© 2008 Pearson Prentice Hall 7-1 Chapter 7: Global Alliances and Strategy Implementation PowerPoint by Hettie A. Richardson Louisiana State University

© 2008 Pearson Prentice Hall 7-2 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

© 2008 Pearson Prentice Hall 7-3 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

© 2008 Pearson Prentice Hall 7-4 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

© 2008 Pearson Prentice Hall 7-5 Categories of Alliances Joint Ventures PSA Peugeot-Citroen Group and Toyota Equity strategic alliances TCL-Thompson Electronics

© 2008 Pearson Prentice Hall 7-6 Categories of Alliances Non-equity strategic alliances UPS and Nike Global strategic alliances Covisint

© 2008 Pearson Prentice Hall 7-7 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

© 2008 Pearson Prentice Hall 7-8 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

© 2008 Pearson Prentice Hall 7-9 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

© 2008 Pearson Prentice Hall 7-10 Guidelines for Successful Alliances Choose a partner with compatible strategic goals and objectives Seek complementary skills, products, and markets

© 2008 Pearson Prentice Hall 7-11 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

© 2008 Pearson Prentice Hall 7-12 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

© 2008 Pearson Prentice Hall 7-13 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

© 2008 Pearson Prentice Hall 7-14 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

© 2008 Pearson Prentice Hall 7-15 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

© 2008 Pearson Prentice Hall 7-16 Implementing a Global Sourcing Strategy Examine your reasons for outsourcing Evaluate the best outsourcing model Gain the cooperation of management and staff

© 2008 Pearson Prentice Hall 7-17 Implementing a Global Sourcing Strategy Consult your alliance partners Invest in the alliance

© 2008 Pearson Prentice Hall 7-18 Managing Performance in IJVs IJV control: Ensures that the way a joint venture is managed conforms to the parent company’s interests

© 2008 Pearson Prentice Hall 7-19 Managing Performance in IJVs Choice of partner Suzuki and TVS Motor in India Organizational design and strategic freedom

© 2008 Pearson Prentice Hall 7-20 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

© 2008 Pearson Prentice Hall 7-21 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

© 2008 Pearson Prentice Hall 7-22 Cultural Influences on Strategic Implementation WesternHungarian Source of Difference Focus on core competencies Focus on empire building Systemic Live to workWork to live Cultural/ systemic Play by rules Beat the system Cultural/ systemic Market-driven technology Volume-driven technology Systemic

© 2008 Pearson Prentice Hall 7-23 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

© 2008 Pearson Prentice Hall 7-24 Cultural Influences on Strategic Implementation The American need for autonomy and independence can cause problems with head office Europeans Mercedes in Tuscaloosa, Alabama

© 2008 Pearson Prentice Hall 7-25 E-commerce Impact on Strategy Implementation E-commerce enablers NextLinx

© 2008 Pearson Prentice Hall 7-26 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

© 2008 Pearson Prentice Hall 7-27 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