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Chapter 13:International Strategic Alliances

International Business, 4th Edition

Griffin & Pustay

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Chapter Objectives_1

Compare joint ventures and other forms of strategic alliances

Characterize the benefits of strategic alliances

Describe the scope of strategic alliances

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Chapter Objectives_2

Discuss the forms of management used for strategic alliance

Identify the limitations of strategic alliances

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Lukoil is building a tanker fleet to haul oil to Asian and American refineries

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Figure 13.1 Benefits of Strategic Alliances

Potential Benefitsof Strategic Alliances

Ease ofMarketEntry

SharedRisk

Shared Knowledge

andExpertise

Synergyand

CompetitiveAdvantage

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Map 13.1 Namibia and Joint Ventures

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Scope of Strategic Alliances

Significant variation– Comprehensive alliance

– Narrowly defined alliance

Degree of collaboration depends upon basic goals of each partner

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Figure 13.2 The Scope of

Strategic Alliances

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Types of Alliances

Comprehensive Functional

– Production

– Marketing

– Financial

– Research and Development

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Comprehensive Alliances

Participating firms agree to perform together multiple stages of the process by which goods or services are brought to the market

Functional areas are intertwined between firms

Organized as joint ventures Achieves greater synergy through sheer size

and total resources

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Functional Alliances

Involve only a single functional area of the business

Integration is less complex Does not typically take the form of a

joint venture

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Implementation of Strategic Alliances

Selection of partners Compatibility Nature of potential partner’s products

or services Relative safeness of the alliance Learning potential of the alliance

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Asahi Video Products Company: A Joint Venture between Corning and Asahi Glass

Asahi Glass’s expertise in large television bulb technology complemented Corning’s strength in other bulb sizes

Joint venture would benefit from Asahi Glass’s ongoing business connections

Combined strength of the two firms would help both stay abreast of technological innovations

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Asahi Video Products Company: A Joint Venture between Corning and Asahi Glass

Asahi Glass would benefit from Corning’s technology and marketing clout in U.S.

Corning had successfully operated another joint venture with Asahi Glass

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Form of Ownership

Corporation Limited partnership Public-private venture

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Joint Management Considerations

Shared management agreements Assigned arrangements Delegated arrangements

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Shared Management Agreement (Figure 13.3)

Partner 1 Partner 2

Alliance

Both partnersparticipate actively

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Assigned Arrangement (Figure 13.3)

Partner 1 Partner 2

Alliance

One partner takesprimary responsibility

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Delegated Arrangement (Figure 13.3)

Partner 1 Partner 2

Joint Venture

Both partners delegatemanagement to the

joint venture’sexecutives

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Figure 13.4 Pitfalls of Strategic Alliances

Pitfallsof Strategic Alliances

Incompatibilityof

partners

Access to

Information

Distributionof

Earnings

Loss of

Autonomy

ChangingCircum-stances

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Beijing Jeep – A joint venture between American Motors Company (part of Daimler Chrysler) and Beijing Auto Works