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© 2008 Pearson Prentice Hall
7-1
Chapter 7:Global Alliances and
Strategy Implementation
PowerPoint by
Hettie A. Richardson
Louisiana State University
© 2008 Pearson Prentice Hall
7-2
Opening Profile: Spanish Companies Flex their Muscles
Spain traditionally invested in Latin America
Now Spain is turning toward the US and European markets
In 2005, Spanish completion of foreign deals was up 69% from 2004
© 2008 Pearson Prentice Hall
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Opening Profile: Spanish Companies Flex their Muscles
Focus in the US is not only on Hispanic markets
Spanish economy is single biggest beneficiary of European monetary policy
Further expansion through acquisitions and mergers is necessary
© 2008 Pearson Prentice Hall
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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
© 2008 Pearson Prentice Hall
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Categories of Alliances
Joint Ventures PSA Peugeot-Citroen Group and Toyota
Equity strategic alliances TCL-Thompson Electronics
© 2008 Pearson Prentice Hall
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Categories of Alliances
Non-equity strategic alliances UPS and Nike
Global strategic alliances Covisint
© 2008 Pearson Prentice Hall
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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
© 2008 Pearson Prentice Hall
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Motivations and Benefits of Global and Cross-Border Alliances
To gain access to markets that favor domestic companies
To reduce political risk
To gain rapid entry into a new or consolidating industry
© 2008 Pearson Prentice Hall
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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 vs. the dangers of new competition
© 2008 Pearson Prentice Hall
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Guidelines for Successful Alliances
Choose a partner with compatible strategic goals and objectives
Seek complementary skills, products, and markets
© 2008 Pearson Prentice Hall
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Guidelines for Successful Alliances
Work out how each partner will deal with proprietary knowledge or competitively sensitive information
Recognize that most alliances only last a few years
© 2008 Pearson Prentice Hall
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Comparative Management in Focus: JVs in the Russian Federation
Investigate whether a joint venture is the best strategy—acquiring a Russian business may be better
Set up meeting with appropriate authorities well in advance
© 2008 Pearson Prentice Hall
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Comparative Management in Focus: JVs in the Russian Federation
Be above board in paying taxes
Set up stricter controls and accountability systems
Make it clear your firm does not pay bribes
© 2008 Pearson Prentice Hall
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Comparative Management in Focus: JVs in the Russian Federation
Assign the firm’s 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
© 2008 Pearson Prentice Hall
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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 key
© 2008 Pearson Prentice Hall
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Implementing a Global Sourcing Strategy
Examine your reasons for outsourcing
Evaluate the best outsourcing model
Gain the cooperation of management and staff
© 2008 Pearson Prentice Hall
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Implementing a Global Sourcing Strategy
Consult your alliance partners
Invest in the alliance
© 2008 Pearson Prentice Hall
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Managing Performance in IJVs
IJV control: Ensures that the way a joint venture is managed conforms to the parent company’s interests
© 2008 Pearson Prentice Hall
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Managing Performance in IJVs
Choice of partner Suzuki and TVS Motor in India
Organizational design and strategic freedom
© 2008 Pearson Prentice Hall
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Managing Performance in IJVs
Three complementary dimensions of IJV control: The scope of activities over which parents
have control The extent or degree of control The mechanisms of control
© 2008 Pearson Prentice Hall
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Government Influences on Strategic Implementation
Unpredictable changes in governmental regulations China’s new restrictions on foreign
investors Caterpillar and tax breaks Ousting of Indonesian President Suharto in
1998
© 2008 Pearson Prentice Hall
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Cultural Influences on Strategic Implementation
Western HungarianSource of Difference
Focus on core competencies
Focus on empire building
Systemic
Live to work Work to liveCultural/ systemic
Play by rulesBeat the system
Cultural/ systemic
Market-driven technology
Volume-driven technology
Systemic
© 2008 Pearson Prentice Hall
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Cultural Influences on Strategic Implementation
Six dimensions of national and corporate culture that affect alliances: Organizational formality Participation in decision-making Attitudes toward risk Systemization of decision-making Managerial self-reliance Attitudes toward funding
© 2008 Pearson Prentice Hall
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Cultural Influences on Strategic Implementation
The American need for autonomy and independence can cause problems with head office Europeans
Mercedes in Tuscaloosa, Alabama
© 2008 Pearson Prentice Hall
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E-commerce Impact on Strategy Implementation
E-commerce enablers
NextLinx
© 2008 Pearson Prentice Hall
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Management Focus: Mittal’s Marriage to Arcelor
In June 2006 Mittal Steel of India merged with Arcelor of Luxembourg to create the world’s largest steel company
Resistance in Europe and by Arcelor: Arcelor had outdated views of Mittal Concerns about losing control of a
European multinational
© 2008 Pearson Prentice Hall
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Management Focus: Mittal’s Marriage to Arcelor
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% share in Mittal, will share chairmanship