
company.
Products: apparel, chemicals,
consumer electronics, electronic
components, medical equipment,
precision instruments, semiconductors,
ships, telecommunications equipment.
Corning-Samsung
It is a tested collaboration that starts from far,
during the 1980s Corning developed a technology
for making glass used in LCD. In 1995 Samsung
and Corning established the Samsung Corning
Precision.
In 2013
Corning entered into a series of agreements with
Samsung intended to strengthen product and
technology collaborations between the two
companies. These agreements will allow Corning
to extend its leadership in specialty glass and drive
earnings growth.
http://www.youtube.com/watch?v=ZXTXQvHC_p0
CEO Wendell Weeks discuss Corning’s agreement with Samsung:
http://www.youtube.com/watch?v=bn7IbgwhwdQ
THE CASE OF
US
CULTURAL HERITAGE
• Individualistic tendency,
the US are generally known:
 to be geocentric
 to have little interest in the whole
community
 To prefere the free market
• Separation between private business and
public government
Goals and objectives
• The US, as a developed country, is not
interested in the technical capabilities, but
in increasing the financial return of the
company.
• Interested in the management skills and
abilities of the potential partner.
Daewoo and GM
http://www.youtube.com/watch?v=iJM_quS
hBCk
DAEWOO AND GM
• Failed joint venture
• Reason: different orientation and goals
• Daewoo
seeks growth and access to
new markets
• GM
wants to achieve financial returns
• NO financial returns for GM, no more
investments for the growth of Daewoo
Failure.
DAIMLER and CHRYSLER
• The Daimer-Benz merger with Chrysler in
1998 is probably the most famous of all
international merger that ended in failure.
Cultural differences and organizational
culture are both acknowledged to have
played their part.
• Cultural factors just cannot be ignored on
a global level, especially not within
mergers and acquisition.
The Cultural factors that played here:
• Differences in corporate cultures and values
• Lack of coordination
• Severe lack of trust among the employees
• All three resulted in communication failures
which in turn caused a sharp reduction in
productivity.
TO CONCLUDE:
Building a successful alliance can depend on
several factors:
1. Find complementary skills;
2. Expecting differences in firms from
different countries;
3. Understand the partner’s desires and have
the same objectives;
4. Be willing to cooperate and create a strong
relationship;
http://en.wikipedia.org/wiki/North_Korea
http://en.wikipedia.org/wiki/South_Korea
http://www.economist.com/node/371476
http://www.youtube.com/watch?v=bn7IbgwhwdQ
http://en.wikipedia.org/wiki/Corning_Inc.
http://en.wikipedia.org/wiki/Samsung
http://www.corning.com/news_center/news_releases/2013/2013
102201.aspx
http://en.wikipedia.org/wiki/Samsung_Corning_Precision_Glass
http://www.korea.net/NewsFocus/Business/view?articleId=1040
50
http://www.kwintessential.co.uk/resources/daimlerbenzchrysler-merger.html
http://www.youtube.com/watch?v=iJM_quShBCk