IBUS 452 Chapter 7

Guidelines for having a long courtship with a potential partner to establish com- patibility strategically and interpersonally and set up a plan with the prospective partne

1. Choose a partner with compatible strategic goals and objectives and with whom the alliance will result in synergies through the combined markets, technologies, and man- agement cadre. 2. Seek alliances where complementary skills, products, and markets will result. If each partner brings distinctive skills and assets to the venture, there will be reduced poten- tial for direct competition in end products and markets. In addition, each partner will begin the alliance in a balanced relationship.44 3. Work out with the partner how you will each deal with proprietary technology or competitively sensitive information—what will be shared, and what will not, and how shared technology will be handled. Trust is an essential ingredient of an alliance, par- ticularly in these areas; but this must be backed up by contractual agreements. 4. Recognize that most alliances last only a few years and will probably break up once a partner feels it has incorporated the skills and information it needs to go it alone. With this in mind, managers need to "learn thoroughly and rapidly about a partner technol- ogy and management: transfer valuable ideas and practices promptly into one's own operations."

Challenges in Implementing Strategies in Emerging Markets

1. Poor Infrastructure 2. Suuply chains/ distribution network 3. Personal challenges foreign firms to enter those new markets without sufficient research and prepara- tion for the differences and difficulties they may face. unaware of the considerable differ- ences from their home markets and the challenges they face in getting started. Because of their lack of familiarity and preparation for those challenges, "foreign" firms are often surprised that they are not able to compete successfully with local firms navigate poor infrastructures, supply chains, and distribution networks—problems that local firms know how to navigate through experience and contacts. The same edge is enjoyed by local firms when dealing with the myriad regulations and bureaucracies prevalent in some developing economies. Pesonnel Challenges domestic companies have the advantage of knowing how to source, attract, and train local talent; those employees also tend to prefer to work for local com- panies that are perceived to be more invested in their future

Unified Technology infrastucture

A(n) ________ provides a strategic advantage during the implementation of aglobal alliance

Management style

According to the research conducted by Danis, which of the following is a majordifference between Hungarian managers and Western expatriates?

Non Equity Strategic Alliance

Agreements are carried out through contract rather than ownership sharing Such contracts are often with a firm's suppliers, distributors, or manufacturers, or they may be for purposes of marketing and information sharing, such as with many airline partnerships.

Successful Alliance

Alliance partners can provide synergies and value to corporate performance by providing access to new resources and markets, generating economies of scale and scope, reducing costs, sharing risks, and enhancing flexibility One key factor in managing alliance portfolios is to consider not only what each al- liance partner will bring to the company, but also how that partner will affect other partners in the portfolio. The complexities involved in managing many alliances often means that many—around half by most estimates—are unsuccessful, often because of poor partner selections initially, and then also because of poor management to ensure that the expected competencies and syner- gies are realized.

B

Alliances in which two or more partners have different relative ownership shares in the new venture are called ________. A) cultural strategic alliances B) equity strategic alliances C) non-equity strategic alliances D) transmodal strategic alliances

NonEquity strategic alliance

Alliances that are carried out through contract rather than ownership sharing are called ________.

Strategic Implementation

Also know as "Functional Level Strategies" Are detailed and involved the entire organization because they entail setting up overall policies, administrative responsibilities, and schedules throughout the organization to enact the selected strategy and to make sure it works. Merger or IJV: process requires compromising and blending procedures among two or more companies and is extremely complex 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. Successful implementation results from setting up the structure, systems, and processes of the firm, as well as the functional activities that create a system of fits with the desired strategy 4 key steps: Involve putting decisions about global alliance and entry strategies into ACTION Requires "system of fits" Resources must be ALLOCATED LEADERSHIP is key

IJV General Manager

will influence the relative allocation of control because that person is responsible for running the IJV and for coordinating relationships with each of the parents

Guanxi

China Refers to the relationship networks that bind millions of Chinese firms into social and business webs

E Commerce Enablers

Companies that specialize in providing the software and Internet technology for complying with the specific regulations, taxes, shipping logistics, translations, and so on for each country with which their clients do business. Such services allow small and medium-sized companies to go global without the internal capabilitiescarry out global e-commerce functions.

Cooperative

Economies of scale in tangible assets (e.g., plant and equipment). Upstream-downstream division of labor among partners. Fill out product line with components or end products provided by supplier. Limit investment risk when entering new markets or uncertain technological fields via shared resources. Create a "critical mass" to learn and develop new technologies to protect domestic, strategic industries. Assist short-term corporate restructurings by lowering exit barriers in mature or declining industries.

Help remove export barriers from domestic firm

Forms cross border alliance most like wants to....

D

France's Thomson Electronics combined with China's TCL to form TCL-Thomson Electronics. Thomson owns 33% and TCL owns the remaining 67% of the combined company. This is best described as a(n) ________. A) non-equity strategic alliance B) manufacturing joint venture C) global licensing agreement D) equity strategic alliance

Government Policy

Host government influence: Level of taxation in the host country Restrictions on profit repatriation. Other important factors- ownership by foreign firms, on labor union rules, on hiring and remuneration practices, on patent and copyright protection, Unpredictable changes in government regulations Ex: China new restriction of foreign investors

Joint Ventures Equity Strategic alliance Nonequity Strategic Alliance Global Strategic Alliance

What are the 4 categories of strategic alliance

What are 4 Challenges in Implementing Global Alliance

In a highly competitive environment, alliances present a faster and less risky route to globalization Shared ownership Diference in national cultures Integration of vastly different structures and systems Conflicts in decisions making and control It is extremely complex to fash-ion such linkages, however, especially where many interconnecting systems are involved, forming intricate networks. Many alliances fail for complex reasons. Surveyed 150 companies that had been in alliances and found that 75 percent of them had been taken over by Japanese partners

Full Global Partnership

Joint ventures in which two or more companies, while retaining their national identities, develop a common, long-term strategy aimed at world leadership.

Implementing Alliances Between SMEs and MNCs

MNCs are dominating the markets in which SMEs operate, often crowding them out of business altogether. However, astute managers of SMEs can often find opportunities for alliances with those multinationals, providing "comple- mentary resources and capabilities that can lead to, for instance, an innovative product offering being rolled out on a global scale, or a worldwide licensing agreement. SMEs should seek out those opportu- nities to offer MNCs complementary technologies as well as local market networks,

Competitive

Opportunity to learn new intangible skills from partner, often tacit or organization-embedded. Accelerate diffusion of industry standards and new technologies to erect barriers to entry. Deny technological and learning initiative to partner via outsourcing and long-term supply arrangements. Encircle existing competitors and preempt the rise of new competitors with alliance partners in "proxy wars" to control market access, distribution, and access to new technologies. Form clusters of learning among suppliers and related firms to avoid or reduce foreign dependence for critical inputs and skills. Alliances serve as experiential platforms to "demature" and transform existing mature industries via new components, technologies, or skills to enhance the value of future growth options.

Strategic Freedom

Organizational Design refers to the relative amount of decision-making power that a joint venture will have, compared with the parents, in choosing suppliers, product lines, customers, and so on.

Strategic Alliance

Partnerships between two or more firms that decide they can better pursue their mutual goals by combining their resources—financial, managerial, and technological—as well as their existing distinctive competitive advantages. These Alliances are often called COOPERATIVE STRATEGIES -International strategic alliances (ISAs)

Guanxihu

Refers to the BOND between specially connected firms that generate preferential treatment for members of the network

b

Strategic alliances are also known as ________. A) competitive strategies B) cooperative strategies C) independent strategies D) virtual

System of Fits

Successful implementation requires the orchestration of many variables into a cohesive sys- tem that complements the desired strategy that will facilitate the actual working of the strategic plan

Global Strategic Alliance

Working partnerships 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. In addition, changing regulations and policies by governments and institutions lead to new opportunities for alliances with national industries abroad.

Knowledge Management

The conscious and active management of creating, dis- seminating, evolving, and applying knowledge to strategic ends. Managing the performance of an IJV for the long term, as well as adding value to the parent companies, necessitates managing the knowledge flows within the IJV network. When managed correctly, "alliances serve as a source of new knowledge for the firm. firms can access and "absorb" this new knowledge, it can be used to alter existing capa- bilities or create new ones. cultural differences and institutional deficits can serve as barriers to the transfer of knowledge in alliance partnership 1. Transfer: managing the flow of existing knowledge between parents and from the parents to the IJV. 2. Transformation: managing the transformation and creation of knowledge within the IJV through its independent activities. 3. Harvest: managing the flow of transformed and newly created knowledge from the IJV back to the parents. Successful in meeting that challenge were found to have personal involvement by the principals of the parent company in shared goals, in the activities and decisions being made, and in encouraging joint learning and coaching.

Implementing Strategies for Emerging Economy Firms

Their motives for expansion into developed countries often include the need to acquire spe- cific resources, such as technological know-how, R&D capability, managerial skills, and global brands so as to make them competitive with established firms. move quickly or skip various stages in order to expand into both developed as well as developing markets those firms must decide how to balance their geographic expansion with their ability to upgrade their capabilities in the market because they lack the resources and capabilities of established MNEs; they must realize that "prioritizing global reach with- out improving firm competencies jeopardizes the capability upgrading process= unsustainable region the dual challenge faced by emerging market firms, namely, market creation and/or R&D knowledge creation firms with less technological and selling capabilities tend to enter new markets one at a time. In addition, firms with strong technological capabili- ties often expand to overseas markets shortly after the firm is established. They found from the firms in their sample that those that were stronger technologically and had more finan- cial resources would compete in the developed markets, whereas those with a lesser stable of competitive resources pursued less-competitive markets during the early stages of their internationalization.

Equity Strategic Alliance

Two or more partners have different relative OWNERSHIP SHARES in the new venture Most global manufacturers have this with suppliers, subassemblers, and distributors forming a network of internal family and financial links. RISK SHARING is often the motive behind this alliance Ex: International or global joint venture

Value Creation Value Capture

What 2 strategies that can guide partner selection decisions, and developed alliance portfolio management practices to help managers extract more value from their alliance portfolios

Government Policy Culture E-Commerce

What are 3 main influences on Strategic implementation

TO AVOID import barriers, licensing requirements TO SHARE cost and risk of R&D of new product TO REDUCE political risk TO GAIN Access to specific markets TO GAIN Rapid entry into a new industry

What are 5 reasons behind cross border alliances?

Cooperative Competitive

What are the 2 categories in the Dual Role of Strategic Alliance?

Choice of partner

What is the most important factor in determining the success of an internationaljoint venture?

Choice of partner

What is the most important single factor determent the IJV success? local partner, especially in less-developed countries. In spite of this fact, many firms rush the process of partner selection because they are anxious to "get on the bandwagon" in an attractive market. In this process, it is vital to establish whether the partners' strategic goals are compatible

Transfer

Which element of the knowledge management process can be defined as managingthe flow of existing knowledge between parents and from the parents to theinternational joint venture?

harvest

Which element of the knowledge management process can be defined as managingthe flow of transformed and newly created knowledge from the international jointventure back to the parents

Government Policies

Which of the following has a PERVASIVE influence on strategy implementation

c

Which of the following is NOT one of the primary categories under which alliances typically fall? A) joint ventures B) equity strategic alliances C) international management D) non-equity strategic alliance

Organizational Formality

Which of the following is a cultural difference in a U.K-European alliance

Gain Insight into the domestic market

Which of the following is most likely the reason why companies enter into equitystrategic alliances, such as Daiichi-Sankyo buy of a 51% equity share in India'sRanbaxy Laboratories

A

Which of the following most likely caused firms to re-trench operations and cancel joint venture plans in 2009? A) global economic downturn B) international terrorist threats C) fluctuation of the euro D) U.S. political atmospher

to avoid import barriers, licensing requirements, and otherprotectionist legislation

Which of the following reasons is why Toyota decided to establish a joint venturewith GM to produce cars in the U.S.?

D

Which of the following terms refers to a new independent entity that is mutually created and owned by two or more parent companies? A) e-business B) subsidiary C) franchise D) joint venture

D

Which of the following terms refers to an overseas business owned and controlled by two or more partners? A) multinational enterprise B) foreign direct investment C) global management team D) international joint ventur

b

Which of the following terms refers to working partnerships between MNCs across national boundaries and often across industries? A) transnational corporations B) strategic alliances C) foreign subsidiaries D) turnkey operations

Non equity Strategic Alliance

Which type of strategic alliance includes agreements carried out through contracts rather than ownership?

Risk-orientation

____ was the key factor that impacted the performance of the combined firm, because risk-taking propensity impacts managers' approach toward stra- tegic options. Overall, risk-taking firms are likely to pursue aggressive strategies and deal well with change, whereas risk-averse companies are likely to tread more carefully and employ in- cremental strategies.

Creating economies of scale in tangible assets

_____ is a cooperative aspect of strategic alliance

IJV performance

a function of the general fit between the interna- tional strategies of the parents, the IJV strategy, and the specific performance goals that the parents adopt Research has shown that, to facilitate this fit, the partner selection process must determine the specific task-related skills and resources needed from a partner, as well as the relative prior- ity of those needs.

Outsourcing

alliances with firms in other countries to perform specific functions for the firm (offshoring) politically charged issue of domestic jobs apparently being "lost" to oth- ers overseas.

Cooperative Strategies

are transition mechanisms that propel the partners' strategies forward in a turbulent environment faster than would be possible for each company alone.

Value Capture

caution that it is important to "avoid partners that compete in your industry if they enjoy superior bargaining power."

Cross Border Alliances

frequently necessitate a local partner in order to counteract political risk factors and to take advantage of local knowledge and contacts. let both sides bolster efficiency, improve economies of scale, reduce development costs, and achieve quicker speeds to market. 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.

International Joint Ventures

is a joint venture among companies in different countries. In that case, the firm: shares the profits, costs, and risks with a local partner (or a global partner) and benefits from the local partner's local contacts and markets

Joint Ventures

is a new independent entity jointly created and owned by two or more parent companies. often the chosen form for such alliances because they provide greater control of proprietary technology as well as providing increased coordination in high technology industries. Agreement for a firm may comprise: 1. a majority JV (where the firm has more than 50 percent equity), 2. a minority JV (less than 50 percent equity), 3. 50-50 JV (where two firms have equal equity).

Cultural Influences

often overlooked when deciding on and implementing entry strategies and alliances, particularly when we perceive the target country to be familiar to us and similar to our own. These differences can have a subtle and often negative effect. found that 54 percent of the acquiring firms cited poor performance resulting from the implementation of their acquisitions, compared to their domestic merger The greater the cultural distance between the allied firms, the more likely problems will emerge such as conflict regarding the level of innovation and the kinds of investments each firm is willing to pursue. cultural Differences in U.K.-European Alliances • Organizational formality • The extent of participation in decision making • Attitude toward risk • Systemization of decision-making • Managerial self-reliance • Attitudes toward funding and gearing (financial leveraging).

International Strategic Alliances

over the last decade has been caused by the need for organizations to respond to the globalization of markets and the opportunities presented by technological advances. the rush to take advantage of those opportunities has resulted in an estimated half of ISAs having poor results or failing

Transformational Outsourcing

properly implemented, global sourcing can produce gains in efficiency, productivity, quality, and profitability by fully leveraging talent around the world

Guidelines for Implementing Transformational Outsourcing

that both sides should do a background check on the financial health and future viability of the company; get references from other partners of the firm; be prepared to give those assurances and data about their own companies; and be prepared for problems by having alternate partners ready to fill in 1. Examine your reasons for outsourcing: Make sure that the advantages of efficiency and competitiveness will outweigh the disadvantages from your employees, customers, and community; don't outsource just because your competitors are doing it. 2. Evaluate the best outsourcing model: Opening your own subsidiary in the host coun- try (a "captive" operation) may be better than contracting with an outside firm if it is crucial for you to keep control of proprietary technology and processes. 3. Gain the cooperation of your management and staff: Open communication and training is essential to get your domestic managers on board; uncertainty, fear, and disagreement from them can jeopardize your plans. 4. Consult your alliance partners: Consult with your partners and treat them with the respect that made you decide to do business with them. 5. Invest in the alliance: Plan to invest time and money in training in the firm's business practices, in particular those to deal with quality control and customer relations.

Value Creation

the importance of assimilating network resources so as to acquire new skills and capabilities.

the parents are more likely to delegate the daily operations of the IJV to the local IJV management

the increased autonomy of the IJV tends to reduce many common human resource problems: staffing friction, blocked communication, and blurred organizational culture, to name a few, which all result from the conflicting goals and working practices of the parent companies.

IJV Control

the processes that management puts in place so as to direct the success of the firm's goals. Most of a firm's objectives can be achieved by careful attention to control features at the outset of the joint venture the choice of a partner-single most important factor Things to consider: IJV Control- ensures that the way a joint venture is managed conforms to the parent company's interest Choice of Partner- suzuki and tbs motor in india Organizational design- the strategic FREEDOM in choosing supplies product lines customers, etc 3 complementary dimensions of IJV Control: Contractual links with parents General Manager Autonomy of IJV