1. Global Strategy Mike W. Peng c h a p t e r 77 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Strategic Management Mike W. Peng Chapter 7 Strategic Alliances and Networks

2. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Variety of Strategic Alliances Strategic Alliances  A compromise between short-term, pure market transactions (e.g., spot transactions) and long-term, pure organizational solutions (e.g., mergers and acquisitions) The Variety of Strategic Alliances Mergers and Acquisitions (M&A) Mergers and Acquisitions (M&A) Market Transactions Market Transactions Figure 7.1

3. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Comprehensive Model of Strategic Alliances and Networks Figure 7.2

4. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Alliances and Networks: Advantages and Disadvantages Strategic alliances and networks must create value Advantages must outweigh disadvantages Table 7.1 ADVANTAGESDISADVANTAGES Reduce costs, risks, and uncertaintiesPossibilities of choosing the wrong partners Gain access to complementary assets and capabilitiesCosts of negotiation and coordination Opportunities to learn from partnersPossibilities of partner opportunism Possibilities to use alliances networks as real optionsRisks of helping nurture competitors (learning race)

5. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Three-Stage Decision Model of Strategic Alliance and Network Formation Source: Adapted from S. Tallman & O. Shenkar, 1994, A managerial decision model of international cooperative venture formation (p. 101), Journal of International Business Studies, 25 (1): 91–113. Figure 7.3

6. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Stage Two: Contract or Equity? DRIVING FORCES EQUITY-BASED ALLIANCES/NETWORKS NON-EQUITY-BASED ALLIANCES/NETWORKS Nature of shared resourcesHighLow (degree of tacitness and complexity) Importance of direct organizationalHighLow monitoring and control Potential as real optionsHigh (for possible upgrading to M&As)High (for possible upgrading to equity-based relationships) Influence of formal institutionsHigh (when required or encouraged by regulations) High (when required or encouraged by regulations)

7. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Evolution Combating opportunism  Need to protect against opportunism  Contractual safeguards and credible commitment Evolving from strong ties to weak ties  Strong ties are cultivated over a long period of time  Weak ties are characterized by infrequent interaction and low intimacy  Firms have a combination of strong ties and weak ties  Benefits of the different types of ties depend on the firms’ strategies  Many interfirm relationships evolve from an emphasis on strong ties to a focus on weak ties

8. Evolution (cont.) Going through a divorce  Initiation  Going public  Uncoupling  Aftermath Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

9. Performance The performance of strategic alliances and networks  A combination of objective and subjective measures can be used to determine performance  Four factors may influence the performance of alliances and networks: equity, learning and experience, nationality, and relational capabilities The performance of parent firms

10. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Alliance- and Network-Related Performance Measures ALLIANCE/NETWORK LEVELPARENT FIRM LEVEL Objective  Financial performance (for example, profitability)  Product market performance (for example, market share)  Stability and longevity  Stock market reaction Subjective  Level of top management satisfaction  Assessment of goal attainment Table 7.4