- In general, the choice will depend on the circumstances confronting the firm. If the firm is seeking to enter a market where there are already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, it may pay the firm to enter via an acquisition.
- if the firm is going to make an acquisition, its management should be cognizant of the risks associated with acquisitions that were discussed earlier and consider these when determining which firms to purchase. It may be better to enter by the slower route of a greenfield venture than to make a bad acquisition.
- If the firm is considering entering a country where there are no incumbent competitors to be acquired, then a greenfield venture may be the only mode. Even when incumbents exist, if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, it may still be preferable to enter via a greenfield venture.
- Partner selection: A good ally, or partner, has three characteristics. First, a good partner helps the firm achieve its strategic goals, whether they are market access, sharing the costs and risks of product development, or gaining access to critical core competencies. The partner must have capabilities that the firm lacks and that it values. Second, a good partner shares the firm's vision for the purpose of the alliance. If two firms approach an alliance with radically different agendas, the chances are great that the relationship will not be harmonious, will not flourish, and will end in divorce. Third, a good partner is unlikely to try to opportunistically exploit the alliance for its own ends, that is, to expropriate the firm's technological know-how while giving away little in return
- Alliance structure:
○ A partner having been selected, the alliance
should be structured so that the firm's risks of giving too much away to the partner are reduced to an acceptable level. First, alliances can be designed to make it difficult (if not impossible) to transfer technology not meant to be transferred. The design, development, manufacture, and service of a product manufactured by an alliance can be structured so as to wall off sensitive technologies to prevent their leakage to the other participant.
○ Second, contractual safeguards can be written
into an alliance agreement to guard against the risk of opportunism by a partner (opportunism includes the theft of technology and/or markets).
○ Third, both parties to an alliance can agree in advance to swap skills and technologies that the other covets, thereby ensuring a chance for equitable gain.
- Managing the alliance:
○ As in all international business deals, an important factor is sensitivity to cultural differences.
○ To maximize the learning benefits of an alliance, a
firm must try to learn from its partner and then apply the knowledge within its own organization.
○ Knowing the cultural differences.
○ Managing an alliance successfully requires building interpersonal relationships between the firms' managers.
Upgrade to remove ads
Only ₩37,125/year
-
Flashcards
-
Learn
-
Test
-
Match
-
Flashcards
-
Learn
-
Test
-
Match
Terms in this set (44)
strategic alliance
business arrangement whereby two or more firms choose to cooperate for their mutual benefit
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.
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)
Benefits of Strategic Alliances
Ease of Market Entry
Shared Risk
Shared Knowledge and Expertise
Synergy and Competitive Advantage
Scope of Strategic Alliances
Comprehensive Alliances
Functional Alliances
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
Types of Functional Alliances
R&D
Production
Marketing
Financial
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
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
R&D Consortium (defined)
a confederation of organizations that band together to research and develop new products and processes for world markets
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
Implementation of Strategic Alliances
Selection of Partners
Forms of
Ownership
Joint Management Considerations
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
Forms of Ownership
public-private venture
joint venture
limited
partnership
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
Selection of Partners
Compatibility
Nature of potential partner's products or
services
relative safeness of the alliance
learning potential of an alliance
public-private venture (defined)
involves a partnership between a privately owned firm and government
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
Joint Management Considerations
Shared-Management agreement
Assigned arrangement
Delegated agreement
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
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
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
Assigned Arrangement
one partner assumes primary responsibility for operations of the strategic alliance
- management is simplified because authority is almost autonomous with one partner
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
Pitfalls of Strategic Alliances
incompatibility of partners
access to information
distribution of earnings
loss of autonomy
changing
circumstances
Which of the following is the primary pitfall MNC partners experience in a strategic alliance?
incompatibility
Research suggests that strategic alliances are more likely to succeed if the skills and resources of the partners are similar.
False
A strategy alliance is an agreement between two firms to cooperate on a venture for their mutual benefit.
True
Most comprehensive alliances are formed as non-joint ventures.
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
Governmental support plays a major role in the formation of R&D consortiums.
True
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
Economies of scope and scale in marketing and distribution confer benefits for firms that aggressively and quickly enter numerous markets.
True
Non-joint ventures are generally mores stable and last longer than a joint venture.
False
A joint venture usually takes the form of a corporation that is incorporated in one of the partners' home countries.
False
In a limited partnership arrangement, the managing partner assumes full financial responsibility for the venture, regardless of the amount of its own investment
True
R & D alliances are usually formed as joint ventures
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
Because joint ventures are not considered separate legal entities, they generally last longer than non-joint ventures.
False
The cross-licensing of proprietary technology is an example of a strategy alliance.
True
Students also viewedEconomics of strategy Ch.4
30 terms
jonas_gutierrez46
International Business Chapter 13
63 terms
SHabeck
EC335 - Quiz no. 11
10 terms
vox-nihili
Chapter 4 Quiz Questions
10 terms
sarastiver
Sets found in the same folderChapter 14
81 terms
livielizardPlus
Chapter 15
37 terms
livielizardPlus
Final Exam - Comprehensive Section
41 terms
livielizardPlus
Final Exam - Chapter 12-15
45 terms
livielizardPlus
Other sets by this creator
NVD/Night Operations
8 terms
livielizardPlus
AH-64D 9's - Checklist Update, 09 MAR 20
46 terms
livielizardPlus
HGST AH-64D - DA
53 terms
livielizardPlus
HGST AH-64D - COIN
155 terms
livielizardPlus
Verified questions
world geography
Briefly explain the importance of each of the following. Massif Central
Verified answer
question
Why do you think a person who writes a negotiable instrument in pencil would be responsible for any loss due to negligence?
Verified answer
algebra
The sizes of the wedges in a pie chart tell you a. the number of categories in the pie chart. b. the frequencies of the categories in the pie chart. c. the relative frequencies of the categories in the pie chart.
Verified answer
algebra
Wanda Dirkson sold $200$ shares of the $500$ shares that she holds of Banff Corporation. She sold the shares at $\$ 9.77$ and paid a total charge of $\$ 75.98$ for commission and other selling expenses. a. How much net proceeds did Wanda receive from this sale? b. Based on the selling price she got for the $200$ shares, how much are the remaining shares that Wanda owns worth?
Verified answer
Recommended textbook solutionsHuman Resource Management
15th EditionJohn David Jackson, Patricia Meglich, Robert Mathis, Sean Valentine
249 solutions
Service Management: Operations, Strategy, and Information Technology
7th EditionJames Fitzsimmons, Mona Fitzsimmons
103 solutions
Information Technology Project Management: Providing Measurable Organizational Value
5th EditionJack T. Marchewka
346 solutions
Information Technology Project Management: Providing Measurable Organizational Value
5th EditionJack T. Marchewka
346 solutions
Other Quizlet setsAnatomy Exam Review 2nd Tri
58 terms
JackParkerSL
Chapter 1 - Networking Concepts (first 20 question…
20 terms
kyleacam
Form B
18 terms
parkerallisonn
Somatosensory System
22 terms
danrose20Plus