Chapter 13

Comprehensive Alliance

- arises when participating firms agree to perform together multiple stages of the process by which goods or services are brought to the market - involves all functions - typically organized as JV's - broad scope

Functional Alliance

- involves a single functional area of business - do not often take the form of a JV - narrow scope

3 Methods of Joint Venture Management

1) Founding firms may jointly share management, each appointing key personnel who report back to officers of the parent. 2) One parent may assume primary responsibility. 3) An independent team of managers may be hired to run it (most often preferred because managers focus on best interests of JV)

Production Alliance

functional alliance in which two or more firms each manufacture products or provide services in a shared or common facility

Marketing Alliance

functional alliance in which two or more firms share marketing services or expertise

Financial Alliance

functional alliance of firms that want to reduce the financial risks associated with a project

R&D Alliance

partners agree to undertake joint research to develop new products or services - not often formed as a JV because scientific knowledge can be readily transmitted among partners through other means/cross-licensing

What type of venture did Gulf Canada and the government of the Ivory Coast enter into when they combined to explore and develop prospective oil fields in its coastal waters?

public-private venture

Forms of Ownership

public-private venture joint venture limited partnership

Delegated Arrangement

reserved for JVs, the partners agree not to get involved in ongoing operations and so delegate management control to the executives of the JV itself - managers have real authority/autonomy

What are factors MNCs must consider when choosing a partner MNC?

Compatibility Nature of Potential Partner's Products or Services Relative Safeness of the Alliance Learning Potential of Alliance

Selection of Partners

Compatibility Nature of potential partner's products or services relative safeness of the alliance learning potential of an alliance

Scope of Strategic Alliances

Comprehensive Alliances Functional Alliances

Benefits of Strategic Alliances

Ease of Market Entry Shared Risk Shared Knowledge and Expertise Synergy and Competitive Advantage

A joint venture usually takes the form of a corporation that is incorporated in one of the partners' home countries.

False

Because joint ventures are not considered separate legal entities, they generally last longer than non-joint ventures.

False

By signing a joint-license agreement, all the MNCs involved in an R&D alliance will be able to use what is developed in the new business.

False

Functional alliances occur when the MNCs agree to work together on many of the stages of the process to bring the goods or services to market.

False

Most comprehensive alliances are formed as non-joint ventures.

False

Non-joint ventures are generally mores stable and last longer than a joint venture.

False

R & D alliances are usually formed as joint ventures

False

Research suggests that strategic alliances are more likely to succeed if the skills and resources of the partners are similar.

False

The agreement venture involving Kodak, Fuji, Canon, Minolta, and Nikon for the new type of film was an example of a successful joint venture.

False

Types of Functional Alliances

R&D Production Marketing Financial

Implementation of Strategic Alliances

Selection of Partners Forms of Ownership Joint Management Considerations

Joint Management Considerations

Shared-Management agreement Assigned arrangement Delegated agreement

Which of the following are the three arrangements that may be used to jointly managing a strategic alliance?

Shared-Management agreement Assigned arrangement Delegated agreement

R&D (Research) consortium

This type of alliance is usually in the high technology fields where the companies band together to research and develop new products and processes with the assistance of government funding

A strategy alliance is an agreement between two firms to cooperate on a venture for their mutual benefit.

True

Economies of scope and scale in marketing and distribution confer benefits for firms that aggressively and quickly enter numerous markets.

True

Governmental support plays a major role in the formation of R&D consortiums.

True

In a limited partnership arrangement, the managing partner assumes full financial responsibility for the venture, regardless of the amount of its own investment

True

The cross-licensing of proprietary technology is an example of a strategy alliance.

True

R&D Consortium (defined)

a confederation of organizations that band together to research and develop new products and processes for world markets

strategic alliance

business arrangement whereby two or more firms choose to cooperate for their mutual benefit

In this type of strategic alliance, the partners agree not to get involved in ongoing operations and so delegate management control to the executives of the joint venture itself.

delegated arrangement

Shared-Management Agreement

each partner fully and actively participates in managing the alliance - requires high coordination, near-perfect agreement between partners, managers have limited authority - most difficult to maintain - most prone to conflict among partners

Which of the following is the primary pitfall MNC partners experience in a strategic alliance?

incompatibility

Pitfalls of Strategic Alliances

incompatibility of partners access to information distribution of earnings loss of autonomy changing circumstances

public-private venture (defined)

involves a partnership between a privately owned firm and government

This type of strategy alliance must have its own set of managers and board of directors to allow it a broader purpose, scope, and duration.

joint venture

When an MNC considers forming an alliance with another MNC, which of the following was not mentioned as one of the three most critical issues they will face in deciding how to manage the new business?

learning potential of an alliance

Assigned Arrangement

one partner assumes primary responsibility for operations of the strategic alliance - management is simplified because authority is almost autonomous with one partner

joint venture (defined)

type of strategic alliance in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents, established as corporations.