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Repetition: Chapter 7: Global Alliances and Strategy Implementation

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1 Repetition: Chapter 7: Global Alliances and Strategy Implementation
PowerPoint by Hettie A. Richardson Louisiana State University

2 Strategic Alliances Partnerships between two or more firms that combine financial, managerial, and technological resources and their distinctive competitive advantages to pursue mutual goals Also referred to as cooperative strategies Alliances are transition mechanisms that propel the partners’ strategies forward faster than would be possible for each company alone.

3 Categories of Alliances
Joint Ventures PSA Peugeot-Citroen Group and Toyota Equity strategic alliances TCL-Thompson Electronics Non-equity strategic alliances UPS and Nike Global strategic alliances Covisint Joint ventures (JVs) are independent entities jointly created and owned by two or more parent companies. An international joint venture (IJV) is a joint venture among companies in different countries. The JV form for a firm may comprise a majority (more than 50% equity), a minority (less than 50% equity), or may be (equal equity). An example of a IJV is between France’s PSA Peugeot-Citroen Group and Japan’s Toyota in the Czech Republic. From this IJV Toyota gains knowledge of suppliers and their capabilities from one of Europe’s biggest indigenous car makers. Peugeot-Citroen gains experience from Toyota’s manufacturing system. In equity strategic alliances two or more partners have different relative ownership shares in the new venture. An example is TCL-Thompson Electronics. France’s Thompson owns 33% of the combined company and China’s TCL owns 67%. Most global manufacturers have equity alliances with suppliers, subassemblers, and distributors.

4 Motivations and Benefits of Global and Cross-Border Alliances
To avoid import barriers, licensing requirements, and other protectionist legislation To share costs of research and development Toshiba To gain access to markets that favor domestic companies To reduce political risk To gain rapid entry into a new or consolidating industry In the semi-conductor industry each new generation of memory chips is estimated to cost more than $1 billion to develop and technological evolution is rapid. In this and similar industries, such endeavors usually require the resources of more than one firm. For example, Toshiba has more than two dozen major joint ventures and strategic alliances around the world.

5 Challenges in Implementing Global Alliances
Many alliances fail or end up in takeover Choosing the right form of governance The benefits of cooperation vs. the dangers of new competition A recent survey by McKinsey & Company of 150 companies in alliances found that 75% had been taken over by Japanese partners. Many of the issues associated with international activities already discussed also contribute to the difficulty of creating successful alliances. These include problems with shared ownership, differences in national cultures, the integration of different structures and systems, the distribution of power, and conflicts about the locus of decision making and control. Choice of governance—either contractual agreement or joint venture—often depends on the desire to control information about proprietary technology. Joint ventures provide greater control and coordination in high-technology industries. Often cross-border partnerships become a “race to learn,” with the faster learner later dominating the alliance and rewriting its terms. Partners also often have problems with mistrust and secrecy when it comes to competitively sensitive areas. The cumulative learning gained through an alliance can potentially be applied to other products or industries beyond the alliance.

6 Guidelines for Successful Alliances
Choose a partner with compatible strategic goals and objectives Seek complementary skills, products, and markets Work out how each partner will deal with proprietary knowledge or competitively sensitive information Recognize that most alliances only last a few years Choosing a partner with compatible goals and objectives will result in synergies through combined markets, technologies, and management cadre. Seek alliances where complementary skills, products, and markets will result. If each partner brings distinctive skills and assets to the venture, there will be reduced potential for direct competition.

7 Knowledge Management in IJVs
Managing the performance of an IJV for the long term, as well as adding value to the parent companies, necessitates managing the knowledge flows within the IJV network. Thus, managers must recognize that it is critical to overcome cultural and system differences in managing knowledge flows in order to gain advantage for the alliance. Knowledge management is the active management of creating, disseminating, evolving, and applying knowledge to strategic ends. As defined by Berdow and Lane, these processes are: Transfer: managing the flow of existing knowledge between parents and from parents to the IJV. Transformation: managing the transformation and creation of knowledge within the IJV through its dependent activities. Harvest: managing the flow of transformed and newly created knowledge from the IJV back to the parents. Those companies found to be most successful in developing and harvesting information for the benefit of the parents were those that had personal involvement by the principals of the parent company in shared goals, in the activities and decisions being made, and in encouraging joint learning and coaching.

8 Repetition: Chapter 8: Organization Structure and Control Systems
PowerPoint by Hettie A. Richardson Louisiana State University

9 Organizational Structure
Must evolve to accommodate internationalization Must “fit” with strategy Should be contingency based A firm’s structure must “fit” with its strategy—that is, be conducive to its implementation. Choice of structure also should be contingency based, taking into consideration factors such as the firm’s size, the appropriate technology, the organizational environment, geographic dispersion, and differences in time, language, cultural attitudes, and business practices. Many managers find it more difficult to develop the appropriate organizational structure than it is to develop the strategy.

10 1. Modernismens strukturtænkning
Differentiering Dele hovedopgaven op i underopgaver Differentiering sker i funktionerne, og jo større differentiering, jo større integrationspres Integrering Koordinere udførelsen af disse underopgaver, så de tilsammen løser hovedopgaven Typisk en ledelsesfunktion

11 den rette balance hvis ikke organisation skal drukne i
Formaliseringens cirkelbevægelse Problemet er at finde den rette balance hvis ikke organisation skal drukne i kompleksitet Differentiering Integrering ”After the task has been divided into specialist subtasks, the problem is to integrate the subtasks around the completion of the global task. This is the problem of organization design.” Jay Galbraith (1974), Organization Design – An Information Processing View

12 Choice of Organizational Form
Exhibit 8-7 Transnational Strategy Globalization Strategy International Strategy Two major issues in choosing the structure and design of an organization are the opportunities and need for (1) globalization and (2) localization. This exhibit shows alternative structural forms appropriate to each of these variables and to the strategic choices regarding the level and type of international involvement desired by the firm. It updates the evolutionary stages model to reflect alternative organizational responses to more recent environments and to the anticipated competitive environments ahead. As the company progresses through various stages from domestic to transnational the organizational structure must be adapted to accommodate changes in relative focus on globalization versus localization, choosing a global product structure, a geographic area structure, or perhaps a matrix form. Multidomestic Strategy

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