International strategic alliances
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International Strategic Alliances. Rob Fuller Director of Entrepreneurial Programs Beyster Institute. International Strategic Alliances. Why use alliances? Options for creating partnerships How to make alliances work. Basic Approach to Globalization. Create a competitive advantage

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International Strategic Alliances

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International strategic alliances

International Strategic Alliances

Rob Fuller

Director of Entrepreneurial Programs

Beyster Institute


International strategic alliances1

International Strategic Alliances

  • Why use alliances?

  • Options for creating partnerships

  • How to make alliances work

MEET U.S.


Basic approach to globalization

Basic Approach to Globalization

  • Create a competitive advantage

  • Establish geographic scope

  • Select global strategy

  • Create alliances

MEET U.S.


Creating a competitive advantage

Creating a Competitive Advantage

  • Every successful strategy is rooted in the establishment of a competitive advantage

  • Most competitive advantages take the form of either:

    • Differentiation

    • Low Costs

MEET U.S.


Tracking profitability and market share

Tracking Profitability and Market Share

Profit

BMW Mercedes

Toyota Honda

Chrysler

Market Share

MEET U.S.


Advantages of differentiation

Advantages of Differentiation

  • Perceived uniqueness

  • Better match with customer needs

  • Ability to target profitable niches

  • Any aspect is fair game:

    • Quality, features, reliability, …

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Advantages of size

Advantages of Size

  • Costs are typically related to volume

Unit Costs

Market Share

MEET U.S.


Extending competitive advantage to global markets

Extending Competitive Advantage to Global Markets

  • Increase market share

  • Increase return on investment

  • Economies of scale

  • Location

    • Raw materials, Lower cost labor, Key customers, Energy, Transportation, etc.

MEET U.S.


Strategies for global competition

Strategies for Global Competition

  • “Global Strategies” (Honda, Sony)

    • Products are standardized across national markets

    • Decisions regarding business-level strategies are centralized in the home office

    • Strategic business units (SBU) are assumed to be interdependent

    • Emphasizes economies of scale

    • Often lacks responsiveness to local markets

MEET U.S.


Strategies for global competition1

Strategies for Global Competition

  • “Multidomestic” Strategies (Philips)

    • Strategy and operating decisions are decentralized to strategic business units in each country

    • Products and services are tailored to local markets

    • Business units in one country are independent of each other

    • Assumes markets differ by country or regions

    • Focus on competition in each market

    • Prominent strategy among European firms due to broad variety of cultures and markets in Europe

MEET U.S.


International trends

International Trends

  • Liability of foreignness

    • Legitimate concerns about the relative attractiveness of global strategies

    • Global strategies not as prevalent as once thought

    • Difficulty in implementing global strategies

  • Regionalization

    • Focusing on particular region(s) rather than on global markets

    • Better understanding of the cultures, legal and social norms

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International strategic alliances

MEET U.S.


Selecting an entry mode

Selecting an Entry Mode

  • ExportingHigh Cost, Low Control

  • LicensingLow cost, low risk, little control, low returns

  • AcquisitionQuick access, high cost, complex deals, problems of integration

  • New subsidiaryComplex, costly, risky, time consuming, maximum control, high potential

  • Strategic Alliances?

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Strategic alliance

Strategic Alliance

  • A primary type of cooperative strategy in which firms combine some of their resources and capabilities to create a mutual competitive advantage

    • Involves the exchange and sharing of resources and capabilities to co-develop or distribute goods and services

    • Requires cooperative behavior from all partners

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International strategic alliances

MEET U.S.


Why use alliances

Why use Alliances?

MEET U.S.


Profitability and market share example

Profitability and Market Share Example

Profit

BMW Mercedes

Toyota Honda

Chrysler

Market Share

MEET U.S.


Problems in alliances

Problems in Alliances

  • Partner may act opportunistically

  • Partner may misrepresent competencies brought to the partnership

  • Partner fails to make committed resources and capabilities available to other partner

  • Partner may make investments that are specific to the alliance while the other partner does not

MEET U.S.


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