INTERNATIONAL BUSINESS STRATEGIES
Andrey G. Medvedev,
Professor
September 29, 2009CEMS MIM Programme
© Andrey Medvedev
6. INTERNATIONAL STRATEGIC ALLIANCES
1. STRATEGIC ALLIANCES
2. TYPOLOGY OF INTERNATIONAL STRATEGIC ALLIANCES
3. STRUCTURE OF STRATEGIC ALLIANCES
4. ALLIANCE FORMATION AND IMPLEMENTATION FRAMEWORK
5. EFFECTIVENESS OF STRATEGIC ALLIANCES
© Andrey Medvedev
INTERNATIONAL STRATEGIC ALLIANCES
Responsibilities of International ManagerResponsibilities of International Manager:
Understand the strategic contextstrategic context of an alliances Undertake partner analysispartner analysis Design the alliance legal and organisational structurestructure Develop implementation mechanismimplementation mechanism
© Andrey Medvedev
INTERNATIONAL STRATEGIC ALLIANCE
STRATEGIC ALLIANCE STRATEGIC ALLIANCE IS AT LEAST TWO COMPANIESCOMBINING VALUE CHAIN ACTIVITIESCOMBINING VALUE CHAIN ACTIVITIES FOR THE PURPOSEOF ENHANCING THEIR COMPETITIVE ADVANTAGECOMPETITIVE ADVANTAGEAND/OR CREATING NEW BUSINESSESWITHOUT LOOSING THEIR RESPECTIVE STRATEGIC AUTONOMY
AllianceMarket contract
Merger of capabilitie
s
© Andrey Medvedev
OBJECTIVES OF INTERNATIONAL STRATEGIC ALLIANCES
LOCAL LOCAL (COUNTRY) STRATEGIC ALLIANCESTRATEGIC ALLIANCE– MARKET ENTRY ALLIANCE
– RESOURCE ACCESS ALLIANCE
– OFTEN ORGANISED AS A COUNTRY-BASED COUNTRY-BASED JJOINT VENTUREOINT VENTURE
GLOBAL STRATEGIC ALLIANCEGLOBAL STRATEGIC ALLIANCE– GLOBAL REACHGLOBAL REACH SEEKERS
(DEVELOPING GLOBAL MARKET PRESENCE)
– GLOBAL LEVERAGEGLOBAL LEVERAGE SEEKERS(ENHANCING THE WORLD-WIDE COMPETITIVE CAPABILITIES)
© Andrey Medvedev© Andrey Medvedev
ADVANTAGESOF LOCAL STRATEGIC ALLIANCES FOREIGN PARTNERFOREIGN PARTNER
INCREASE IN MARKET MARKET PENETRATIONPENETRATION
PROFITSPROFITS FROM DIVIDENDS, TRANSFER PRICES,AND MANAGEMENT FEES
ACCESS TO LOCAL NATURAL RESOURCESNATURAL RESOURCESAND SKILLSSKILLS
LOCAL PARTNERLOCAL PARTNER
ACCESS TO FOREIGN PRODUCT AND PROCESS TECHNOLOGYTECHNOLOGY, KNOW-HOWKNOW-HOW, AND MANAGERIAL MANAGERIAL EXPERTISEEXPERTISE
© Andrey Medvedev© Andrey Medvedev
GLOBAL STRATEGIC ALLIANCES
COALITIONSCOALITIONS– ALLIANCES IN THE SAME INDUSTRY
– SEARCH FOR GLOBAL REACH; ‘SIZE’ IS ESSENTIAL
– CO-ORDINATING GEOGRAPHIC ASSETS, POOLING CAPABILITIES
– COST REDUCTION OR COMPETITIVENESS GROWTH
CO-SPECIALISATIONSCO-SPECIALISATIONS– COMPLEMENTARY CAPABILITIES (ASSETS, RESOURCES)
– EACH PARTY CONCENTRATES ON WHAT IT IS GOOD
– CREATION OF NEW BUSINESS OR NEW PRODUCTS/PROCESSES
LEARNING ALLIANCESLEARNING ALLIANCES– EXCHANGE OF TECHNOLOGY, KNOW-HOW, INFORMATION, SKILLS
© Andrey Medvedev© Andrey Medvedev
LEGAL STRUCTUREOF STRATEGIC ALLIANCES NO OWNERSHIP NO OWNERSHIP
– LONG-TERM CONTRACT AGREEMENTSLONG-TERM CONTRACT AGREEMENTS
– JOINT PROJECTSJOINT PROJECTS
SOME OWNERSHIPSOME OWNERSHIP
– MINORITY EQUITY PARTICIPATIONMINORITY EQUITY PARTICIPATION
– JOINT EQUITY PARTICIPATION (CROSS-OWNERSHIP)JOINT EQUITY PARTICIPATION (CROSS-OWNERSHIP)
– JOINT VENTURE JOINT VENTURE (A NEW SEPARATE LEGAL ENTITY)
© Andrey Medvedev© Andrey Medvedev
DYADIC AND MULTILATERALSTRATEGIC ALLIANCES
DYADIC STRATEGIC ALLIANCESDYADIC STRATEGIC ALLIANCES– INVOLVE ONLY TWO PARTNERS
MULTILATERAL STRATEGIC ALLIANCESMULTILATERAL STRATEGIC ALLIANCES
– NETWORKSNETWORKSONE ALLIANCE – SEVERAL PARTNERS
– PORTFOLIOSPORTFOLIOS ONE PARTNER – SEVERAL ALLIANCES
– WEBSWEBS SEVERAL PARTNERS – SEVERAL ALLIANCES
© Andrey Medvedev
INTERNATIONAL NETWORKS
NETWORKS TAKE ACCOUNT OF PARTNERS’ INTERACTIONSPARTNERS’ INTERACTIONS
CO-ORDINATION OF FIRMS’ ACTIVITIESCO-ORDINATION OF FIRMS’ ACTIVITIESIS ACHIEVED THROUGH THESE INTERACTIONS
ROLE OF EACH FIRMROLE OF EACH FIRM IN THE NETWORKHAS TO BE DEFINED CLEARLY
© Andrey Medvedev
STRATEGIC ALLIANCE:SKYTEAM
SkyTeamSkyTeam is a strategic alliance of airlines.
With its 11 member airlines SkyTeam provides 16,409 daily flights to 841 destinations in 162 countries.
The alliance members are Aeroflot, Aeromexico, Air France – KLM Group, Alitalia, China Southern, Continental Airlines, CSA, Delta Air Lines Inc., Korean Air, Northwest Airlines.
© Andrey Medvedev© Andrey Medvedev
STRATEGIC ALLIANCE FORMATIONAND IMPLEMENTATION FRAMEWORK
FORMULATION FORMULATION AN INTERNATIONAL ALLIANCE STRATEGY STRATEGY
PARTNERS’ ANALYSISPARTNERS’ ANALYSIS
NEGOTIATION AND DESIGN NEGOTIATION AND DESIGN OF THE ALLIANCELEGAL AND ORGANISATIONAL STRUCTURE
IMPLEMENTATION IMPLEMENTATION OF THE ALLIANCE
© Andrey Medvedev
STRATEGIC CONTEXT, OBJECTIVES,AND VALUE CREATION IN ALLIANCES
COMPREHENSIVE ALLIANCESCOMPREHENSIVE ALLIANCES– PARTNERS PARTICIPATE
IN ALL FACETS OF CONDUCTING BUSINESSALL FACETS OF CONDUCTING BUSINESS – FROM PRODUCT DESIGN TO MANUFACTURING AND MARKETING
– MOST COMPREHENSIVE ALLIANCES ARE ORGANISEDAS JOINT VENTURESJOINT VENTURES
FUNCTIONAL ALLIANCESFUNCTIONAL ALLIANCES– PRODUCTION ALLIANCES
– R & D ALLIANCES
– MARKETING ALLIANCES
– COMMERCIAL ALLIANCES
– FINANCIAL ALLIANCES
© Andrey Medvedev© Andrey Medvedev
PARTNERS’ ANALYSIS
STUDYINGSTUDYING A POTENTIAL FOREIGN PARTNERFOREIGN PARTNER
FACTORSFACTORS TO TAKE INTO ACCOUNT– STRATEGIC FITSTRATEGIC FIT
RELATIVE COMPETITIVE POSITIONS OF PARTNERS,COMPATIBILITY, THE RELATIVE SAFENESS OF THE ALLIANCE,THE LEARNING POTENTIAL OF THE ALLIANCE
– CAPABILITIES FITCAPABILITIES FITREQUIRED CAPABILITIES AND CONTRIBUTION OF THE PARTNERS (RESOURCES, ASSETS, COMPETENCIES – VALUE CHAINVALUE CHAIN STUDY)
– ORGANISATIONAL FITORGANISATIONAL FIT THE DEGREE OF DECISION-MAKING DECENTRALISATION
– CULTURAL FITCULTURAL FITCORPORATE AND NATIONAL CULTURES
© Andrey Medvedev© Andrey Medvedev
NEGOTIATION AND DESIGN
LEGAL STRUCTURELEGAL STRUCTURE
ORGANISATIONAL DESIGNORGANISATIONAL DESIGN
THE APPOINTMENTS OF EXECUTIVESEXECUTIVES
MANAGEMENT CONTROLMANAGEMENT CONTROL
THE DISTRIBUTION OF VALUETHE DISTRIBUTION OF VALUE
THE REPORTING AND COMMUNICATION PROCESSTHE REPORTING AND COMMUNICATION PROCESS
THE CONFLICT RESOLUTION MECHANISMSTHE CONFLICT RESOLUTION MECHANISMS
© Andrey Medvedev
MANAGEMENT CONTROLIN STRATEGIC ALLIANCES SHARED MANAGEMENT
DOMINANT PARENT
MIXED DECISION-MAKING– SHARED STRATEGIC DECISION-MAKING
AND SEPARATED FUNCTIONAL-LEVEL DECISION-MAKING
INDEPENDENT MANAGEMENT
ROTATING MANAGEMENT
© Andrey Medvedev© Andrey Medvedev
MIXED DECISION-MAKING:RENAULT – NISSAN In 1999, CEOs of Renault Renault and NissanNissan
signed an agreement for a total partnershiptotal partnership.
The two companies are operating independently, but their strategic orientation and the organisation of synergies are supervised by a joint management company, Renault-Nissan BVRenault-Nissan BV.
© Andrey Medvedev
DOMINANT PARENT MANAGEMENT: AVTOVAZ – GM In 2001, AvtoVAZAvtoVAZ, Russia's biggest car maker, General MotorsGeneral Motors, and
the European Bank for Reconstruction and DevelopmentEuropean Bank for Reconstruction and Development (EBRD) created a joint venture for manufacturing VAZ-2123 "Niva" carsunder the Chevrolet (Chevy-Niva) brand.
A new manufacturing plant was built in Togliattiwith the capacity 75 thousand cars per year.
Investment in the project totalled $332 million.AvtoVAZ and GM each holds 41.5 percent stakesin the project, EBRD has 17 percent.
According to the agreement,GM took management controlGM took management controlof the joint venture from Day One.
© Andrey Medvedev
REACHING ADVANTAGESIN STRATEGIC ALLIANCES
EASE OF MARKET ENTRY
KNOWLEDGE AND EXPERTISE SWAP
SYNERGY AND COMPETITIVE ADVANTAGE
SHARED RISK
© Andrey Medvedev
LEARNING EFFECT IN ALLIANCES
US – JAPAN EXPERIENCE
© Andrey Medvedev© Andrey Medvedev
SYNERGIES IN ALLIANCE:RENAULT – NISSAN
Renault-Nissan Purchasing Organisation Renault-Nissan Purchasing Organisation (RNPO)sources 75 percent of the Alliance 2006 world-wide purchases.
Common platforms are being developed. Cross-manufacturing operations. Common distribution in Europe. Common information system. Exchange of best practices.
© Andrey Medvedev© Andrey Medvedev
ALLIANCE DISSOLUTION
MOST ALLIANCES REPRESENT A TEMPORARY CO-OPERATIONTEMPORARY CO-OPERATION
ENDINGS OF STRATEGIC ALLIANCESARE EITHER STRATEGIC PURPOSE FULFILMENTPURPOSE FULFILMENTOR A FAILUREFAILURE OF THE ALLIANCE
INTERNATIONAL STRATEGIC ALLIANCE FAILURE RATEFAILURE RATEIS AROUND 30–60 PERCENT
© Andrey Medvedev© Andrey Medvedev
ALLIANCE DISSOLUTION:CLOETTA FAZER
In June, 2008, the principal owners of Cloetta Fazer ABCloetta Fazer AB – Oy Karl Fazer Ab (“Fazer Group”) and AB Malfors Promotor – who together own approximately 78.5 percent of the votes in Cloetta Fazer,have struck an agreement concerning a de-merger of Cloetta Fazer.
Through the de-merger, Cloetta Fazer creates the two future companies CloettaCloetta and Fazer ConfectioneryFazer Confectionery.
The new Cloetta intends to apply for a listing on the OMX Nordic Exchange Stockholm.
Fazer Confectionery will be consolidated in the privately held Fazer Group.
© Andrey Medvedev© Andrey Medvedev
INTERNATIONAL NETWORKS:MNCs AND INDEPENDENT FIRMS
INTERNATIONAL NETWORK COULD BE ORGANISEDON THE BASE OF MNC’S SUBSIDIMNC’S SUBSIDIААRIESRIES
INDUSTRIAL NETWORK COULD ALSO INCLUDEINDEPENDENT PARTNERS,WHICH CREATE A STRATEGIC ALLIANCESTRATEGIC ALLIANCETOGETHER WITH MNC’S SUBSIDIARIES