Global Marketing Management A European Perspective Warren J. Keegan Bodo B. Schlegelmilch Production Abroad and Strategic Alliances

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 2 Overview  Production Abroad  Licensing  Franchising  Joint Ventures  Subsidiary/Acquisition  Demands on Strategic Alliances  Co-operative Strategies in Japan: keiretsu  Beyond Strategic Alliances  Summary

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 3 Learning Objectives  Be aware of market entry and expansion alternatives involving production abroad  Know how and when to engage in licensing, franchising, joint ventures or establishing subsidiaries  Be cognisant of strategic alliances (problems and success factors)  Learn about the key characteristics of Japanese keiretsu and their effects on competition  Be aware of new forms of strategic alliances (virtual enterprises)

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 4 Production Abroad and Strategic Alliances: Important Concepts zProduction Abroad zLicensing zFranchising zJoint Venture zSubsidiary/Acquisition zkeiretsu  Virtual Enterprise

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 5 Production Abroad Ownership and Control

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 6 Licensing zContractual arrangement where one company (the licensor) makes an asset available to another company (the licensee) in exchange for compensation zThe licensed asset may be a patent, trade secret or name zRisks for the licensor: yLimited form of participation (licensor is not fully involved) yLimited control yLicensee develops own know-how and can turn into a competitor

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 7 Franchising zFranchising is a special form of licensing zFranchisor is provided with an entire business concept (product and marketing package, managerial know-how) zFranchisor has extensive influence on the franchisee`s operations, but commits few financial resources zInternationally uniform brand image

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 8 Joint Ventures zCompany run by two or more partner firms zRisk is shared and different value chain strengths are combined zInfluence depends on degree of ownership zGood opportunity to build on local know-how zJV finds greater acceptance by local authorities

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 9 Wholly-owned Subsidiaries/Acquisition zA subsidiary represents the most extensive engagement abroad is subsidiary zSubsidiary is either established through the creation of a new facility or the acquisition of an existing firm zCompany has complete decision power and control zInvestor achieves greater flexibility zIn many countries majority or 100% ownership by foreign companies is forbidden

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 10 Demands on Strategic Alliances zCompetitive collaborations that offer significant advantages zCharacteristics: yParticipants remain independent following to the formation of the alliance yParticipants share the benefits of the alliance as well as control over the performance of assigned tasks yParticipants make ongoing contributions in technology, products and other key strategic areas

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 11 Global Strategic Partnership zTwo or more companies develop a joint long-term strategy zThe relationship is reciprocal zTransfer of resources between partners zPartner must know their core strength and be able to defend their position zWhen in new markets, partners must retain identities

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 12 Success Factors of Alliances zMission zStrategy zGovernance zCulture zOrganisation zManagement

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 13 Case Examples of Partnership zCFM International/GE/Snecma- A success story zAT&T/Olivetti - A Failure zBoeing/Japan - A Controversy

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 14 Co-operative Strategies in Japan: Keiretsu zInterbusiness alliance or enterprise group, where different companies or company groups are intertwined zA keiretsu operates in a broad spectrum of markets zkeiretsu executives can sit on each other`s boards and share information zForeign competitors interpret keiretsu relations as cartels which dominate the market and restrict competition zThe most famous keiretsu are Mitsui and Mitsubishi

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 15 Beyond Strategic Alliances zInformation, communication technologies and globalisation have fostered new forms of strategic alliances: zRelationship enterprise yGroups of firms in different industries will be held together by common goals that encourages them to act like a single firm zVirtual corporation yMultiple co-operations which are employed only when needed

Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 16 Summary zCompanies can choose among a wide range of alternatives, when participating in foreign markets zLicensing can increase the bottom-line with little investment zJoint ventures offer opportunities to share risk and combine value chain strengths zOwnership requires substantial resources, but offers full control zCo-operative strategies include global strategic partner- ships, the Japanese keiretsu or the virtual enterprise