Chapter 7: Global Alliances and Strategy Implementation

1. Chapter 7:Global Alliances and Strategy Implementation PowerPoint by Hettie A. Richardson Louisiana State University

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

3. 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

4. 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

5. Categories of Alliances • Joint Ventures • PSA Peugeot-Citroen Group and Toyota • Equity strategic alliances • TCL-Thompson Electronics

6. Categories of Alliances • Non-equity strategic alliances • UPS and Nike • Global strategic alliances • Covisint

7. 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

8. 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

9. 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

10. Guidelines for Successful Alliances • Choose a partner with compatible strategic goals and objectives • Seek complementary skills, products, and markets

11. 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

12. 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

13. 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

14. 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

15. 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

16. Implementing a Global Sourcing Strategy • Examine your reasons for outsourcing • Evaluate the best outsourcing model • Gain the cooperation of management and staff

17. Implementing a Global Sourcing Strategy • Consult your alliance partners • Invest in the alliance

18. Managing Performance in IJVs • IJV control: Ensures that the way a joint venture is managed conforms to the parent company’s interests

19. Managing Performance in IJVs • Choice of partner • Suzuki and TVS Motor in India • Organizational design and strategic freedom

20. 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

21. 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

22. Cultural Influences on Strategic Implementation

23. 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

24. Cultural Influences on Strategic Implementation • The American need for autonomy and independence can cause problems with head office Europeans • Mercedes in Tuscaloosa, Alabama

25. E-commerce Impact on Strategy Implementation • E-commerce enablers • NextLinx

26. 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

27. 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