EXAMINATION OF U.S . AND KOREAN FIRMS

1. SELECTING PARTNERS FOR SUCCESSFUL INTERNTIONAL ALLIANCES • EXAMINATION OF • U.S. AND KOREAN FIRMS Maria PaccagnaniChiara PorcaroRoberta Vilonna Authors: M.TinaDacinMichael A.HittEdward Levitas

2. Alliances are the best strategies for firms to enterinternationalmarkets, butit can represent a challenge for thembecausethereis an high risk to fail, due to severalfactors. In orderto avoidit, managershave to preparetheirfirms to be willing to cooperate and make the right decisions, beforeentering in an alliance.

3. One of the mainpoint to be consideredis the PARTNER SELECTIONand the criteriaused in itsresearch.

4. Understandingthesecriteria can reduce the likelihood of failure and build up a successfulalliance.

5. Risk to fail • Despitetheir spread (the number of joint ventures in the U.S. grew by 423% over the period1986-1995) about 50-60% of alliancesfail, due to partner’sincompatibilities in term of goals, skills, decision- makingprocessapproach and orientation.

6. The right partner’sresearch • The right partner’sresearch can be a demanding work in term of time, butitrepresents the first step to create an alliance and limits the probability to select a partner without the capabilitiesneeded.

7. Oftenfirmsselecttheirpartners, basing on previousworkingexperiences or after a long courtship to assesspartner’sdesires and orientation. • However, under market pressure, managersdon’tspend an adequate time and don’tpayattention in partner selection, so that the alliances go out of business.

8. Take care of theseaspectsprior to consolidate an allianceleadfirms to establish a long termrelationship, especially in those set amongfirms from differentcountries.

9. The cultural contextin whichfirms are involved, the nationaleconomicgrowth, differentgovernmentpolicies, infrastructures and differentorientation can affect the outcome of an alliance. • SO … • Managershave to bear in mindallthesefeatures, whenthey start a new business with anotherfirm.

10. Examiningdifferentapproachesused by U.S and Koreain partner selectioncan higlight the difficulty to cooperate in a cross-boarderalliance.

11. CROSS-BOARDER ALLIANCES • Firms from developedcountries can encounter some problems in formingalliances with firms set in developingcountries. • Firms from NICs(New IndustrializedCountries) suchas South Korea, Taiwan , Hong Kong, Singapore, Mexico and Brazil, differ for their cultural heritage, differentideologies and perspectivesrespect to industrializedcountries.

12. In some cases, the alliancesbetweenNICs and developedcountriesare unsuccessfulbecause of theirdifferentaims. Iffirms from developedcountries can exploit localknowledges, customs and business practicestypical of developedones, on the contrary, firms from NICsaren’tallowed to gain experiences, or theydon’tpossesscapabilitiesneeded.

13. Mainfeaturesaffecting the Partner Selection: • First: CULTURAL HERITAGE • Differencesin the culture of origin can produce differentstrategicorientationsthatmay cause the alliancefailure. • e.g. diverse decision-makingprocessesused by twofirms

14. Second: ECONOMIC DEVELOPMENT • Firmfrom developed and developingcountries can havedifferent targets and motives • e.g. the one decide to establish an alliance in order to find new markets to sell products, butfirms from NICsseekaccess to technologies and export opportunities.

15. Third: GOVERNMENT POLICIES • Governmentsupport with industrial policies can influencealso the firm development and regulations can constrain the pool of availablepartners and influence the decisions to be made.

16. THE CASE OF KOREA

17. Korea We speak about Korea but we are evaluating only the the southern part of the Korean Peninsula: SOUTH KOREAIn fact:

18. South Korea is a presidential republic and is a developed country with the II highest standard of living in Asia and the world's 12th largest economy. The economy is export-driven with production focusing on electronics, automobiles, ships, machinery, petrochemicals and robotics. North Korea is a dictatorship, totalitarian and Stalinist country.The means of production are owned by the state through state-run enterprises and collectivized farms

19. Historical Aspects The 21st century has been referred to as the century of Pacific Asia.Korea has emerged as a major participant in the world market since world war II and, as a result, competition between US and Korean firms in global markets is increasing. No other country has developed so rapidly from a development aid recipient to one of the major donors.Samsung, LG and Hyundai are among the twelve top companies in the world

20. Economic expansion • Korean economic expansion is related to the evolution of Korean Chaebols(large business groupings) and is vigorously supported by government policies. • Alliances with Korean firms can be seen as an entrance into other Asian markets allowing firms to improve their existing partnerships. • No other country has developed so rapidly from a development aid recipient to one of the major donors. Given these factors, Korean firms are likely candidates for cross-border alliances.

21. Focusing on Korea, peculiarities: • Korean culture is strongly influenced by Confucian ideology. • Koreans’ standard of success and failure are more closely associated with approval or disapproval of others than with inner personal standards or goals. • American culture is individualistic. Korean culture is more concerned with the interests of the community. • Defined relationships between business and government.

22. Korean managers have had to: • develop the requisite partnering skills needed to be effective in collaborative ventures. • by working in Chaebol networks and their linkages to the system of state government, Korean managers have developed internal capabilities for network. • research suggests that Korean managers have a stronger long-term orientation than US managers.

23. Partner selection criteria There are differences in the criteria used by US and Korean executives in strategic decision making. Firms from different countries tend to approach strategic problems in different ways. Based on differences in history, cultural and economic factors.

24. Partner selectioncriteria(for Korea):

25. -Industry Attractiveness -Special skills you can learn from partner -Willingness to share expertise -Capabilities to provide quality are of course relevant but the most important criteria are the Technical capabilities:Korean executives in fact place significant emphasis on the financial health of a partner and the peculiar characteristic is that they are specifically searching for partners that have technical capabilities that their firms may not possess but wishes to learn.

26. Strategic alliances…a positive example: “CORNING AND SAMSUNG ” is an American manufacturer of glass, ceramics and related materials, primarily for industrial and scientific applications. is a South Korean multinational company.Products: apparel, chemicals, consumer electronics, electronic components, medical equipment, precision instruments, semiconductors, ships, telecommunications equipment.

27. Corning-Samsung Itis a tested collaboration that starts from far, during the 1980sCorning developed a technology for making glass used in LCD. In 1995 Samsung and Corning established the Samsung Corning Precision. In 2013 Corningentered into a series of agreements with Samsung intended to strengthen product and technology collaborations between the two companies. These agreements will allow Corning to extend its leadership in specialty glass and drive earnings growth. http://www.youtube.com/watch?v=ZXTXQvHC_p0

28. http://www.youtube.com/watch?v=bn7IbgwhwdQ CEO Wendell Weeks discussCorning’sagreement with Samsung:

29. THE CASE OF US

30. CULTURAL HERITAGE • Individualistic tendency, the US are generally known: • to be geocentric • to have little interest in the whole community • To prefere the free market • Separation between private business and public government

31. Goals and objectives • The US, as a developed country, isnotinterested in the technicalcapabilities, but in increasing the financialreturn of the company. • Interested in the management skills and abilities of the potential partner.

32. Daewoo and GM http://www.youtube.com/watch?v=iJM_quShBCk

33. DAEWOO AND GM • Failedjoint venture • Reason: different orientation and goals • Daewoo seeks growth and access to new markets • GM wants to achieve financial returns • NO financial returns for GM, no more investments for the growth of Daewoo Failure.

34. DAIMLER and CHRYSLER

35. The Daimer-Benz merger with Chrysler in 1998 is probably the most famous of all international merger that ended in failure. Cultural differences and organizational culture are both acknowledged to have played their part. • Cultural factors just cannot be ignored on a global level, especially not within mergers and acquisition.

36. The Cultural factors that played here: • Differences in corporate cultures and values • Lack of coordination • Severe lack of trust among the employees • All three resulted in communication failures which in turn caused a sharp reduction in productivity.

37. TO CONCLUDE: • Building a successfulalliance can depend on severalfactors: • Findcomplementaryskills; • Expectingdifferences in firms from differentcountries; • Understand the partner’sdesires and have the sameobjectives; • Be willing to cooperate and create a strong relationship;

38. Thankyou

39. http://en.wikipedia.org/wiki/North_Korea http://en.wikipedia.org/wiki/South_Korea http://www.economist.com/node/371476 http://www.youtube.com/watch?v=bn7IbgwhwdQ http://en.wikipedia.org/wiki/Corning_Inc. http://en.wikipedia.org/wiki/Samsung http://www.corning.com/news_center/news_releases/2013/2013102201.aspx http://en.wikipedia.org/wiki/Samsung_Corning_Precision_Glass http://www.korea.net/NewsFocus/Business/view?articleId=104050 http://www.kwintessential.co.uk/resources/daimlerbenz-chrysler-merger.html http://www.youtube.com/watch?v=iJM_quShBCk