Internationalization through Strategic Alliances & Joint Ventures Helena Grba Ulrico Figà-Talamanaca Kasia Kozirog Anne-Sophie Le Boubennec

Plan  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Introduction  Deciding whether to go abroad  Advantages  Risks  Deciding in market to enter  Deciding how to enter the market  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

 Deciding how to enter the market  Indirect or direct exporting  Licensing  Joint Ventures  Direct Investment  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

I – Strategic Alliances  “ A strategic alliance typically includes a constellation of agreements involving technology swaps, joint research and development or co- development, and/or the sharing of complementary assets, such as where one party does manufacturing and the other distribution for a co-developed product”  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Several Kinds of Strategic Alliances  Licensing :  Manufacturing industries  Services & Franchises  Joint Venture :  Specialization across partners  Shared value adding  A particular one : Network Groups  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

II – Joint Ventures  „ Joint ventures are business entities that are owned by two or more firms that share resources and skills"  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Types of Joint Ventures  Nonequity joint ventures  Equity join venture Scale Link  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Nonequity Joint Ventures  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Equity Joint Ventures  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Firm A Firm B Joint Venture Frim A 50% Frim B 50% Frim A Frim B Scale Joint Ventures  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Link Joint Ventures Firm A Joint Venture Frim A 50% Frim B 30% Frim C 20% Frim A Frim B Firm C  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Why Joint Ventures?  To take existing products to foreign markets  To diversify into new business  To strengthen the existing business  To bring the foreign products to local markets  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Strengthening The Existing Business  To obtain economies of scale, new technology and know-how or to diminish the risk of the project  Existing market and existing product  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Taking Products To Foreign Markets  Existing products and new market  Company often looks for a partner in the same branch. Such a partner will have a good feel for the local market  Joint venture covers only some activities  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Bringing Foreign Product To Local Markets  Protection against new technology and new competitors  Better use of existing manufacturing plants and of their distribution channels  Existing market and new products  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Diversification Into New Business  Joint venture may be used to enter both into the new business and the new market  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

 Access to Expertise  Cost Savings  Manufacturing Capability  Reduced Risk  Sharing of Future Profits  Creating a Competitor or a Potential Competitor  Distractions  Introduction I – Strategic Alliances II – Joint Ventures III – Networks Group IV – Case Study  Conclusion Advantages and Disadvantages

Transaction Cost Theory of Equity Joint Venture  Main Objectives  Economie of Scale  Overcoming Entry Barriers  Pooling Knowledge  Reducing Political Risk  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Transaction Cost Theory of Equity Joint Venture  Device inefficient market for intermediate inputs  Raw Materials and Components  Knowledge  Distribution  Loan Capital  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Transaction Cost Theory of Equity Joint Venture  Raw Materials and Components  Loan Capital  Distribution  Economies of scale  Quality Control  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Transaction Cost Theory of Equity Joint Venture  Knowledge Tacit Knowledge Marketing Knowledge Country Specific  Joint Ventures vs. Licensing Patent rightsPatent Rights + Tacit Knowledge  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Transaction Cost Theory of Equity Joint Venture Acquisition Greenfield Investment Joint Venture VS. Assets : Firm – Specific Public Goods Employees  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

III – Network Groups  Definition Companies joined forces for a common purpose that is to say in a large overarching relationship. Alliance groups are a number of companies linkes together by through collaborative agreements.  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Schema  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion Exemple of a Structure Group in 1994 H-P Hitachi Hitachi Samsung Sequoia Stratus

Goals and Advantages  New technology and implantation « Snowball effect »  Maximize joint volume in order to exploit Economie of Scale  Cooperation & Exploitation  Competitive advantages  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Management Differences in Alliance Network  Size  Pattern of Growth  Composition  Internal Competition  Governance Structure  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

The Constraints Organizational Dependance Strategic Gridlock  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Key Facts  The partnership complement one another  Depends of the competitive advantages  Carefull management  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

 Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion OSG Microelectronics  JV between Olin Corporation (US) and CIBA-GEIGY AG (Switzerland) in January 1, 1991  Objective of becoming an innovative supplier of photoresist and polyamide products and services to semiconductor customers worldwide.  Synergistically combine of unique technological capabilities  Operating with a total quality Management (TQM) philosophy to reach a goal of innovation and customer satisfaction.  Early success in the new venture - after six months of operation OSG became number three in microelectronics industry

 Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion OSG Structure & Management  Complex AND decentralized   Departments in Europe, North America and Pacific Rim, coordinated on a global basis,   "Triad alliance"; photoresist supplier represented in all three major electronics markets of the world.  90% of the OSG staff former Olin employees  HR Management area contracted from Olin; to minimize the disruption to employees Olin HR policies was originally adopted.  Dissatisfaction of former CIBA-GEIGY executives and employees  Necessary move for the Ardsley group to East Providence

 Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion The major challenge: JV Integration  Integration of former CIBA-GEIGY staff into venture:  Company handbook and newsletter: again originally taken from Olin – equals partners?  Divided loyalty to the parent firm and to the JV  Physical relocation for Ardsley group, causing uncertainty and anger  Staffing dilemma: "2-year-no-bid-policy"

The Solution: Forging a JV Identity  Focus on communication: important for reaching personal goals as well as to the strategic requirements of the venture  Creating a new and "fair" HR policy  Developing a feeling of loyalty by employees to the JV  Creating a new value system unique to OSG  Introduction I – Strategic Alliances II – Joint Ventures III – Network Groups IV – Case Study  Conclusion

Conclusion

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