Global Marketing Management A European Perspective Production Abroad
Global Marketing Management A European Perspective Production Abroad and Strategic Alliances Warren J. Keegan Bodo B. Schlegelmilch
Overview y. Production Abroad x. Licensing x. Franchising x. Joint Ventures x. Subsidiary/Acquisition y. Demands on Strategic Alliances y. Co-operative Strategies in Japan: keiretsu y. Beyond Strategic Alliances y. Summary Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 2
Learning Objectives z Be aware of market entry and expansion alternatives involving production abroad z Know how and when to engage in licensing, franchising, joint ventures or establishing subsidiaries z Be cognisant of strategic alliances (problems and success factors) z Learn about the key characteristics of Japanese keiretsu and their effects on competition z Be aware of new forms of strategic alliances Keegan/Schlegelmilch Chapter 9 / 3 (virtual enterprises) Global Marketing Management: A European Perspective
Production Abroad and Strategic Alliances: Important Concepts z Production Abroad z Licensing z Franchising z Joint Venture z Subsidiary/Acquisition z keiretsu z Virtual Enterprise Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 4
Production Abroad Ownership and Control Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 5
Licensing z Contractual arrangement where one company (the licensor) makes an asset available to another company (the licensee) in exchange for compensation z The licensed asset may be a patent, trade secret or name z Risks for the licensor: y. Limited form of participation (licensor is not fully involved) y. Limited control y. Licensee develops own know-how and can turn into a competitor Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 6
Franchising z Franchising is a special form of licensing z Franchisor is provided with an entire business concept (product and marketing package, managerial know-how) z Franchisor has extensive influence on the franchisee`s operations, but commits few financial resources z Internationally uniform brand image Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 7
Joint Ventures z Company run by two or more partner firms z Risk is shared and different value chain strengths are combined z Influence depends on degree of ownership z Good opportunity to build on local know-how z JV finds greater acceptance by local authorities Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 8
Wholly-owned Subsidiaries/Acquisition z A subsidiary represents the most extensive engagement abroad is subsidiary z Subsidiary is either established through the creation of a new facility or the acquisition of an existing firm z Company has complete decision power and control z Investor achieves greater flexibility z In many countries majority or 100% ownership by foreign companies is forbidden Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 9
Demands on Strategic Alliances z Competitive collaborations that offer significant advantages z Characteristics: y. Participants remain independent following to the formation of the alliance y. Participants share the benefits of the alliance as well as control over the performance of assigned tasks y. Participants make ongoing contributions in technology, products and other key strategic areas Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 10
Global Strategic Partnership z Two or more companies develop a joint long-term strategy z The relationship is reciprocal z Transfer of resources between partners z Partner must know their core strength and be able to defend their position z When in new markets, partners must retain identities Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 11
Success Factors of Alliances z Mission z Strategy z Governance z Culture z Organisation z Management Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 12
Case Examples of Partnership z CFM International/GE/Snecma- A success story z AT&T/Olivetti - A Failure z Boeing/Japan - A Controversy Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 13
Co-operative Strategies in Japan: Keiretsu z Interbusiness alliance or enterprise group, where different companies or company groups are intertwined z A keiretsu operates in a broad spectrum of markets z keiretsu executives can sit on each other`s boards and share information z Foreign competitors interpret keiretsu relations as cartels which dominate the market and restrict competition z The most famous keiretsu are Mitsui and Mitsubishi Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 14
Beyond Strategic Alliances z Information, communication technologies and globalisation have fostered new forms of strategic alliances: z Relationship enterprise y. Groups of firms in different industries will be held together by common goals that encourages them to act like a single firm z Virtual corporation y. Multiple co-operations which are employed only when needed Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 15
Summary z Companies can choose among a wide range of alternatives, when participating in foreign markets z Licensing can increase the bottom-line with little investment z Joint ventures offer opportunities to share risk and combine value chain strengths z Ownership requires substantial resources, but offers full control z Co-operative strategies include global strategic partnerships, the Japanese keiretsu or the virtual enterprise Keegan/Schlegelmilch Global Marketing Management: A European Perspective Chapter 9 / 16
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