Week 9 Modes of Entry
Strategic Alliances
Where we are at NOW
Strategy Formation
Strategy Planning
Country
Assessment
Corporate
Strategy
Planning
Mgt Tools
Environment
Scanning
Country
Strategy Dev
Scenario Planning
Game Theory
Conceptual Mapping
Business Level
Planning
Strategy Implementation
Planning & Execution
Internationalisation
Process
Country by Country,
Regional or Global
Corporate Level
Configuration &
Coordination
VC location configuration
& activities coordination
Foreign Market
Strategies evaluation &
selection
We are still
HERE
Leadership, innovation
& governance
Organisational Design &
Control
From Earlier Weeks to Today:
1. Select which countries – justify why SWOT/PEST/Country Risk Analysis…..
• How to position for competitive advantage – same game or new game
positioning
2. Planning at corporate, SBU and functional levels – vision, mission & objectives and
whose perspectives
3. Strategy implementation - how?
a) Internal & external analysis  global, regional, multi-domestic or all 3 in
varying mix (transnational) implementation focus
b) Overall management control – IVC location configuration & activities
coordination design
c) Decide methods for entering countries – decision criteria, how and risk
management  Export, license, Franchise and today is Strategic Alliances
Strategic Alliances
An Example
MasterCard Global Strategic Alliances
https://www.youtube.com/watch?v=2BzXmdSZ6VU 1.48m
Strategic Alliances
Started with 1980’s
Cooperative Strategies
Today’ Definition (Bain & Company, 2014)
Enter New
Markets
Competitive
Positioning
A
Share rare
critical skills
Common
Goals
Share Resources & Capabilities
Lower
Risks/Costs
B
Types of Strategic Alliances
1.
2.
3.
4.
Joint Ventures (VC) – formalised
contracts, usually between 2 parties
Consortia – two or more parties in a JV
Network collaboration – less formal
agreement to work together for
common interests
Strategic alliances can also include:
• Franchising
• Licensing
• Subcontracting aka outsourcing
contractual arrangements
Topology of Strategic Alliance Frameworks
Strategic alliances usually involves long
term sharing of resources & capabilities
for strategic positioning
Strategic alliance can have:
1. Local positioning implications within
a country, or
2. Global positioning implications
across countries
Topology of Strategic Alliance Frameworks
Global Strategic Alliances aim for:
1. Global markets reach via partner’s markets in many countries
2. Global value activity leverage via partner’s VA configuration
Local strategic alliances aim for:
1. Country market entry via local partner
2. Access to country’s resources via local partner
Topology of Strategic Alliance Frameworks
3 types of Global Strategic Alliances:
Partnering with:
1.
2.
3.
Competitors;
Suppliers
Distributors
To also aim for the following:
• To collaborate against other
competitors (coalition)
• To create co-specialisation and
• To learn from each other
Topology of Strategic Alliance Frameworks
Strategic Alliances: Success, Failure & Impact Trends
Strategic Alliances: Success, Failure & Impact Trends
(Bain & Company, 2014)
Why Strategic Alliances
Companies use Strategic Alliances to:
• Reduce costs through economies of
scale or increased knowledge
• Increase access to new technology
• Inhibit competitors
• Enter new markets
• Reduce cycle time
• Improve R&D efforts
• Improve quality
(Bain & Company, 2014)
Reasons for taking strategic alliance international
Leveraging strategic advantage from
Country-partner’s :
1.
2.
Operating and/or competitive
strengths
Statutory representation
to overcome local barriers eg market
competition, government policy
barriers, other PEST barriers, etc
Benefits / Advantages
1. Economies of scale & scope
2. Stronger market penetration & power
3. Stronger local & global competitiveness
4. Higher new products/services dev
capacity
5. Higher / New technology capacity
6. Higher speed to market
7. Lesser risks
8. Skills leverage
9. Mitigating organisational complexity
Problems (Issues) / Disadvantages
1. People / partners problems
2. Trust issues
3. Earning sharing disputes
4. Situational changes
5. Short term exploitation
6. High costs exposure
7. Long dev time
8. Partners’ risk may force shared assets’
sale
9. Partners steals IP and become
competitor
Why Strategic Alliances Fail?
Types of Strategic Alliance Developments
Corporate Level
Cooperative Strategies
Business Level
Cooperative Strategies
Diversity or
Synergistic
Driven
Inter-org
partnership
Inter-org VC
partnership
Leverage by
1.
2.
VC Configuration:
Location specific
VC Coordination:
Specific Value
Activities involved
Network
Cooperative Strategies
Common
Interest Based
Inter-org
partnership
What’s involved in Corporate, Business & Network SA developments?
Business Level
Corporate Level
Network
Look & research for
common themes eg:
• definition
• types & forms
• strategic reasons
• underpinning how to methods
• assessment methods
Selecting Partners
Sleeping
Yes
Legal requirement
to have an
equity partner?
No
Consider Partner
as $investor only
Local
Active Partner
Or Sleeping Partner
($ equity)
req?
Hands on
Consider other
MoE
What sort of
role/s partner
plays?
Strategic fit contributions
Teaching partner
Acquisition partner
What to look for in Partners?
Partner Selection Criteria
Compatibility reasons:
1. Strategic Fit: Share similar strategic
objectives
2. Cultural Fit: Share similar cultural values
& ethics
3. Org Fit: Practise similar decision making,
mgt control, communication,
performance mgt , leadership styles, etc
4. Capability Fit: Share and benefit from
each other’s resources, capabilities &
even core competencies
Evaluating Strategic Fit
1. Evaluate & measure strategic importance
 How important is the partner for:
• Restructuring purposes?
• Increasing cost/differentiation
advantage?
• Achieving global research?
• Enabling new strategic business
development?
2. Evaluate & measure dependency on
each other  How capable is partner in:
• Enhancing achievements of objectives
 risk of each partner capable of
doing that alone  who needs who
the most  power control balance?
• Meeting tight deadlines?
• Sharing sustaining resources & core
competencies ?
Evaluating Strategic Fit
1) Is the partner a:
• Market leader in the target
country?
• Market follower in target country?
2) Where do you want to be – leader
or follower?
Evaluating Strategic Fit
1) What are shared expectations?
• 100% fit
• Possible fit  any risk mgt
requirements?
2) What are the gaps between each
other’s expectations  what
issues, any resolution agreements?
Agreement Agendas
1. Venturing agenda – agree the intention to engage in
collaboration to create a business
Intention
2. Extractive agenda: agree the aim of ‘learning’ or
‘acquiring’ capabilities from the collaboration
Capability Dev
3. Sharing agenda: agree the goal of maximising efficiency
in certain elements of the value chain through economies
of scale and scope
Efficacy Goals
4. Options agenda: agree :
1. to use the alliance to explore without committing
vast amount of resources and
2. The need to decide whether to terminate or
continue the alliance.
Scope &
Exit Options
Value Creation & Extraction
Agree the Split
& Uses
Agree the
Methods
Agree the Split
& Uses
Evaluation Cultural Fit
Check there are similar:
1.
2.
3.
4.
Values
Business objectives
Ways to compete
Ways to communicate & relate to
people
What cultural gaps prevail & agree how to
deal with differences?
Causes of differences may be due to:
1. Org cultural drivers: Leadership,
corporate ownership, history and
experiences, time orientation, etc
2. Industry cultural drivers: logistics,
quality, technology, customer service
culture, etd
3. International cultural drivers:
centralised/decentralised control &
mgt styles, operating styles, etc
Evaluation Organisational Fit
Check there are similar or compatible:
1.
2.
3.
4.
Org structures
Systems &b procedures
Decision making
Human resources
What org gaps prevail & agree how to deal
with differences?
Causes of differences may be due to:
1. Bureaucratic Vs Entrepreneurial styles
in org leadership, management &
operational styles
2. Low Vs High contexts in
communication styles
3. Decision making styles, including use
of high level Vs detail information
evidence
4. Risk tolerances & risk mgt attitudes
5. etc
Evaluation Capability Fit
Competition Value
Contribution Value
Complementary Value
Evaluation Capability Fit: Assessment Method
Method : addresses:
1. What capabilities are needed for
effective competition ?
• Technology needs
• Resource & CC sourcing needs
• Production needs
• Marketing needs
2. What capabilities can each partner
offers to each other?
• Are contributions
complementary?
• Any redundant capabilities
• Any co-investment needed in
sharing capabilities?
Evaluation Capability Fit: Issues Mgt Capacity
Issues:
1.
Marketing: Marketing Vs Selling; Price vs
Value; Customer Service
2.
Financial : Fragmented financial capabilities
& access; Lack of financial controls; High
gearing
3.
Land ownership issues
4.
Contacts: Selective; Politically influenced;
Parochial / closed minded
5.
Suppliers: different attitudes or capabilities
towards time deadlines, quality,
sustainability & logistics performance
6.
Staff: fragmented availability & access to
quality staff, work culture & staff turnover
rates
7.
… pto
Evaluation Capability Fit: Issues Mgt Capacity
Issues:
6.
………
7.
Technology: transfer capacity;
inappropriateness; protection
constraints; rigid changeability;
lacking project management
8.
Management: inflexible; too
formalistic; complex relationships & in
fighting; pressure for results;
multinational subsidiaries reluctance;
Loss of jobs in home country;
associated with biased “made in …”
reputation, etc
9.
Export: time pressure; attitudes;
engineering oriented
10. Training issues
Negotiating & Designing the Operating Models of
Strategic Alliance
Coalition
Model
Learning
Alliances
What
Design
Goals?
How
to
Design?
Eg Partnership
Operating Models
Co
Specialisation
SA Design Considerations: Roles Design
Coalition & Co-Specialisation
Models:
• JV Project Manager –
coordination role
• JV Committee – forum
facilitator for resource &
info sharing
• Independent JV entity
o New independent
entity setup
o Transfer Platform
setup
Broker
Roles
Operator
Roles
SA Design Considerations: Interface &
Control
Interfaces
Legal Structures
Decision Making Protocols
Executives
Team Setup
Reporting &
Comms
Governance
Coordination
& Integration
Inter-organisation Workflow
integration & coordination
Profit Sharing
Vs Rev Sharing
Conflict
Resolution
SA Design Considerations: Communication protocols
Forms: Meetings, teleconference, emails, blog, etc
Frequency & participants
Reporting Preparation & Review arrangements
Meeting/Communication Admin requirements
Implementation Planning: Integration &
Cooperation
Implementation
Honeymoon
Crisis
Implementation Planning: Knowledge Management
8 Success Criteria
1. Both partners strive for Individual Excellence & share
strengths
2. Sense of Importance – common goals and strategy fit for
both
3. Interdependence – need each other, collaborating to
harness each other for maximising benefits dev & sharing
4. Investment – show real commitments
5. Information dev & sharing
6. Integration supported by shared operating procedures,
resources, people, networks, etc
7. Institutionalisation – clear responsibility & decision
making process
8. Integrity – trust and respect, etc
Joint Venture in Focus
JV What & Why Concepts
Types of JV:
1. Contractual agreement
2. Equity Sharing
Reasons
1. Govt legislation
2. Want partner’s:
• Skills
• Resources
• Customers
• etc
Advantages & Disadvantages
Due Diligence Contents of JV
Video - https://www.youtube.com/watch?v=l0rt4ChmBn8 4.17 m
JV Lifecycle
JV Agreements Dev example