Source: Deresky, H. (2011).

International Management:
Managing Across Borders and Cultures. 7th Ed. Chp.7.

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 Unit Objectives

At the end of this unit, the student should be able

to:
Analyze the role strategic alliances play in conducting international
business
Appraise the reasons firms pursue strategic alliances
Evaluate the complexities in managing international joint ventures
Relate the guidelines for successfully implementing various forms of
alliances

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 Opening Profile: Haeir GroupGrowth Through Strategic
Alliances, Acquisitions, and Global Networks

Haeir Group is the fourth-largest white goods

(refrigerators, washing machines, and other
appliances) manufacturer in the world.
Haeir has established an extensive sales network
around the globe, primarily through strategic
alliances with key partners in prospective global
markets.

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 Strategic Alliances
(Cooperative Strategies)

Partnerships between two or

more firms that combine
financial, managerial, and
technological resources and
Strategic their distinctive competitive
advantages to pursue mutual
Alliances goals

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 Categories of Strategic Alliances

Joint Ventures: PSA Peugeot-Citroen

Group and Toyota

Equity Strategic Alliances: TCL-

Thompson electronics

Non-Equity Strategic Alliances: UPS

and Nike

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 Global and Cross-Border Alliances:
Motivations and Benefits

To avoid import barriers, licensing

requirements, and protectionist legislation

To share the costs of research and

development of new products and
processes

To reduce political risk while making

inroads into a new market

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 Global and Cross-Border Alliances:
Motivations and Benefits

To gain access to markets (EU), where

regulations favor domestic companies

To gain rapid entry into a new or

consolidating industry and to take
advantage of synergies

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 Implementing Alliances Between SMEs and
MNCs
Traditional Model: New Model: Strategies for Small
Stage of
MNCs Partnering Enterprises Partnering Enterprises Partnering
Relationship with MNCs
with Each Other Locally with MNCs
Use local allies such as regional
A direct frontal approach through Given asymmetry of access and attention, institutions or partnering programs
a dedicated alliance department Use MNCs reputational strength to
Forming or key individuals who are direct
the direct approach is likely to fail; use
indirect means of access gain support
counterparts

Well-established processes for
structuring, governance, and
staffing alliances
Consolidating
A relatively predictable pattern
for the further development of
alliances, including built-in
Extending contingencies for instability and
dissolution
Given the asymmetry of resources and
long term objectives, these processes
dont apply; so plan for the short term with
an eye on the long term
Given asymmetry and therefore
dispensability of small enterprises; there
is greater uncertainty vis--vis MNCs
own plans and priorities; so be vague by
design with an eye on the bigger prize
Capitalize on points of technology
by proactively demonstrating skills
and creating opportunities
Ensure modular or discrete
knowledge transfer to ensure
tangible outcomes
Proactively build networks within
the MNC and add value
Adopt an ambiguous approach by
design; pursue oblique goals without
showing all cards initially, and keep
options open

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 Challenges in Implementing Global Alliances

Many alliances fail or end up in

takeover

Choosing the right form of governance

The benefits of cooperation versus the dangers of new

competition

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 Guidelines for Successful Alliances

Work out how each Recognize

Choose a partner will deal
partner with Seek comple- that most
mentary skills, with proprietary
compatible products, and
knowledge or alliances only
strategic goals competitively last a few
markets sensitive
and objectives. information years

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 Comparative Management in Focus:
JVs in Russian Federation

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 Comparative Management in Focus: Guidelines
for Establishing JVs in Russian Federation
Investigate whether a joint venture is the
best strategyacquiring a Russian business
may be better.

Set up meeting with appropriate

authorities well in advance.

Be above board in paying taxes.

Set up stricter controls and accountability

systems.
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 Comparative Management in Focus: Guidelines
for Establishing JVs in Russian Federation

Make it clear your firm does not pay

bribes

Assign the firms best managers and given

them enough authority

Take advantage of local knowledge by

hiring Russian managers

Designate considerable funds for

promotion and advertising to establish an
image
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 Strategic Implementation

Involves putting decisions about global alliances and

entry strategies into action

Successful implementation requires creating a

system of fits

Resources must be allocated

Leadership is the key

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 Strategic Implementation

Implementation McDonalds Style

Form paradigm- Know a countrys Keep pricing low to build

busting arrangements culture before you hit market share. Profits will
follow when economies of
with suppliers. the beach. scale kick in.

Hire locals whenever Tweak the standard

possible. menu only slightly Maximize autonomy.
from place to place.

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 Implementing a Global
Outsourcing Strategy

Consult
Examine Evaluate the Gain the co- Invest in
your reasons best operation of your
the
for out- outsourcing manage-ment alliance
sourcing. model. and staff. alliance.
partners.

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 Managing Performance in
International Joint Ventures
Ensures that the way a joint venture is managed
IJV conforms to the parent companys interests
Control

Suzuki and TVS Motor in India

Choice of
Partner

The strategic freedom in choosing suppliers,

Orgznal. product lines, customers, and so on
Design

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 Three Complementary Dimensions
of IJV Control

Extent/De-
gree of
Control
Scope of
Activities Mechanism
and of Control
Control

IJV
Control

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 Knowledge Management in IJVs

EXHIBIT 7-4 Knowledge Management in IJVs

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 Government Influences on
Strategic Implementation
Unpredictable changes in governmental
regulations
Chinas new restrictions on foreign investors
Caterpillar and tax breaks
Ousting of Indonesian President Suharto in 1998

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 Cultural Influence on Strategic
Implementation
Source of
Western Hungarian
Difference
Focus on core Focus on empire
competencies Systemic
building
Live to work
Work to live Cultural/ systemic

Play by rules Beat the system Cultural/ systemic

Market-driven Volume-driven
Systemic
technology technology

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 Dimensions of National and Corporate
Culture Affecting Alliances
1. Organizational 4. Systemization of
formality decision making

2. Participation in 5. Managerial self-

decision making reliance

3. Attitudes toward 6. Attitudes toward

risk funding and gearing

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 Management in Focus: Mittals Marriage to
Arcelor Breaks the Marwari Rules
In June 2006 Mittal Steel of India merged with
Arcelor of Luxembourg to create the worlds
largest steel company.

Resistance in Europe and by Arcelor:

Arcelor had outdated views of Mittal
Concerns about losing control of a European
multinational

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 Management in Focus: Mittals Marriage to
Arcelor Breaks the Marwari Rules
Resistance in India:
Concerns about breaking Marwari rules
Mittal put family interests behind industry and
shareholder interests.
Lakshmi Mittal gave up half of his 90 percent
share in Mittal, will share chairmanship.

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 END OF LECTURE 7
ANY QUESTIONS?

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