Chapter 7
Global Alliances and
Strategy Implementation
PowerPoint by
Kristopher Blanchard
North Central University
© 2006 Prentice Hall
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Strategic Alliances
It is no longer an era in which a single
company can dominate any technology or
business by itself. The technology has
become so advanced, and the markets so
complex, that you simply can’t expect to be
the best at the whole process any longer.
—Fumio Sato, CEO, Toshiba Electronics Co.
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Strategic Alliances
Strategic alliances are partnerships between two or
more firms which decide they can better pursue
their mutual goals by combining their resources –
financial, managerial, technological – as well as
their existing distinctive competitive advantages
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Global Strategic Alliances
Global strategic alliances are working partnerships
between companies (often more than two) across
national boundaries and increasingly across
industries
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Opening Profile: France’s Thomson and China’s TCL
to Join TV Units
“If you can’t beat them, join them.” French appliance
maker Thomson has announced that it is combining its
television and DVD businesses with TCL International
Holdings of China. The union will create the largest maker
of television sets with annual revenue of $3 billion. The
unprofitable Thomson hopes to utilize cheaper Chinese
labor and the union provides TCL with a steppingstone
into the European and American markets. The combined
company will be able to use the RCA brand in North
America, the TCL brand in Asia, and the Thomson brand
in Europe. Thomson will retain one factory in France to
focus on new technologies such as flat and plasma screens.
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Categories of Alliances
Joint ventures – when two or more companies create an
independent company
An example is the Nuumi corporation, created as a joint
venture between Toyota and General Motors, which gave
GM access to Toyota’s manufacturing expertise and
provided Toyota with a manufacturing base in the U.S.
Equity strategic alliances – in which two or more partners
have different relative ownership shares (equity
percentages) in the new venture —such as 25%, 25%,
50%—such as that between Chrysler and Mitsubishi
Motors.
Non-equity strategic alliances – when agreements are
carried out through contract rather than ownership sharing
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4. Global strategic alliances: Working
partnerships were found between companies
(often more than two) across national
boundaries and increasingly across
industries. Alliances are also sometimes
formed between a company and a foreign
government, or among companies and
governments.
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E-Biz: Covisint
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Global and Cross-Border:
Motivations and Benefits
To avoid import barriers, licensing requirements and other
protectionist legislation
To share the costs and risks of the research and
development of new products and processes
To gain access to specific markets
To reduce political risk while making inroads into a new
market
To gain rapid entry into a new or consolidating industry
and to take advantage of synergies
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AT&T’s Alliance Structure
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Challenges in Implementing Global Alliances
1. In a highly competitive environment, alliances present
a faster and less risky route to globalization. It is extremely
complex to fashion such linkages, however, especially
where many interconnecting systems are involved, forming
intricate networks. Many alliances fail or end up in a
takeover in which one partner swallows the other.
2. Often, form of governance chosen for multinational
firm alliances greatly influences their success, particularly
in technologically-intense fields—pharmaceuticals,
computers, and semiconductors. Cross-border partnerships,
in particular, often become a “race to learn”—with the
faster learner later dominating the alliance and rewriting its
terms. In a real sense, an alliance becomes a new form of
competition
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Challenges..cont…
3. All too often, cross-border allies have
difficulty in collaborating effectively, especially in
competitively sensitive areas, creating mistrust
and secrecy, which then undermine the purpose of
the alliance. The difficulty that they are dealing
with is the dual nature of strategic alliances—the
benefits of cooperation versus the dangers of
introducing new competition through sharing their
knowledge and technological skills about their
mutual product or the manufacturing process.
Some of the trade-offs of the duality of crossborder ventures are shown in Exhibit 7-2.
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Challenges…
4. The enticing benefits of cross-border
alliances often mask their many pitfalls. In
addition to potential loss of technology and
knowledge-skill base, other areas of
incompatibility often arise, such as
conflicting strategic goals and objectives,
cultural clashes, and disputes over
management and control systems.
Visit http://www.bah.com/index.shtml
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Challenges in Global Alliances
Five years after Daimler-Benz acquired Chrysler to
create DaimlerChrysler AG,. . . . DaimlerChrysler
has become a German company and the
struggling Chrysler division is run by executives
dispatched from DaimlerChrysler’s corporate
headquarters in Stuttgart.
—Kirk Kerkorian, November 28, 2003
Daimler is in crisis talks with Hyundai, its South
Korean partner, in a move that could see the
German company left with no presence in the
Asian car market (having abandoned its partner in
Japan, Mitsubishi Motors (MMC)), and an
increasingly tattered global strategy.
—Financial Times, April 27, 2004
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The Dual Role
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Guidelines for successful Alliances
Choose a partner with compatible strategic goals and
objectives
Seek alliances where complementary skills, products, and
markets will result
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 and
will probably break up one a partner feels it has
incorporated the skills and information it needs to go it
alone
Many difficulties arise in cross-border alliances in melding
the national and corporate cultures of the parties, in
overcoming language and communication barriers, and in
building trust between the parties over how to share
proprietary assets and management processes. This slide
offers suggestions to make alliances more successful.
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Comparative Management in Focus:
Russian Federation
As of 2004 Russia is a market where
companies are considering joint ventures
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More politically stable
New land, New legal system, New labor Laws
Rouble is more stable
Underexploited natural resources
Killed 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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Comparative Management in Focus:
Russian Federation
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Comparative Management in Focus:
Russian Federation
What can help minimize the risk?
– Choose the right partner – compatible goals or
strategy
– Find the right local general manager
– Choose the right location – political risk
decreases from south to north and west to east
– Control the international joint venture – the best
chance of success is to be vertically integrated
to retain control of supplies and access to
customers
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The Russian oil industry has attracted Western
interest including BP that developed an IJV with
Russia’s TNK to form the third-largest oil
producer in Russia. Some large MNCs have
realized that short-term upheavals are possible in
Russia and have stuck to a long-term plan. These
companies include GM and Gillette. Exhibit 7-3
shows the joint venture relationship between a
U.S. and Russian firm, the different goals that they
bring to the venture, and the barriers caused by
their different operating environments.
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Implementation McDonald’s Style
Form paradigm-busting arrangements with
suppliers
Know a country’s 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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Successful implementation requires the orchestration of
many variables into a cohesive system that complements
the desired strategy—that is, a system of fits that will
facilitate the actual working of the strategic plan. In this
way, the structure, systems, and processes of the firm are
coordinated and set into motion by a system of
management by objectives (MBO), with the primary
objective being the fulfillment of strategy. Managers must
review the organizational structure and, if necessary,
change it to facilitate the administration of the strategy and
to coordinate activities in a particular location with
headquarters. In addition to ensuring the strategy–structure
fit, managers must allocate resources to make the strategy
work, budgeting money, facilities, equipment, people, and
other support. Increasingly, that support necessitates a
unified technology infrastructure in order to coordinate
diverse businesses around the world and to satisfy the need
for current and reliable information. An efficient
technology infrastructure can provide a strategic advantage
in a globally competitive environment.
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Managing Performance
IJV Control is the process through which a
parent company ensures that the way a joint
venture is managed conforms to its own
interest
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 y 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
Knowledge management consists of 1)
transferring, 2) transforming, 3) harvesting
knowledge for a competitive advantage. See
Exhibit 7-4. Research shows that successful
IJVs encouraged joint learning and
coaching.
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Knowledge Management Process
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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Knowledge Management Process
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Cultural Influences
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Management Focus: Wal-Mart Hopes it Won’t
be Lost in Translation in Japan
The article discusses Wal-Mart’s expansion into
Japan. Wal-Mart now owns a 38% share of the
Japanese retailer Seiyu and is trying to develop the
Wal-Mart culture in its employees. The Japanese
employees now shout the company pledge and
are encouraged to speak out about possible
changes and opinions and to be more goaloriented. Wal-Mart has brought many of the
Japanese employees to Arkansas for training.
Wal-Mart hopes to combine its proven
efficiency with Seiyu’s knowledge of the
Japanese market and supplier network.
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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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Management Focus: Nextlinx Enables
Global Strategy Implementation
Nextlinx’ Trade Collaborator has
everything needed to automate and manage
an entire global trade operation. As a webbased environment, it enables all trading
partners to collaborate in a single online
location, using the same information and
processes. It enables companies to calculate
accurate landed costs, automate
imports/exports, comply with NAFTA
2001, and gain visibility into shipments
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Looking Ahead
Chapter 8 – Organization Structure and Control
Systems
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Organizational Structure
Evolution and Change in MNC
Organizing for Globalization
Emergent Structural Forms
Choice of Organizational Form
Control Systems for Global Operations
Managing Effective Monitoring Systems
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