Professional Documents
Culture Documents
Entry Strategies
Strategic Alliances
Entry Strategies
Information Sources about Overseas Suppliers
Source Usage
Professional contacts 48%
Trade Journals 44%
Directories 31%
Trading companies 30%
Import brokers 24%
Foreign subsidiary 22%
Trade fairs 16%
Foreign trade offices 13%
Entry Strategies
Supplier Ratings on a National Basis
Exporting
Tapping foreign markets through marketing channels
Non-equity Licensing
arrangements Franchising
Management contracts
Turnkey operations
Overview
Entry Strategies
Strategic Alliances
Types of Alliances
Joint Marketing
Shared Distribution
Shared Service
Standard Setting
Research Consortia
Types of Alliances
STRATEGIC
IMPORTANCE
Acquisition
Joint Venture
Joint Marketing
Licensing Agreements
Alliance/Consortia
Technology Trials
Low High
LEVEL OF COMMITMENT
Strategic Alliances
Definition
Information exchange
Reduce risk and search costs
E.g., Technology transfer or technological complementarity
SMEs: cut risk through research sponsored by multiple big firms
Big firms: mitigate risk by supporting multiple innovative SMEs
Complementary resources
New entrant gains access to efficient production facilities,
established channels of marketing and distribution, custr loyalty
Existing competitor may share new technology for rapid expansion of
market share in response to revolutionary innovations
Strategic Alliances
Incentives to Enter Strategic Alliances (contd)
Economies of scale
Until a new entrant has reached it own econs of scale in
prodn, it is at a significant cost disadvantage => take part
in competitors econs of scale
Competitor may reduce average unit cost and create addl
entry barrier
International expansion
International expansion through a domestic partner at
reduced risk (e.g., for commercialization)
May be appropriate if speed of deployment important
Often chosen by small firms (less capital intensive) or as a
result of trade laws/restrictions
Strategic Alliances
Joint Venture
Effect on cooperating firms
New legal entity
Operating (own facilities) vs. non-operating (admin) joint venture
Mutual hostage position by combining real & financial assets
=> Incentives to share technology and info, invest in relationship-
specific assets, monitor each other
Effect on market
Increase in market power by binding upstream suppliers or
downstream distributors => higher entry barrier
Strategic Alliances
Myths
Disguised Sales
A weak company combines with a strong company (often a
(future) direct competitor)
The weakling remains weak and is acquired by the stronger fellow
Disguised sales tend to be short-lived, usually less than five years
Bootstrap Alliances
Combination of a strong and a weak company
Weak one tries to improve its capabilities, but usually remains
weak and is acquired by partner
If successful, the partnership evolves into an alliance of partners
Strategic Alliances
Six Types of Alliances (contd)
Evolutions to a Sale
Two strong and compatible partners
Competitive tensions develop, bargaining power shifts,
one of the partners ultimately sells out to the other
Often success in meeting the initial objectives
May exceed a seven-year period