Chapter 7 Implementing Strategy Strategic Alliances Small Businesses

Chapter Learning Goals 1. To become familiar with the types of strategic alliances for international business, the challenges in implementing them, and guidelines for success in alliances 2. To understand what is involved in implementing strategies, including those for small businesses and those involved in emerging economies 3. To consider how to manage the firm’s performance in international joint ventures, with attention to knowledge management, government and cultural influence, role of e-commerce 7 -2 Copyright © 2017 Pearson Education, Inc.

Chapter Learning Goals To become familiar with the types of strategic alliances for international business, the challenges in implementing them, and guidelines for success in alliances 7 -3 Copyright © 2017 Pearson Education, Inc.

Opening Profile: Tag Heuer in Smartwatch Alliance with Google and Intel This alliance marks the first time a top-end brand from the Swiss watch industry has joined the competition for smartwatches Google follows Apple into the high-end segment of wearable technology The partnership between Tag Heuer and Google mixed technical innovation and watchmaking credibility There is a demand for luxury connected watches 7 -4 Copyright © 2017 Pearson Education, Inc.

Strategic Alliances (Cooperative Strategies) Strategi c Alliance s 7 -5 Copyright © 2017 Pearson Education, Inc. • Partnerships between two or more firms that combine financial, managerial, and technological resources and their distinctive competitive advantages to pursue mutual goals

Categories of Strategic Alliances Joint Ventures: Starbucks and Tata Global beverages Equity Strategic Alliances: Daiichi-Sankyo 51% in Ranbaxy Non-Equity Strategic Alliances: UPS and Nike Global Strategic Alliances 7 -6 Copyright © 2017 Pearson Education, Inc.

Global and Cross-Border Alliances: Motivations and Benefits To avoid import barriers, licensing requirements, and protectionist legislation To share the costs of research and development of new products and processes To reduce political risk while making inroads into a new market 7 -7 Copyright © 2017 Pearson Education, Inc.

Global and Cross-Border Alliances: Motivations and Benefits To gain access to specific markets where regulations favor domestic companies; China, Russia To gain rapid entry into a new or consolidating industry and to take advantage of synergies 7 -8 Copyright © 2017 Pearson Education, Inc.

Challenges in Implementing Global Alliances: faster and less risky route to globalization Problems with Shared ownership Differences in national cultures Integration of vastly different structures Conflicts in decision making and control 7 -9 Copyright © 2017 Pearson Education, Inc.

The Dual Role of strategic Alliances 7 -10 Copyright © 2017 Pearson Education, Inc.

Challenges in Implementing Global Alliances Many alliances fail or end up in takeover Choosing the right form of governance The benefits of cooperation versus the dangers of new competition 7 -11 Copyright © 2017 Pearson Education, Inc.

Guidelines for Successful Alliances Choose a partner with compatible strategic goals and objectives. 7 -12 Seek comple -mentary skills, products, and markets Copyright © 2017 Pearson Education, Inc. Work out how each partner will deal with proprietary knowledge or competitively sensitive information Recognize that most alliances only last a few years

Comparative Management in Focus: JVs in Russian Federation 7 -13 Copyright © 2017 Pearson

Comparative Management in Focus: Guidelines for Establishing JVs in 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. Be above board in paying taxes. Set up stricter controls and accountability systems. 7 -14 Copyright © 2017 Pearson Education, Inc.

Comparative Management in Focus: Guidelines for Establishing JVs in Russian Federation Make it clear your firm does not pay bribes Assign the firm’s best managers and given them enough authority Take advantage of local knowledge by hiring Russian considerable managers Designate funds for promotion and advertising to establish an image 7 -15 Copyright © 201 Pearson Education, Inc.

Chapter Learning Goals To understand what is involved in implementing strategies, including those for small businesses and those involved in emerging economies 7 -16 Copyright © 2017 Pearson Education, Inc.

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 the key 7 -17 Copyright © 2017 Pearson Education, Inc.

Strategic Implementation Mc. Donald’s Style Form paradigmbusting arrangements with suppliers Hire locals whenever possible 7 -18 Know a country’s Keep pricing low to build market share. culture before Profits will follow you hit the beach when economies of scale kick in Tweak the standard menu only slightly from place to place Copyright © 2017 Pearson Education, Inc. Maximize autonomy

Breaking Down Barriers for Small Business Exports China offers opportunities for exports for SMEs • agricultural products computers and electronics chemicals non-electrical machinery waste and scrap China is the third largest export market for U. S. companies. 7 -19 Copyright © 2017 Pearson Education, Inc.

Under the Lens: Breaking Down Barriers for Small Business Exports Small businesses make up 97% of American Companies • A goal of NEI is to help firms ship to multiple markets • SBA aims to increase small business exporters through U. S. Export Assistance Centers • In addition to counseling and training, SBA guarantees loans of up to $5 million • Ex-Im Bank provides export financing for amounts over $5 million • 7 -20 Copyright © 2017 Pearson Education, Inc.

Implementing a Global Outsourcing Strategy Examine your reasons for outsourcing. 7 -21 Evaluate the best outsourcin g model. Copyright © 2017 Pearson Education, Inc. Gain the cooperation of manage -ment and staff. Consult your alliance partners. Invest in the alliance.

Under the Lens: Global Supply Chain Risks- The Japanese Disaster Supply chains have become larger and far more complex to manage After the March 2011 earthquake and tsunami in Japan disrupted supply chains Auto industry particularly hard hit Control/risk became issues 7 -22 Copyright © 2017 Pearson Education, Inc

Expansion Paths for emerging economy Firms 7 -23 Copyright © 201 Pearson Education, Inc.

Management in Action: Infosys’ Path From Emerging Start-up to EMNE Infosys is one of the most fascinating success stories to come out of India • A start-up valued at $250 in 1981 to over $36. 1 billion as of Q 3 2015 • A path from a “born global” IT-services company to strategic alliances around the world 7 -24 Copyright © 2017 Pearson Education, Inc.

Management in Action: Infosys’ Path From Emerging Start-up to EMNE • A central goal was the global delivery model: • producing where it is most cost effective • selling where it is most profitable • Most software development work was done in India and the sales focused on the United States • Infosys then focused on being a global company— global clients, operations, staff, and brand image • It is now the global leader in consulting, technology, and outsourcing solutions with 165, 000 employees and clients in over 50 countries 7 -25 Copyright © 2017 Pearson Education, Inc.

Challenges in Implementing Strategies in Emerging Markets “Foreign” firms are often surprised they have trouble competing successfully with local firms Challenges: Poor infrastructure Supply chains/distribution networks Personal challenges 7 -26 Copyright © 2017 Pearson Education, Inc.

Chapter Learning Goals To consider how to manage the firm’s performance in international joint ventures, with attention to knowledge management, government and cultural influence, role of ecommerce. 7 -27 Copyright © 201 Pearson Education, Inc.

Managing Performance in International Joint Ventures IJV Control Choice of Partner • Ensures that the way a joint venture is managed conforms to the parent company’s interests • Suzuki and TVS Motor in India • The strategic freedom in choosing Organiza suppliers, product lines, customers, and -tional so on Design 7 -28 Copyright © 2017 Pearson Education, Inc.

Three Complementary Dimensions of IJV Control IJV General Manager Contractual links with parents Autonom

Knowledge Management in IJVs • Transfer: managing the flow of existing knowledge between parents and from the parents to the IJV • Transformation: managing the transformation and creation of knowledge within the IJV through its independent activities • Harvest: managing the flow of transformed and newly created knowledge from the IJV back to the parents 7 -30 Copyright © 2017 Pearson Education, Inc.

Government Influences on Strategic Implementation Profitability impacted by taxation and restrictions on repatriation Unpredictable changes in governmental regulations China’s new restrictions on foreign investors $2. 5 billion tax bill for Vodaphone in India 7 -31 Copyright © 2017 Pearson Education, Inc.

Cultural Influence on Strategic Implementation: Western ex-pats vs. Hungarian Managers 7 -32 Western Hungarian Team Orientation Individual Orientation Consensual Management Style Autocratic Style Future Planning Mentality Survival Mentality Copyright © 2017 Pearson Education, Inc.

Dimensions of National and Corporate Culture Affecting Alliances: U. K. vs. Europe 1. Organizational 4. Systemization of 2. Participation in 5. Managerial self- 3. Attitudes toward 6. Attitudes toward formality decision making risk 7 -33 Copyright © 2017 Pearson Education, Inc. decision making reliance funding and gearing

French Managers Comment on the U. S. Americans have difficulty accepting foreign managers Americans have difficulty developing a world perspective Americans are very U. S. oriented; the least international of all people 7 -34 Copyright © 2017 Pearson Education, Inc.

E-Commerce on Strategy Implementation Outsourcing necessary tasks to e-commerce Help companies sort through the maze of difficult taxes, duties, language translations, etc Small and medium-sized companies go global with no internal capabilities to carry out global e-commerce functions 7 --36 Copyright © 2017 Pearson Education, Inc.

Conclusion Cross-border strategic alliances are formed 7 -36 for many reasons: market expansion, cost/technology-sharing, avoiding protectionism, synergies SMEs can leverage network relationships to accelerate the internationalization process Alliances take many forms, but can fail in the strategic implementation phase Emerging economy firms have to move quickly Successful alliances require compatible partners and the creation of a system of fits Differences in national culture and changes in the political arena can affect implementation Copyright © 2017 Pearson Education, Incl

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2017 Pearson Education, Inc. 37