Forming International
Strategic Alliances
Kim Richards | Adrine Hampartzoumian | Loyola George
AD 655 International Business, Economics, and Cultures
Professor Jung Wan Lee
April 24, 2013
International Strategic Alliances
Risks
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Mismatched business practices
Communication difficulties
Failure of strategic alliance
Product may not take to foreign market
Cautions
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Instability in host countries
Environmental & regulatory factors
Partner selection
Product must be tailored foreign market
Benefits
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Access to additional resources
Risk is shared among parties
Access to a larger customer market
Ability to gain brand recognition & loyalty from partner
International Strategic Alliances
Case Studies
Research Questions
1. What is the motivation for alliance formation?
2. What benefit does each company gain by forming a
strategic alliance?
3. How does each company use the strategic alliance to
exploit its competitive advantage?
Dunkin’ Donuts & Jubliant FoodWorks, Ltd
International Strategic Alliance:
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Jubliant FoodWorks, Ltd is Master Franchisee of “Dunkin’ Donuts and More” in
India.
Dunkin’ Donuts will earn franchise fees and collaborate with company.
Plan to open 100 locations within the next 5-6 years
Dunkin’ Donuts & Jubliant FoodWorks, Ltd
What is the motivation for alliance formation?
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Growing economy in India, 25-30% fast food industry growth per year
Rising coffee consumption among India’s youth
Both companies have a strong reputation in respective market
Both companies are innovative in the food sector
What benefit does each company gain by forming a strategic alliance?
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Low risk - franchising brand
Expansion of brand into other
regions if alliance is successful
Franchise fees
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Dunkin’s brand name
Exclusive rights to develop
Dunkin’ in India
Flexible location requirements
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How does each company use the strategic alliance to exploit its competitive advantage?
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Experience in partnerships.
• 58 years franchising, 32
countries
Strong brand name & loyalty
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Extensive supply chain
infrastructure
Network of 700 vendors
Experience in the quick service
food industry of India
Tata Motors & Marcopolo
International Strategic Alliance:
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Joint venture in India to produce approximately 7,000 buses and coaches a year
India’s Tata Motors has 51% ownership in the venture
Brazil’s Marcopolo has 49% ownership in the venture
Tata Motors & Marcopolo
What is the motivation for alliance formation?
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Indian government is expanding road infrastructure
Demand for buses is expected to increase
Both companies have future goals to expand into their partner’s home region
What benefit does each company gain by forming a strategic alliance?
• Access to countries outside of
India, primarily in South America
• Able to sell chassis to Marcopolo
for global bus sales
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Access to advanced
technological capabilities
Further expertise in chasses
and aggregates
How does each company use the strategic alliance to exploit its competitive advantage?
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India’s largest automobile
company
Advanced expertise in chasses
and aggregates
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Leading bus body
manufacturer in Brazil, exports
to more than 60 countries
Mass production technology,
lean manufacturing
Starbucks & Tata Global Beverages
International Strategic Alliance:
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Tata Starbucks Limited is 50/50 joint venture
Owns and operates Starbucks cafés across India
Coffee beans sourced and roasted at Tata Coffee’s facilities.
India is predicted to be among the top five global markets for Starbucks
Starbucks & Tata Global Beverages
What is the motivation for alliance formation?
• India’s growing economy - emerging middle class with increased disposable income
• Industrialization is making Indian people more open to western coffee culture
• Less risk for partnership failure - Tata has been Starbucks’ global supplier since 2004
What benefit does each company gain by forming a strategic alliance?
• Cost savings - sourcing coffee locally
from Tata
• Tata’s understanding of Indian culture
• Tata’s real estate access for coffee
outlets.
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Ability to enter into the coffee retail
market
Starbucks’ brand name recognition &
experience
Ability to sell coffee globally
How does each company use the strategic alliance to exploit its competitive advantage?
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Strong global brand loyalty and
reputation
Unique farming technology
Training to improve coffee growing
skills
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World’s largest integrated coffee
plantation
Shade grown coffee – unique flavor
Established food supply chain
Results and Findings
Common traits shared between strategic alliances
•Each partner is major player in its respective industry
•Multinational companies seek local partners from the same industry
•Strategic alliance used to expand to surrounding regions beyond India
•Goal of the alliance is risk mitigation
Competitive advantages strengthen the strategic alliance
•Tata Motors’ expertise in chassis and aggregates & Marcopolo’s operational
excellence
•Starbucks’ strong brand name & Tata Global Beverages’ superior quality
coffee beans
•Dunkin’ Donuts’ brand loyalty & Jubliant FoodWorks’ established distribution
channels
Discussions and Conclusions
Fundamentals of partner selection
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Partners need to be compatible
Partner’s capabilities complement each other
Mutual commitment to a common goal
Partnership should offer the highest risk-adjusted return on investment
Main benefits of forming strategic alliances
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Additional resources, manufacturing capabilities, distribution
channels
Knowledge, expertise, intellectual property
Brand reputation
Factors for success
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Strong, established communication lines
Requirements for each partner are carefully outlined and agreed upon
Both parties have realistic expectations of partnership