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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Categories of Alliances
Joint ventures – when 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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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 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
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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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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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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
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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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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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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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