STRATEGIC ALLIANCES

DR. R. N. KAR

CHARACTERISTICS

Remain independent

Share the benefits

Contribute on a continuing basis

NEED FOR STRATEGIC ALLIANCE

Satisfy customer demands

Share R&D costs

Fill knowledge gaps

Make scale economies

Jump market barriers

Speed in product introduction

Pre-empt competitive threats

Use excess capacity

Make scope economies

Advantages of Alliances

Rapid move to seize opportunities

Quick to change

Greater flexibility

Increase in market share

Access to new markets

Quick recovery from internal weakness

Gaining new skill/competence

TYPES OF STRATEGIC ALLIANCES

Contractual Approach

Corporate Entity Approach

Hybrid Approach

Integrating Alliances into Corporate Strategy

Development of strategic planDevelopment of the alliance planPartner search and selectionDevelopment of the implementation planExecution

Evaluating Options

Consider whether the company should be looking for an alliance and if so, why ?

List and prioritize the reasons

Identify the options for alliance structures, cost considerations, risks and the commitment

Focus on specific structures

Relate the choices to the corporate strategy and plan

Preparing for the Alliance

a.Developing qualitative and quantitative Criteria for partner selection

b. Develop a list of prospective partners

c. Partner selection

PARTNER SELECTION

COMPATIBILITY

CAPABILITY

COMMITMENT

d. Partner analysis

e. Obtaining internal approvals

f. Creating an implementation plan

g. Final pre deal evaluation of all the relevant Information

h. Negotiating the deal

i. Managing the legal process

CROSS CULTURAL ALLIANCES

MANAGING THE ALLIANCES

Who will do what?How will contributions be made?What communication mechanism will be in place?How will the information flow?Who will be the liaison from each company?How will be the partnership fit with the existing relationship of both the companies?

Some Cultural Scenarios

China

India Mexico

JAPANTo help her American Company establish a presence in Japan, Mrs. Torres wants to hire a local interpreter who can advise her on business customs. Ms. Tomari has superb qualifications on paper, but when Mrs. Torres tries to probe about her experience, Ms. Tomari just says, “I will do my best. I will try very hard.” She never gives details about any of the previous positions she has held. Mrs. Torres begins to wonder if Ms. Tomari's resume is inflated.

CHINAStan Williams wants to negotiate a joint venture between his American firm and a Beijing-based company. He asks Tung-Sen Lee if the Chinese people have enough discretionary income to afford his product. Mr. Lee is silent for a time, and then says, “Your product is good. People in the West must like it.” Stan smiles, pleased that Mr. Lee recognizes the quality of his product, and he leaves a contract for Mr. Lee to sign. Weeks later, Stan still hasn’t heard anything. If China is going to be so inefficient, he wonders if his company should try to do business there.

INDIAGloria Johnson is proud of her participatory management style. Assigned in Bombay on behalf of her U.S.-based company, she is careful not to give orders but to ask for suggestions. But the employees rarely suggest anything. Even a formal suggestion system she established does not work. Worse still, she doesn’t sense the respect and camaraderie that she felt at the plant she managed in Texas. Perhaps the people in India just are not ready for a woman boss.

MEXICOAlan Caldwell is a U.S. sales representative in Mexico City. He makes appointments with Senor Lopez and is careful to be on time, but his host is frequently late. To save time, Alan tries to get right to business, his host wants to talk about sightseeing and about Alan’s family. Even worse, the meetings are interrupted constantly with phone calls, long conversations with other people, and even customers’ children who come into the office. Alan’s first report to his home office is very negative. He hasn’t yet made a sale. Perhaps Mexico just isn’t the right place to do business.

How to Win, Achieve and Implement

STRATEGIC PREDISPOSITIONS

Most MNCs have cultural strategic orientation towards doing things in a particular wayThis orientation /predisposition helps to determine the specific steps the MNC would take

Ethnocentric

Polycentric

Regiocentric

Geocentric

EthnocentricAllows the values and interests of the parent company to guide strategic decisions

PolycentricStrategic decisions tailor made to suit the cultures of the Countries where the MNC operates

RegiocentricTries to blend its own interest with those of its Subsidiaries on a regional basis

GeocentricMNC tries to integrate a global system approach to decision making

Meeting the ChallengesIt becomes more difficult as different cultures tend to view emotions, enjoyment, humour, rules, status differently

Germans want advertising that is factual and rational;The typical German spot features the standard family of Two parents, two children and grand mother

The French avoid reasoning. It is based on emotional, dramatic and symbolic gestures

The British value laughter above all else the typical British commercial amuses by mocking both the advertiser and consumer

EXAMPLES AND CASE STUDIES

ETHICAL ISSUES IN CHINA

Piracy & Industrial Spying Problems

According to a Survey, 1300 US MNCs now see China as their major foreign espionage threat.(Wilke, 2003)

Amgen discovered that a Chinese spy had infiltrated its organization and was trying to steal a vial of cell cultures for Epogen, now a $1.5 billion a year anemia drug.

A Chinese engineer at a Colorado, software company allegedly stole the source code and peddled it to a Chinese company.

A related problem is joint ventures in which Chinese partners break the agreement and walk off with patents or capital or simply start an operation that is in direct competition with the venture.

Kimberley-Clarke is a good example.