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.