2. International Strategic Alliances
It refers to cooperative arrangements between
potential or actual competitor firms from
different countries.
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3. Reasons for Strategic Alliances
1. Spread and reduce costs
2. Specialize in competencies
3. Avoid or counter competition
4. Secure vertical and horizontal integration
5. Learn from other companies
6. Gain location-specific assets
7. Overcome legal constraints
8. Diversify geographically
9. Minimize exposure in risky environment
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4. Managing Strategic Alliances
1. Partner Selection: Selecting the right partner
who:
Helps firm achieve its strategic goals (market access, cost sharing,
product development, gain access to core competencies)
Shares the firm’s vision for alliance
Complement each other and not exploit for opportunist gains
2. Alliance Structure: Structured in a way to
safeguard individual interests
Difficult to transfer technology not meant to be transferred
Guard against the risk of opportunism by partner
Ensuring chances of equitable gains
Extracting a significant credible commitment from partners in advance
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5. Managing Strategic Alliances
3. Managing the alliance
Sensitivity to cultural differences
Differences in management styles
Building interpersonal relationships between managers to facilitate
harmonious dealings
Ability to learn from alliance partners and apply the knowledge within
organizations
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7. 1. Licensing
A Co. (licensor) grants right to intangible
property to another Co. (licensee) to use it in
a specified geographical area for a specified
period, in exchange of a royalty.
Includes: Patents, inventions, processes,
designs, copyrights, trademarks
Exclusive or Non-exclusive
E.g. Microsoft office suite, Walt Disney
Company
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8. 2. Franchising
It is a specialized form of licensing in which the
franchiser not only sells an independent
franchisee the use of intangible property but also
operationally assists the its’ business on a
continuing basis through sales promotion and
training
Franchiser maintains considerable degree of
control over operations and processes of
franchisee
Long-term commitments
E.g., Domino’s pizza, McDonald’s
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9. 3. Joint Ventures
Establishing a firm that is jointly owned by 2
or more otherwise independent firms.
Firms have an independent existence outside
the joint venture
Formed to achieve particular objectives
E.g., Hero Honda, ICICI Prudential life
insurance Co. Ltd.
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10. 4. Mergers
Two separate firms combine or are amalgamated
into a single business firm with a new name
The assets & operations of two firms belonging to
two different countries are combined to form a
new legal entity
The firms cease to exist independently
Centurion Bank and Bank of Punjab merged to
form Centurion Bank of Punjab; Capital First and
IDFC Bank; Bank of Baroda and Vijaya Bank &
Dena Bank
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11. 5. Acquisitions
Takeover (buyout) of one organization by
another
Brownfield investment
A new firm is not formed, rather the smaller
firm ceases to exist independently and is
bought by a larger firm
Types: Friendly or Hostile
E.g., Tata motor’s acquisition of Jaguar Land
Rover (JLR); Facebook acquired Whatsapp
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12. Problems with Strategic Alliances
1. Relative importance to partners
2. Divergent objectives
3. Control problems
4. Comparative contributions & appropriations
5. Differences in culture
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13. References
1. Daniels, J. D., Radebaugh, L. H., Sullivan, D. P., & Salwan, P.
(2010). International Business: Environments and Operations
(Twelfth Edition ed.). New Delhi: Pearson Education.
2. Hill, C. W., & Jain, A. K. (2011). International Business:
Competing in the Global Marketplace (Sixth Edition ed.). New
Delhi: Tata McGraw Hill.
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