global alliances and strategy implementation 1224930044394120 8
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Chapter 7
Global Alliances and
Strategy Implementation
PowerPoint by
Kristopher Blanchard North Central University
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Strategic Alliances
It is no longer an era in which a single
company can dominate any technology or
business by itself. The technology hasbecome so advanced, and the markets so
complex, that you simply can¶t expect to be
the best at the whole process any longer.
²Fumio Sato, CEO, Toshiba Electronics Co.
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Strategic Alliances
Strategic alliances are partnerships between two or
more fir ms which decide they can better pursue
their mutual goals by com bining their resources ±
financial, managerial, technological ± as well as
their existing distinctive com petitive advantages
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Global Strategic Alliances
Global strategic alliances are working partnerships
between com panies (often more than two) across
national boundaries and increasingly across
industries
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Opening Profile: France¶s Thomson and China¶s TCLto Join TV Units
³If you can¶t beat them, join them.´ French appliancemaker Thomson has announced that it is com bining itstelevision and DVD businesses with TCL InternationalHoldings of China. The union will create the largest maker of television sets with annual revenue of $3 billion. The
unprofitable Thomson hopes to utilize cheaper Chineselabor and the union provides TCL with a steppingstoneinto the European and American markets. The com binedcom pany will be able to use the RCA brand in NorthAmerica, the TCL brand in Asia, and the Thomson brand
in Europe. Thomson will retain one factory in France tofocus on new technologies such as flat and plasma screens.
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Categories of Alliances
Joint ventures ± when two or more com panies create anindependent com pany
An example is the Nuumi corporation, created as a joint venture between Toyota and General Motors, which gaveGM access to Toyota¶s manufacturing expertise and
provided Toyota with a manufacturing base in the U.S.Equity strategic alliances ± in which two or more partnershave different relative ownership shares (equity
percentages) in the new venture ² such as 25%, 25%,50% ² such as that between Chrysler and Mitsu bishi
Motors.
Non-equity strategic alliances ± when agreements arecarried out through contract rather than ownership sharing
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4. Global strategic alliances: Working
partnerships were found between com panies(often more than two) across national
boundaries and increasingly across
industries. Alliances are also sometimesfor med between a com pany and a foreign
government, or among com panies and
governments.
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E-Biz: Covisint
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Global and Cross-Border:
Motivations and BenefitsTo avoid im port barriers, licensing requirements and other
protectionist legislation
To share the costs and risks of the research and
development of new products and processes
To gain access to specific markets
To reduce political risk while making inroads into a new
market
To gain rapid entry into a new or consolidating industryand to take advantage of synergies
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AT&T¶s Alliance Structure
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Challenges in Implementing Global Alliances
1. In a highly co
m petitive environ
ment, alliances presenta faster and less risky route to globalization. It is extremely
com plex to fashion such linkages, however, especiallywhere many interconnecting systems are involved, for mingintricate networks. Many alliances fail or end u p in atakeover in which one partner swallows the other .
2. Often, for m of governance chosen for multinationalfir m alliances greatly influences their success, particularlyin technologically-intense fields ² phar maceuticals,com puters, and semiconductors. Cross-border partnerships,
in particu
lar, often becom
e a³race to learn
´² with thefaster learner later dominating the alliance and rewriting its
ter ms. In a real sense, an alliance becomes a new for m of com petition
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Challenges..cont«
3. All too often, cross-border allies havedifficulty in collaborating effectively, especially incom petitively sensitive areas, creating mistr ustand secrecy, which then under mine the purpose of the alliance. The difficulty that they are dealingwith is the dual nature of strategic alliances ² the benefits of cooperation versus the dangers of introducing new com petition through sharing their knowledge and technological skills about their
mutual product or the manufacturing process. Some of the trade-offs of the duality of cross- border ventures are shown in Exhibit 7-2.
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Challenges«
4. The enticing benefits of cross-border alliances often mask their many pitfalls. In
addition to potential loss of technology and
knowledge-skill base, other areas of
incom patibility often arise, such as
conflicting strategic goals and objectives,
cultural clashes, and disputes over
management and control systems. Visit http://www. bah.com/index.shtml
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Challenges in Global Alliances F ive years after Daimler -Benz acquired Chrysler to
create DaimlerChrysler AG,. . . . DaimlerChrysler has become a German company and the
struggling Chrysler division is run by executives
dispatched from DaimlerChrysler¶s corporateheadquarters in Stuttgart. ² Kirk Kerkorian, November 28, 2003
Daimler is in crisis talks with Hyundai, its South Korean partner, in a move that could see theGerman company left with no presence in the
Asian car market (having abandoned its partner in Japan, Mitsubishi Motors (MMC)), and an
increasingly tattered global strategy. ²Financial Times, April 27, 2004
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The Dual Role
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Guidelines for successful AlliancesChoose a partner with com patible strategic goals andobjectivesSeek alliances where com plementary skills, products, andmarkets will result
Work out with the partner how you will each deal with proprietary technology or com petitively sensitive
infor mationRecognize that most alliances last only a few years andwill probably break u p one a partner feels it hasincorporated the skills and infor mation it needs to go italone
Many difficulties arise in cross-border alliances in melding the national and corporate cultures of the parties, inovercoming language and communication barriers, and inbuilding trust between the parties over how to share
proprietary assets and management processes. This slideoffers suggestions to make alliances more successful .
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Comparative Management in F ocus:
Russian F ederationAs of 2004 R ussia is a market where
com panies are considering joint ventures
± More politically stable ± New land, New legal system, New labor Laws
± Rou ble is more stable
± Underexploited natu
ral resou
rces ± Killed and education population of 145 million
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Comparative Management in F ocus:
Russian F ederationThere are still roadblocks
± Possible repeat of the economic collapse of
1998 ± Lack of debt and equity capital
± Non-convertibility of the currency
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Comparative Management in Focus:
Russian Federation
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Comparative Management in F ocus:
Russian F
ederationWhat can help minimize the risk?
± Choose the right partner ± com patible goals or
strategy
± Find the right local general manager
± Choose the right location ± political risk
decreases from south to north and west to east
± Control the international joint venture ± the bestchance of success is to be vertically integrated
to retain control of su pplies and access to
customers
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The Russian oil industry has attracted Western
interest including BP
that developed an IJV with Russia¶s TNK to form the third -largest oil
producer in Russia. Some large MNCs have
realized that short -term upheavals are possible in
Russia and have stuck to a long -term plan. Thesecompanies include GM and Gillette. E xhibit 7 -3
shows the joint venture relationship between a
U.S. and Russian firm, the different goals that they
bring to the venture, and the barriers caused bytheir different operating environments.
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Implementation McDonald¶s Style
For m paradigm-busting arrangements withsu ppliers
Know a country¶s culture before you hit the
beachMaximize autonomy
Tweak the standard menu only slightly from
place to placeKeep pricing low to build market share
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Successf ul im plementation requires the orchestration of many variables into a cohesive system that com plementsthe desired strategy ² that is, a system of fits that will
facilitate the actual working of the strategic plan. In thisway, the str ucture, systems, and processes of the fir m arecoordinated and set into motion by a system of management by objectives (MBO), with the primaryobjective being the f ulfillment of strategy. Managers mustreview the organizational str ucture and, if necessary,
change it to facilitate the administration of the strategy andto coordinate activities in a particular location withheadquarters. In addition to ensuring the strategy±str ucturefit, managers must allocate resources to make the strategywork, budgeting money, facilities, equipment, people, andother su pport. Increasingly, that su pport necessitates aunified technology infrastr ucture in order to coordinatediverse businesses around the world and to satisfy the needfor current and reliable infor mation. An efficienttechnology infrastr ucture can provide a strategic advantagein a globally com petitive environment.
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Managing P erformance
IJV Control is the process through which a
parent com pany ensures that the way a joint
venture is managed confor ms to its owninterest
IJVs are like a marriage: the more issues
that can be settled before the merger, the
less likely it will be to break u p
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Managing P erformance
Three com plementary and interdependent
dimensions of IJV control
± Focus of IJV control ± the scope of activitiesover which parents exercise control
± Extent or degree of IJV control achieved by the
parents
± Mechanisms of IJV control used y the parents
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Knowledge Management
Knowledge Management is the consciousand active management of creating,disseminating, evolving and applyingknowledge to strategic ends
Knowledge management consists of 1 )transferring, 2) transforming, 3) harvesting knowledge for a competitive advantage. SeeExhibit 7-4. Research shows that successf ulIJVs encouraged joint learning andcoaching.
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Knowledge Management P rocess
Transfer: managing the flow of existing
knowledge between parents and from the parents
to the IJV
Transfor mation: managing the transfor mation andcreation of knowledge within the IJV through its
independent activities
Harvest: Managing the flow of transfor med and
newly created knowledge from the IJV back to the parents
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Knowledge Management P rocess
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Cultural Influences
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Management Focus: Wal-Mart Hopes it Won¶tbe Lost in Translation in Japan
The article discusses Wal-Mart¶s expansion intoJapan. Wal-Mart now owns a 38% share of theJapanese retailer Seiyu and is trying to develop theWal-Mart culture in its em ployees. The Japanese
employees now shout the company pledge andare encouraged to speak out about possiblechanges and opinions and to be more goal-oriented. Wal-Mart has brought many of the
Japanese employees to Arkansas for training.Wal-Mart hopes to combine its provenefficiency with Seiyu¶s knowledge of theJapanese market and supplier network.
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E-Commerce Impact
Due to the com plexity of global trade, many fir ms
decide to im plement their global e-commerce
strategy by outsourcing the necessary tasks to
com panies which specialize in providing the
technology to organize transactions and follow
through with the regulatory requirements. These
specialists are called e-commerce enablers.
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Management Focus: Nextlinx EnablesGlobal Strategy Implementation
Nextlinx¶ Trade Collaborator haseverything needed to automate and managean entire global trade operation. As a web-
based environment, it enables all trading partners to collaborate in a single onlinelocation, using the same infor mation and
processes. It enables com panies to calculate
accurate landed costs, automateim ports/exports, com ply with NAFTA2001, and gain visibility into shipments
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Looking Ahead
Chapter 8 ± Organization Str ucture and Control
Systems
± Organizational Str ucture
± Evolution and Change in MNC
± Organizing for Globalization
± Emergent Str uctural For ms
± Choice of Organizational For m
± Control Systems for Global Operations
± Managing Effective Monitoring Systems