International Strategic Alliances - PowerPoint

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					International Strategic
              Alliances
                                   Rob Fuller
        Director of Entrepreneurial Programs
                            Beyster Institute
International Strategic Alliances

 • Why use alliances?
 • Options for creating partnerships
 • How to make alliances work




                  MEET U.S.            2
Basic Approach to Globalization


 •   Create a competitive advantage
 •   Establish geographic scope
 •   Select global strategy
 •   Create alliances




                   MEET U.S.          3
Creating a Competitive Advantage
• Every successful strategy is rooted in the
  establishment of a competitive advantage

• Most competitive advantages take the
  form of either:
  – Differentiation
  – Low Costs



                      MEET U.S.            4
Tracking Profitability and Market Share


  Profit



           BMW                    Toyota
           Mercedes               Honda



                      Chrysler




                                      Market Share

                      MEET U.S.                      5
Advantages of Differentiation

•   Perceived uniqueness
•   Better match with customer needs
•   Ability to target profitable niches
•   Any aspect is fair game:
    – Quality, features, reliability, …



                      MEET U.S.           6
 Advantages of Size

• Costs are typically related to volume

 Unit
 Costs




                             Market Share

                 MEET U.S.                  7
Extending Competitive Advantage to Global Markets

    • Increase market share
    • Increase return on investment
    • Economies of scale
    • Location
         • Raw materials, Lower cost labor,
           Key customers, Energy,
           Transportation, etc.

                      MEET U.S.                 8
Strategies for Global Competition
 • “Global Strategies” (Honda, Sony)
   – Products are standardized across national
     markets
   – Decisions regarding business-level
     strategies are centralized in the home office
   – Strategic business units (SBU) are
     assumed to be interdependent
   – Emphasizes economies of scale
   – Often lacks responsiveness to local
     markets          MEET U.S.                      9
Strategies for Global Competition
 • “Multidomestic” Strategies (Philips)
   – Strategy and operating decisions are
     decentralized to strategic business units in each
     country
   – Products and services are tailored to local markets
   – Business units in one country are independent of
     each other
   – Assumes markets differ by country or regions
   – Focus on competition in each market
   – Prominent strategy among European firms due to
     broad variety of cultures and markets in Europe

                         MEET U.S.                         10
International Trends
 • Liability of foreignness
    – Legitimate concerns about the relative
      attractiveness of global strategies
    – Global strategies not as prevalent as
      once thought
    – Difficulty in implementing global
      strategies
 • Regionalization
    – Focusing on particular region(s) rather
      than on global markets
    – Better understanding of the cultures,
      legal and social norms

                      MEET U.S.                 11
                                         Entry Modes




                            Equity                             Non-Equity



                                 Wholly Owned
            Joint Venture                             Export               Contractual
                                  Subsidiary



  Minority EJV          Greenfield                               Direct                  Licensing




                                                                                  Collaboration w/o
  Majority EJV         Acquisition                              Indirect
                                                                                        Equity



                                                                                           R&D
Cash Neutral EJV
                                                                                         Contracts



                                          MEET U.S.                                             12
    Selecting an Entry Mode

• Exporting         High Cost, Low Control

• Licensing         Low cost, low risk, little control, low
                          returns

• Acquisition       Quick access, high cost, complex
                          deals, problems of integration

• New subsidiary    Complex, costly, risky, time consuming,
                         maximum control, high potential

• Strategic Alliances      ?

                            MEET U.S.                         13
Strategic Alliance
• A primary type of cooperative strategy in
  which firms combine some of their
  resources and capabilities to create a
  mutual competitive advantage
  – Involves the exchange and sharing of
    resources and capabilities to co-develop or
    distribute goods and services
  – Requires cooperative behavior from all
    partners

                      MEET U.S.                   14
                            Strategic
                            Alliances


                  Equity                Non-Equity
                 Exchange                Exchange



                                                 Collaboration
 Joint Venture
                                                 without Equity


                                                     Cash-Neutral
   One-Way
                                                     Exchange of
Equity Purchase                                         Assets



    Mutual
                                                     Co-Branding
Equity Purchase


                            MEET U.S.                               15
Why use Alliances?




        MEET U.S.    16
Profitability and Market Share Example


  Profit

           BMW
           Mercedes                Toyota
                                   Honda


                      Chrysler




                                            Market Share

                       MEET U.S.                           17
 Problems in Alliances
• Partner may act opportunistically
• Partner may misrepresent competencies
  brought to the partnership
• Partner fails to make committed
  resources and capabilities available to
  other partner
• Partner may make investments that are
  specific to the alliance while the other
  partner does not
                    MEET U.S.                18

				
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