International Strategic Alliances

Reasons for not exporting abroad Exportation alternatives

Anne-Charlotte BazoudGabrielle ColombierFranzisca Guehlke

Arnaud Katz

Contents

I. Context

II. Aims – Objectives

III. Reasons for not exporting abroad

IV. Case study of Cisco Systems

V. Conclusion

VI. Sources

Context

• Foreign production If exporting may not be feasible Reasons for Foreign Production

• Cisco Systems: Alternatives to exporting

and their effects

Aims - Objectives

• Show why companies might choose not to sell abroad by exporting home country production

• Show the Reasons / Advantages for Foreign Production

• Focus on the alternatives of exporting by Cisco Systems and their effects

III. Reasons for not exporting abroad

1. Cheaper to produce abroad

2. Transportation Costs

3. Lack of Domestic Capacity

4. Need to Alter Products and Services

5. Trade Restrictions

6. Country of Origin Effects

Reasons for not exporting

III Reasons for Foreign Production

• Products / Services that costumers abroad would like to buy

• Producing within their home markets may be too expensive

• Companies from abroad can produce at a lower cost

• I.e. Car Production in Turkey

Reasons for not exporting

1. Cheaper to produce abroad

• Some Products / Services become impractical to export

• Transportation costs relative to production costs

• Impossible to export

• I.e Big Mac

Reasons for not exporting

2. Transportation Cost

• Excess Capacity: foreign prices on the basis of variable prices

• Companies first produce in one location

• Demand pushes: Companies build a second plant => meet demand & reduce transaction costs

• I.e. Beetle Production in Mexico

Reasons for not exporting

3. Lack of Domestic Capacity

• Need to alter products to gain sufficient sales in foreign markets

• I.e. electrical voltage

Reasons for not exporting

4. Need to Alter Products

• Some governments still restrict imports

• Companies must produce in a foreign country

• Market size of the foreign country / market potential

• I.e. Automobile Production in brazil

Reasons for not exporting

5. Trade Restrictions

• Consumer desire / Nationalism

• A belief that these products are better French wine or german beer

• A fear that foreign made goods may not be delivered on time

Reasons for not exporting

6. Country of Origin Effects

IV. Case Study of Cisco Systems

Cisco Systems Presentation Founded: 1984

Headquarters: San Jose, California, USA

Chairman: John Chambers

Products: Technology that facilitates communications

Slogan: “Welcome to the Human Network”

Employees: 61,535 worldwide

The world’s largest supplier of data networking equipment

The leading global supplier of computer networking solutions

Case study : Cisco Systems

Cisco Systems Presentation

Geographic composition of Cisco Systems net sales (2004)

Case study : Cisco Systems

Europe, Middle East, Africa28%

Americas55%

Asia Pacific

(excluding Japan)10%

Japan7%

Source : Cisco Systems, Annual Report, 2004, p.21.

Case study : Cisco Systems

Growth Strategy

Partnerships

• Strategic alliances

Acquisitions

Internal growth

• R&D investment(Engineers,

Labs, Patents)

Cisco’s alternatives to exporting

Parnerships

Case study : Cisco Systems

“we are more powerful together that we ever could be apart”

A Cisco quotation from the report “Strategic Alliances Update”, 2007, p.3

Globalization

Many partnerships

Objectives:

sharing technology

having goods and components produced

distributing worldwide

Strategic alliances

Case study : Cisco Systems

“An agreement between companies that is of strategic importance to one or both companies’ competitive viability”

Alliances help Cisco to achieve several objectives

Enhancing the competitiveness

Reducing costs

Expanding into new markets

Meeting customer needs worldwide

Examples

Positive Effects of these alternatives

Case study : Cisco Systems

• To meet customer needs worldwide

• To enhance its competitiveness by focusing on its and partnersips’s core competencies.

• Improve processes

• Reduce its costs

• Enhance productivity

• Provide Cisco a cost-effective means to expand into new markets

Alliances enable Cisco :

Negative Effects

Case study : Cisco Systems

• Challenges poses by managing collaborative agreements

• Objectives are not always achieved as they were initially expected

• Management of different organizational and national cultures.

Negative Effects

Case study : Cisco Systems

• Challenges poses by managing collaborative agreements

• Objectives are not always achieved as they were initially expected

• Management of different organizational and national cultures.

Cisco Systems and its alliances

Case study : Cisco Systems

Setting up of a standard mechanics of partnership agreements which is

continuously improve.

Despite occasional problems, Cisco has continued strongly using partnership to extend its ability to

service customer in more markets around the world.

2008 Alliances Trends

Case study : Cisco Systems

• Responsive to customer needs

• Continued investment in alliances as differentiator

• Major alliance globalization, encreased emphasis on Asia Pacifique and Emerging Market

• Transform industries using vertical solution, partners in new markets

Conclusion

Strategic alliances are a good way to avoid export problems and to succeed in foreign countries.

Sources

Cisco Systems’ website : www.cisco.com

www.eur-export.com

International Business:  environments and Operations, (11th Edition, 2007), Pearson Prentice Hall, John D. Daniels, Lee H. Radebaugh, Daniel P. Sullivan

Strategic Alliances Update: Recent developments and a view to the future, 2007, Cisco Systems

Thanks for your attention

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