1. Discuss the reasons that companies embark on cross-border strategic alliances. What other motivations may prompt such alliances? The text notes five motives for cross border alliances: 1) to avoid import barriers, licensing requirements and other protectionist legislation; 2) to share the costs and risks of the research and development of new products and processes; 3) to gain access to specific markets; 4) to reduce political risk while making inroads into a new market; and, 5) to gain rapid entry into a new or consolidating industry, and to take advantage of synergies. Each firm is faced with its own environmental conditions and this may prompt a strategic alliance for other reasons. The GM-Toyota strategic alliance resulting in NUMMI was motivated in part by the desire of each firm to learn. GM wanted to learn about the Toyota production process, and Toyota wanted to learn about American labor relations.
The content notes five thought processes in cross fringe collusions: 1) to evade import hindrances, authorizing necessities and other protectionist enactment; 2) to impart the expenses and dangers of the innovative work of new items and courses of action; 3) to get access to particular markets; 4) to diminish political danger while making advances into another business; and, 5) to addition quick section into another or uniting industry, and to exploit collaborations. Each one firm is confronted with its own ecological conditions and this may incite a key organization together for different reasons. The GM-Toyota key cooperation bringing about NUMMI was roused to some extent by the craving of each one firm to learn. GM needed to look into the Toyota creation methodology, and Toyota needed to research American work relations.
2. Why are there an increasing number of mergers with companies in different industries? Give some examples. What industry do you think will be the next for global consolidation? There are a variety of reasons. In some cases, companies in different industries still can share resources in ways that create operating synergies. In other cases, companies can capitalize on the intangible resources of its new partner—resources like brand names and proprietary processes. Sometimes cross border mergers and acquisitions accompany the deregulation of industry, as it did in telecoms. If so, a likely candidate will be insurance, financial services and banking, all of which are undergoing substantial deregulation in world markets.
There is an assortment of reasons. Sometimes, organizations in diverse businesses still can impart assets in ways that make working collaborations. In different cases, organizations can gain by the immaterial assets of its new accomplice assets like brand names and restrictive courses of action. Some of the time cross fringe mergers and acquisitions go hand in hand with the deregulation of industry, as it did in telecoms. Assuming this is the case, a possible hopeful will be protection, monetary administrations and managing an account, all of which are experiencing considerable deregulation in world markets.
3. Discuss the problems inherent in developing a cooperative alliance in order to enhance competitive advantage while incurring the risk of developing a new competitor. Technology transfer is inevitable in alliance relationship. An alliance partner can quickly learn all it needs to know about a new technology from its partner. Once that happens, it no longer needs its partner in order to conduct business. In essence, the first of the partners to fully learn the other’s technology or business practices obsoletes the venture.
The text calls this the “race to learn.” In order to reduce this risk, firms sometimes “rope-off” certain sensitive areas from their partners. A strategic alliance is a difficult concept in some ways – cooperating with a competitor – and this may requires particular action to avoid strengthening the position of the competitor. In the end of chapter case on Lenovo, IBM will need to make sure that the association they maintain with this Chinese company does not compromise proprietary knowledge which is IBM’s competitive advantage.
Innovation move is certain in partnership relationship. A cooperation accomplice can rapidly realize everything it needs to think around engineering from its accomplice. When that happens, it probably won’t needs its accomplice so as to direct business. Generally, the first of the accomplices to completely take in the other’s innovation or business hones obsoletes the wander. The content calls this the “race to learn.” so as to lessen this danger; firms now and then “rope-off” certain touchy regions from their accomplices. A vital partnership is a troublesome idea in a few ways – collaborating with a contender – and this may obliges specific activity to abstain from reinforcing the position of the contender.
Toward the end of part case on Lenovo, IBM will need to verify that the affiliation they keep up with this Chinese organization does not bargain restrictive information which is IBM’s preferred 4. What are the common sources of incompatibility in cross-border alliances? What can be done in order to minimize them? Differences in culture can cause differences in objectives, leadership style, strategy, governance, control and compensation among other issues. There can also be regulatory differences in the host country that preclude operating the business in the traditional style. Minimizing these difficult areas requires attention paid up front to the problem areas. If the problems are anticipated, it is more likely that they can be resolved in an easier and less costly fashion.
Difference in culture can result in contrasts in destinations, authority style, system, administration, control and payment in addition to different issues. There can likewise be administrative contrasts in the host nation that block working the business in the conventional style. Minimizing these troublesome zones obliges consideration paid in advance to the issue regions. On the off chance that the issues are foreseen, it is more probable that they can be determined in a less demanding and less exorbitant style. 5. Explain what is necessary for companies to successfully implement a global sourcing strategy. Global sourcing isn’t just about finding lower paid workers. In order to fully benefit from a global sourcing strategy a firm must seek to develop into “transformational outsourcing” in which motives for sourcing are examined and acted on. Some recommendations include: examining your reasons for outsourcing, evaluating the best sourcing model, gaining the cooperation of your management staff, consulting with alliance partners, and investing in the alliance.
Worldwide sourcing isn’t pretty much discovering lower paid laborers. To completely profit from a worldwide sourcing method a firm must look to form into “transformational outsourcing” in which thought processes in sourcing are analyzed and followed up on. A few proposals include: inspecting your purposes behind outsourcing, assessing the best sourcing model, picking up the collaboration of your administration staff, counseling with organization together accomplices, and putting resources into the union. 6. Discuss the political and economic situation in the Russia Federation with your class. What has changed since this writing?
What are the implications for foreign companies to start a joint venture there now? This area is still struggling to establish a modern market economy and achieve strong economic growth. The economic picture in 2007 is much brighter with a surging trade surplus fueled by rising world oil prices. The arrest of the Yukos CEO and the political strong-arm tactics of Mr. Putin however, have caused many MNCs to remain cautious. It appears that Russia is feeling the power that its energy resources have given her and is once again threatening parts of the world. The current political and economic climate of Russia makes foreign investment not too desirable, with the possible exception of the energy sector.
This area is even now attempting to create a present day market economy and attain to solid monetary development. The financial picture in 2007 is much brighter with a surging exchange surplus powered by climbing world oil costs. The capture of the Yukos CEO and the political solid arm strategies of Mr. Putin in any case, have brought on numerous MNCs to stay mindful. It gives the idea that Russia is feeling the power that its vitality assets have provided for her and is by and by debilitating parts of the world. The current political and monetary atmosphere of Russia makes outside speculation not very alluring, with the conceivable exemption of the vitality division.
7. What is involved in strategic implementation? What is meant by “creating a system of fits’” with the strategic plan? In order for a strategy to work effectively, there must be a good fit between the company’s structure, systems, and operating processes. This process becomes more complex in an international setting precisely because the fit factors are subject to more cultural and environmental diversity. Further, the cross-cultural communication process discussed in the previous chapters indicates that the feedback needed for strategic adjustments will be more difficult to comprehend. Strategic control procedures, which constitute a continuous process, provide feedback to enable managers to reevaluate strategy so that the company can update and recycle its plans accordingly.
In place for a methodology to work adequately, there must be a decent fit between the organization’s structure, frameworks, and working techniques. This methodology gets to be more intricate in an universal setting definitely on the grounds that the fit elements are liable to more social and ecological differences. Further, the diverse correspondence methodology talked about in the past parts shows that the criticism required for key modification will be more hard to appreciate. Vital control methods, which constitute a persistent procedure, give input to empower directors to reconsider methodology with the goal that the organization can redesign and reuse its plans in like manner.
8. Explain how the host government may affect strategic implementation—in an alliance or another form of entry strategy. There are many areas of influence by host governments on the strategic choice and implementation of foreign firms. The profitability of those firms is greatly influenced, for example, by the level of taxation in the host country and by any restrictions on profit repatriation. Also important influences are government policies on ownership by foreign firms, on labor union rules, on hiring and remuneration practices, on patent and copyright protection. Further, unpredictable changes in governmental regulations can increase the risk of failure in a venture.
There are numerous zones of impact by host governments on the key decision and usage of remote firms. The productivity of those organizations is significantly impacted, for instance, by the level of levy in the host nation and by any confinements on benefit repatriation. Additionally critical impacts are government arrangements on proprietorship by remote firms, on worker’s guild standards, on enlisting and compensation hones, on patent and copyright insurance. Further, unusual changes in administrative regulations can expand the danger of disappointment in a wander. 9. How might the variable of national culture affect strategic implementation?
Use the Mittal Steel example to highlight some of these factors. National culture influences everything, including strategy implementation. As we have learned from the work of Hofstede and others, management theory and practices do not always travel well across national cultures. Strategy implementation involves managerial practices and human relations. Different approaches to “people management” are needed in different cultures. In the case of Mittal Steel, the issue involved the cultural norms of a particular ethnic group in which the preference was to maintain family ownership of businesses. This concept ran counter to global expansion and the founder, Mr. Mittal decided to attempt to break with these cultural values.
National society impacts everything, including technique usage. As we have gained from the work of Hofstede and others, administration hypothesis and practices don’t generally traverse national societies. System execution includes managerial practices and human relations. Diverse methodologies to “individual’s administration” are required in distinctive societies. On account of Mittal Steel, the issue included the social standards of a specific ethnic gathering in which the inclination was to keep up family responsibility for. This idea ran counter to worldwide extension and the originator, Mr. Mittal chose to endeavor to break with these social qualities.
National society impacts everything, including methodology usage. As we have gained from the work of Hofstede and others, administration hypothesis and practices don’t generally traverse national societies. System usage includes managerial practices and human relations. Diverse methodologies to “individuals administration” are required in distinctive societies. On account of Mittal Steel, the issue included the social standards of a specific ethnic gathering in which the inclination was to keep up family responsibility for. This idea ran counter to worldwide extension and the author, Mr. Mittal chose to endeavor to break with these social qualities. 10. Discuss the importance of knowledge management in IVJs and what can be done to enhance effectiveness of that process.
Knowledge management in international joint ventures is critical, especially as we enter a more knowledge-based global economy. The alliance allows for the transfer of knowledge in order to make both firms in the partnership stronger. In order to capitalize on this benefit it is important to overcome cultural differences that may arise. There are essentially three processes which occur in knowledge management of IVJs: transfer, transformation, and harvesting. Successful firms in this area have the personal involvement of the major principles of the parent company and encourage joint learning and sharing.
Adapted from “International Management: Managing Across Borders and Cultures” by Helen Deresky