International Management
MBA – Lecture 6
Prepared by: Loaloa Riad
Learning objectives
To become familiar with the types of strategic alliances for
international business, the challenges in implementing
them, and guidelines for success in alliances.
To understand what is involved in implementing strategies,
including those for small businesses and those involved in
emerging economies.
To consider how to manage the firm’s performance in
international joint ventures, with attention to knowledge
management, government and cultural influence, role of e-
commerce.
The CSA-FSA
Matrix
Strategy
implementation
The process of providing goods
and services in accord with a plan
of action.
Strategic alliances
are partnerships between two or more firms that decide they can pursue their
mutual goals better by combining their resources—financial, managerial, and
technological—as well as their existing distinctive competitive advantages.
Alliances—often called cooperative strategies—are transition mechanisms that
propel the partners’ strategies forward in a turbulent environment faster than
would be possible for each company alone.
Alliances typically fall under one of three categories: joint ventures, equity
strategic alliances, and non-equity strategic alliances
• Joint Ventures: Starbucks and Tata Global
Strategic beverages
alliances • Equity Strategic Alliances: Heinz and kraft
• Non-Equity Strategic Alliances: UPS and Nike
International Joint Venture (IJV)
• Joint ventures (JVs) are independent entities jointly created and owned by two or more
parent companies.
• An international joint venture (IJV) is a joint venture among companies in different
countries.
• The JV form for a firm may comprise a majority (more than 50% equity), a minority (less
than 50% equity), or may be (equal equity).
• An example of a IJV is between France’s PSA Peugeot-Citroen Group and Japan’s Toyota
in the Czech Republic. From this IJV Toyota gains knowledge of suppliers and their
capabilities from one of Europe’s biggest indigenous car makers. Peugeot-Citroen gains
experience from Toyota’s manufacturing system.
Equity Strategic Alliances
In equity strategic alliances two or more partners have different
relative ownership shares in the new venture.
An example is TCL-Thompson Electronics. France’s Thompson
owns 33% of the combined company and China’s TCL owns 67%.
Most global manufacturers have equity alliances with suppliers,
sub assemblers, and distributors.
In non-equity strategic
alliances
• Agreements are carried out through contract
rather than ownership sharing. Such contracts
are often with suppliers, distributors, or
manufacturers, but they also may be for the
purposes of marketing and information
sharing.
• An example is UPS, which has a non-equity
alliance with Nike. Nike contracts with UPS to
manage its entire supply chain from factory, to
warehouse, to customer, to repair.
They are working partnerships between two or more
companies across national boundaries and/or industries.
Global
strategic
alliances
Alliances also can be formed between companies and
governments. Alliances may comprise full global partnerships
(e.g., joint ventures in which two or more companies retain
their national identities but develop a common, long-term
strategy), or they may be narrower and more specific (e.g.,
aimed at production, marketing, or research and
development).
Global and Cross-Border Alliances:
Motivations and Benefits
To avoid import barriers, licensing requirements, and protectionist legislation
To share the costs of research and development of new products and
processes
To reduce political risk while making inroads into a new marketIn the semi-
conductor industry each new generation of memory chips is estimated to
cost more than $1 billion to develop and technological evolution is rapid.
Global and Cross-Border Alliances: Motivations
and Benefits
• In this and similar industries, such endeavors usually require the resources of more than
one firm.
• For example, Toshiba has more than two dozen major joint ventures and strategic
alliances around the world.
• Alliances can reduce political risks while making inroads into a new market. Hong Kong
Disneyland is jointly owned by the Chinese government, which owns a 57% stake. Beijing
is interested in promoting tourism through the venture and in the employment of 5,000
Disney workers and 18,000 workers in related services.
Global and Cross-Border Alliances:
Motivations and Benefits
• To gain access to specific markets where regulations favor domestic companies;
China, Russia
• To gain rapid entry into a new or consolidating industry and to take advantage of
synergies.
• Firms are forming strategic alliances with European companies to bolster their
chances of competing in the European Union and to gain access to markets in
Eastern Europe as they open to world business.
Global and Cross-Border Alliances:
Motivations and Benefits
• Finally, alliances can help gain rapid entry into a new or consolidating industry
and to take advantage of synergies.
• Technology is providing means for the overlapping and merging of traditional
industries such as entertainment, computers, and telecommunications in new
digital-based systems.
Global and Cross-Border Alliances:
Motivations and Benefits
• In many cases, technological developments are necessitating strategic alliances
across industries in order to enter areas in which they have no expertise or
manufacturing capabilities.
• Competition is so strong that they cannot afford to wait to develop those
resources alone. For example, an alliance with Japan’s NEC gave AT&T access to
new semiconductor and chip making technologies, helping it learn how to better
integrate computers with communications.
The Dual Role of
Strategic Alliances
Implementing
Alliances
between SMEs
and MNCs
Guidelines for Successful
Alliances
Starbucks and Target
Disney and
Chevrolet
Louis Vuitton and BMW
Apple Pay and MasterCard
Strategic
Implementation
• Involves putting decisions about global alliances and
entry strategies into action
• Successful implementation requires creating a “system
of fits”
• Resources must be allocated
• Leadership is the key.
• Implementation plans are detailed and pervade the
entire organization because they entail setting up
overall policies, administrative responsibilities, and
schedules throughout the organization.
Strategic
Implementation
• Until strategic plans are put into operation, they remain
abstract ideas that have no effect on the organization.
• Successful implementation requires the orchestration of
many variables into a cohesive system that complements
the desired strategy.
• This is called creating a system of fits. The structure,
systems, and processes of the firm should be coordinated
and mutually reinforce one another.
• Creating such a system may require altering some of its
elements to make them work—such as changing the
organizational structure.
Strategic Implementation
• Resources must be allocated to make the strategy work. This
entails budgeting money, facilities, equipment, people and
other support.
• People are the ones who make things happen.
• Leaders must skillfully guide employees and processes in the
desired direction.
• Additionally, in equity-sharing alliances, it is necessary to
determine which top managers in each company will be in
each position and to determine who will be CEO. Increasingly
joint-CEOs are appointed.
Implementation
McDonald’s Style
• Form paradigm-busting
arrangements with suppliers.
• Hire locals whenever possible.
• Know a country’s culture before you
hit the beach.
• Tweak the standard menu only
slightly from place to [Link]
pricing low to build market share.
• Profits will follow when economies of
scale kick in.
• Maximize autonomy.
Implementing a Global Sourcing Strategy:
From Offshoring to Next-Shoring?
Managing performance in International Joint Ventures
International Joint Ventures (IJVs) control refers to the processes that
management puts in place to direct the success of the firm’s goals.
Ignoring the unique controls required by IJVs can limit the parent company’s
ability to efficiently use its resources, coordinate its activities, and implement
its strategy.
Strategic freedom refers to the relative amount of decision-making power that
a JV will have, relative to the parents, when choosing suppliers, product lines,
customers, etc.
Knowledge
Management in IJVs
• Knowledge management, is “the conscious and active
management of creating, disseminating, evolving, and
applying knowledge to strategic ends.” Research on eight
IJVs by Berdrow and Lane led them to define these
processes as follows.
• Transfer: Managing the flow of existing knowledge
between parents and from the parents to the IJV
• Transformation: Managing the transformation and creation
of knowledge within the IJV through its independent
activities
• Harvest: Managing the flow of transformed and newly
created knowledge from the IJV back to the parents
Thank you