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© 2006 Prentice Hall 7-1
Chapter 7 Global Alliances and
Strategy Implementation
PowerPoint byKristopher Blanchard
North Central University
© 2006 Prentice Hall
7-2
Strategic Alliances
It is no longer an era in which a single company can dominate any technology or
business by itself. The technology has become so advanced, and the markets so
complex, that you simply can’t expect to be the best at the whole process any longer.
—Fumio Sato, CEO, Toshiba Electronics Co.
© 2006 Prentice Hall
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Strategic Alliances
Strategic alliances are partnerships between two or more firms which decide they can better pursue their mutual goals by combining their resources – financial, managerial, technological – as well as their existing distinctive competitive advantages
© 2006 Prentice Hall
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Global Strategic Alliances
Global strategic alliances are working partnerships between companies (often more than two) across national boundaries and increasingly across industries
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Categories of Alliances
Joint ventures – when two or more companies create an independent company
Equity strategic alliances – in which two or more partners have different relative ownership shares (equity percentages) in the new venture
Non-equity strategic alliances – when agreements are carried out through contract rather than ownership sharing
© 2006 Prentice Hall
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E-Biz: Covisint
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Global and Cross-Border: Motivations and Benefits
To avoid import 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 industry and to take advantage of synergies
© 2006 Prentice Hall
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AT&T’s Alliance Structure
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Challenges in Global AlliancesFive 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 corporate
headquarters in Stuttgart.—Kirk Kerkorian, November 28, 2003
Daimler is in crisis talks with Hyundai, its South Korean partner, in a move that could see the German 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.—Financial Times, April 27, 2004
© 2006 Prentice Hall
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The Dual Role
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Guidelines for successful Alliances
Choose a partner with compatible strategic goals and objectivesSeek alliances where complementary skills, products, and markets will resultWork out with the partner how you will each deal with proprietary technology or competitively sensitive informationRecognize that most alliances last only a few years and will probably break up one a partner feels it has incorporated the skills and information it needs to go it alone
© 2006 Prentice Hall
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Comparative Management in Focus: Russian Federation
As of 2004 Russia is a market where companies are considering joint ventures– More politically stable– New land, New legal system, New labor Laws– Rouble is more stable– Underexploited natural resources– Killed and education population of 145 million
© 2006 Prentice Hall
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Comparative Management in Focus: Russian Federation
There are still roadblocks – Possible repeat of the economic collapse of
1998– Lack of debt and equity capital– Non-convertibility of the currency
© 2006 Prentice Hall
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Comparative Management in Focus: Russian Federation
© 2006 Prentice Hall
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Comparative Management in Focus: Russian Federation
What can help minimize the risk?– Choose the right partner – compatible 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 best chance of success is to be vertically integrated to retain control of supplies and access to customers
© 2006 Prentice Hall
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Implementation McDonald’s Style
Form paradigm-busting arrangements with suppliersKnow a country’s culture before you hit the beachMaximize autonomyTweak the standard menu only slightly from place to placeKeep pricing low to build market share
© 2006 Prentice Hall
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Managing Performance
IJV Control is the process through which a parent company ensures that the way a joint venture is managed conforms to its own interest
IJVs are like a marriage: the more issues that can be settled before the merger, the less likely it will be to break up
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Managing Performance
Three complementary and interdependent dimensions of IJV control– Focus of IJV control – the scope of activities
over which parents exercise control– Extent or degree of IJV control achieved by the
parents– Mechanisms of IJV control used y the parents
© 2006 Prentice Hall
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Knowledge Management
Knowledge Management is the conscious and active management of creating, disseminating, evolving and applying knowledge to strategic ends
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Knowledge Management Process
Transfer: managing the flow of existing knowledge between parents and from the parents to the IJV
Transformation: managing the transformation and creation of knowledge within the IJV through its independent activities
Harvest: Managing the flow of transformed and newly created knowledge from the IJV back to the parents
© 2006 Prentice Hall
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Knowledge Management Process
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Cultural Influences
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E-Commerce Impact
Due to the complexity of global trade, many firms decide to implement their global e-commerce strategy by outsourcing the necessary tasks to companies which specialize in providing the technology to organize transactions and follow through with the regulatory requirements. These specialists are called e-commerce enablers.
© 2006 Prentice Hall
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Looking Ahead
Chapter 8 – Organization Structure and Control Systems– Organizational Structure
– Evolution and Change in MNC
– Organizing for Globalization
– Emergent Structural Forms
– Choice of Organizational Form
– Control Systems for Global Operations
– Managing Effective Monitoring Systems