global alliances and strategy implementation 1224930044394120 8

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© 2006 Prentice Hall 7-1

Chapter 7

Global Alliances and

Strategy Implementation

PowerPoint by

Kristopher Blanchard North Central University



© 2006 Prentice Hall7-2

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.




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




Global Strategic Alliances

Global strategic alliances are working partnerships

between com panies (often more than two) across

national boundaries and increasingly across

industries




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.




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




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.




E-Biz: Covisint




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




AT&T¶s Alliance Structure




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




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.




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




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




The Dual Role




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 .




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





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




Comparative Management in Focus:

Russian Federation





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




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.




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




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.




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




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




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.




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




Knowledge Management P rocess




Cultural Influences




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.




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.




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




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

global alliances and strategy implementation 1224930044394120 8

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