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Collaborative Strategies. Objectives. To explain the major motives that guide managers when choosing a collaborative arrangements for IB. To define the major types of collaborative arrangements. To describe what companies should consider when entering into arrangements with other companies.
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Objectives • To explain the major motives that guide managers when choosing a collaborative arrangements for IB. • To define the major types of collaborative arrangements. • To describe what companies should consider when entering into arrangements with other companies. • To discuss what collaborative arrangements succeed or fail • To discuss how companies can manage diverse collaborative arrangements.
Introduction • Companies must choose an international operating mode, many of which are collaborative. -Collaborative frequently lessens control. -MNEs with fully global orientation use most of the operational modes available. • Strategic alliance-collaborative is of strategic importance to one or more of the companies. • Collaborations-provide different opportunities and problems than do trade or wholly owned direct investment.
I. Motives for Collaborative Arrangements • General Motives for Collaboration 1. Spread and reduce costs - sometimes it is cheaper to get another company to handle work, especially: - cooperative ventures may increase operating costs. 2. Specialize in competencies - Resource-based view of the firm-holds that each company has a unique combination of competencies. - Large, diversified companies realign to focus on their major strengths. - licensing can yield a return on a product that does not fit the company’s strategic priority based on its best competencies.
General Motives for Collaboration (cont) 3. Avoid competition - Companies may combined resource to combat large competitors. -Companies may collude to raise everyone’s profits. 4. Secure vertical and horizontal links -Companies may lack competence or resources to become fully vertically integrated. -Secure horizontal links-may provide finished products and components. 5. Gain market knowledge -learn about a partner’s technology, operating methods, or home markets.
B. International Motives for Collaboration • Gain location-specific assets - Foreign companies may gain operational assets when teaming with local companies. • Overcome legal constraints - country may require foreign companies to share ownership. - Collaboration a means of protecting assets. • Diversify geographically - can smooth its sales and earnings because business cycles differ. • Minimize exposure in risky environments -reduce base of assets located abroad.
II. Types of Collaborative Arrangements • Forms of foreign operations differ in the: -Amount of resources committed to the operation -Proportion of resources located abroad • Type of collaborative arrangement selected may necessitate trade-offs among objectives • Companies with difficult-to-duplicate resource have a wider choice of operating form • Some Considerations in Collaborative Arrangments -The greater reliance on collaboration, the greater the loss of control over decision making - External arrangements imply the sharing of revenues
III. Problems of Collaborative Arrangements 1. Collaboration’s importance to partners -One partner may devote more managerial attention to the collaboration. 2. Differing objektif -Partners’ objectives may evolve differently over time. 3. Control problems -Company loses some control over assets shared with others in collaborative arrangement. -Without control residing with one of the partners, joint operation may lack direction.
4. Partners’ contributions and appropriations -Partners’ capabilities to contribute may change. -Suspicions may arise about what other partner is taking from the operation. 5. Differences in culture i) Companies differ by nationality in how they evaluate the success of their operations. -differences can mean that one partner is satisfied while the other is not. ii) Some companies prefer not to collaborate with companies of very different cultures -joint ventures from culturally distant countries survive at least as well as those between partners from similar cultures. iii) Differences in corporate cultures may also create problems within joint ventures -compatibility of corporate cultures is important in cementing relationships.
