international business strategies andrey g. medvedev, professor september 29, 2009 cems mim...

INTERNATIONAL BUSINESS STRATEGIES

Andrey G. Medvedev,

Professor

September 29, 2009CEMS MIM Programme

© Andrey Medvedev

6. INTERNATIONAL STRATEGIC ALLIANCES

1. STRATEGIC ALLIANCES

2. TYPOLOGY OF INTERNATIONAL STRATEGIC ALLIANCES

3. STRUCTURE OF STRATEGIC ALLIANCES

4. ALLIANCE FORMATION AND IMPLEMENTATION FRAMEWORK

5. EFFECTIVENESS OF STRATEGIC ALLIANCES

© Andrey Medvedev

INTERNATIONAL STRATEGIC ALLIANCES

Responsibilities of International ManagerResponsibilities of International Manager:

Understand the strategic contextstrategic context of an alliances Undertake partner analysispartner analysis Design the alliance legal and organisational structurestructure Develop implementation mechanismimplementation mechanism

© Andrey Medvedev

INTERNATIONAL STRATEGIC ALLIANCE

STRATEGIC ALLIANCE STRATEGIC ALLIANCE IS AT LEAST TWO COMPANIESCOMBINING VALUE CHAIN ACTIVITIESCOMBINING VALUE CHAIN ACTIVITIES FOR THE PURPOSEOF ENHANCING THEIR COMPETITIVE ADVANTAGECOMPETITIVE ADVANTAGEAND/OR CREATING NEW BUSINESSESWITHOUT LOOSING THEIR RESPECTIVE STRATEGIC AUTONOMY

AllianceMarket contract

Merger of capabilitie

s

© Andrey Medvedev

OBJECTIVES OF INTERNATIONAL STRATEGIC ALLIANCES

LOCAL LOCAL (COUNTRY) STRATEGIC ALLIANCESTRATEGIC ALLIANCE– MARKET ENTRY ALLIANCE

– RESOURCE ACCESS ALLIANCE

– OFTEN ORGANISED AS A COUNTRY-BASED COUNTRY-BASED JJOINT VENTUREOINT VENTURE

GLOBAL STRATEGIC ALLIANCEGLOBAL STRATEGIC ALLIANCE– GLOBAL REACHGLOBAL REACH SEEKERS

(DEVELOPING GLOBAL MARKET PRESENCE)

– GLOBAL LEVERAGEGLOBAL LEVERAGE SEEKERS(ENHANCING THE WORLD-WIDE COMPETITIVE CAPABILITIES)

© Andrey Medvedev© Andrey Medvedev

ADVANTAGESOF LOCAL STRATEGIC ALLIANCES FOREIGN PARTNERFOREIGN PARTNER

INCREASE IN MARKET MARKET PENETRATIONPENETRATION

PROFITSPROFITS FROM DIVIDENDS, TRANSFER PRICES,AND MANAGEMENT FEES

ACCESS TO LOCAL NATURAL RESOURCESNATURAL RESOURCESAND SKILLSSKILLS

LOCAL PARTNERLOCAL PARTNER

ACCESS TO FOREIGN PRODUCT AND PROCESS TECHNOLOGYTECHNOLOGY, KNOW-HOWKNOW-HOW, AND MANAGERIAL MANAGERIAL EXPERTISEEXPERTISE


GLOBAL STRATEGIC ALLIANCES

COALITIONSCOALITIONS– ALLIANCES IN THE SAME INDUSTRY

– SEARCH FOR GLOBAL REACH; ‘SIZE’ IS ESSENTIAL

– CO-ORDINATING GEOGRAPHIC ASSETS, POOLING CAPABILITIES

– COST REDUCTION OR COMPETITIVENESS GROWTH

CO-SPECIALISATIONSCO-SPECIALISATIONS– COMPLEMENTARY CAPABILITIES (ASSETS, RESOURCES)

– EACH PARTY CONCENTRATES ON WHAT IT IS GOOD

– CREATION OF NEW BUSINESS OR NEW PRODUCTS/PROCESSES

LEARNING ALLIANCESLEARNING ALLIANCES– EXCHANGE OF TECHNOLOGY, KNOW-HOW, INFORMATION, SKILLS


LEGAL STRUCTUREOF STRATEGIC ALLIANCES NO OWNERSHIP NO OWNERSHIP

– LONG-TERM CONTRACT AGREEMENTSLONG-TERM CONTRACT AGREEMENTS

– JOINT PROJECTSJOINT PROJECTS

SOME OWNERSHIPSOME OWNERSHIP

– MINORITY EQUITY PARTICIPATIONMINORITY EQUITY PARTICIPATION

– JOINT EQUITY PARTICIPATION (CROSS-OWNERSHIP)JOINT EQUITY PARTICIPATION (CROSS-OWNERSHIP)

– JOINT VENTURE JOINT VENTURE (A NEW SEPARATE LEGAL ENTITY)


DYADIC AND MULTILATERALSTRATEGIC ALLIANCES

DYADIC STRATEGIC ALLIANCESDYADIC STRATEGIC ALLIANCES– INVOLVE ONLY TWO PARTNERS

MULTILATERAL STRATEGIC ALLIANCESMULTILATERAL STRATEGIC ALLIANCES

– NETWORKSNETWORKSONE ALLIANCE – SEVERAL PARTNERS

– PORTFOLIOSPORTFOLIOS ONE PARTNER – SEVERAL ALLIANCES

– WEBSWEBS SEVERAL PARTNERS – SEVERAL ALLIANCES

© Andrey Medvedev

INTERNATIONAL NETWORKS

NETWORKS TAKE ACCOUNT OF PARTNERS’ INTERACTIONSPARTNERS’ INTERACTIONS

CO-ORDINATION OF FIRMS’ ACTIVITIESCO-ORDINATION OF FIRMS’ ACTIVITIESIS ACHIEVED THROUGH THESE INTERACTIONS

ROLE OF EACH FIRMROLE OF EACH FIRM IN THE NETWORKHAS TO BE DEFINED CLEARLY

© Andrey Medvedev

STRATEGIC ALLIANCE:SKYTEAM

SkyTeamSkyTeam is a strategic alliance of airlines.

With its 11 member airlines SkyTeam provides 16,409 daily flights to 841 destinations in 162 countries.

The alliance members are Aeroflot, Aeromexico, Air France – KLM Group, Alitalia, China Southern, Continental Airlines, CSA, Delta Air Lines Inc., Korean Air, Northwest Airlines.


STRATEGIC ALLIANCE FORMATIONAND IMPLEMENTATION FRAMEWORK

FORMULATION FORMULATION AN INTERNATIONAL ALLIANCE STRATEGY STRATEGY

PARTNERS’ ANALYSISPARTNERS’ ANALYSIS

NEGOTIATION AND DESIGN NEGOTIATION AND DESIGN OF THE ALLIANCELEGAL AND ORGANISATIONAL STRUCTURE

IMPLEMENTATION IMPLEMENTATION OF THE ALLIANCE

© Andrey Medvedev

STRATEGIC CONTEXT, OBJECTIVES,AND VALUE CREATION IN ALLIANCES

COMPREHENSIVE ALLIANCESCOMPREHENSIVE ALLIANCES– PARTNERS PARTICIPATE

IN ALL FACETS OF CONDUCTING BUSINESSALL FACETS OF CONDUCTING BUSINESS – FROM PRODUCT DESIGN TO MANUFACTURING AND MARKETING

– MOST COMPREHENSIVE ALLIANCES ARE ORGANISEDAS JOINT VENTURESJOINT VENTURES

FUNCTIONAL ALLIANCESFUNCTIONAL ALLIANCES– PRODUCTION ALLIANCES

– R & D ALLIANCES

– MARKETING ALLIANCES

– COMMERCIAL ALLIANCES

– FINANCIAL ALLIANCES


PARTNERS’ ANALYSIS

STUDYINGSTUDYING A POTENTIAL FOREIGN PARTNERFOREIGN PARTNER

FACTORSFACTORS TO TAKE INTO ACCOUNT– STRATEGIC FITSTRATEGIC FIT

RELATIVE COMPETITIVE POSITIONS OF PARTNERS,COMPATIBILITY, THE RELATIVE SAFENESS OF THE ALLIANCE,THE LEARNING POTENTIAL OF THE ALLIANCE

– CAPABILITIES FITCAPABILITIES FITREQUIRED CAPABILITIES AND CONTRIBUTION OF THE PARTNERS (RESOURCES, ASSETS, COMPETENCIES – VALUE CHAINVALUE CHAIN STUDY)

– ORGANISATIONAL FITORGANISATIONAL FIT THE DEGREE OF DECISION-MAKING DECENTRALISATION

– CULTURAL FITCULTURAL FITCORPORATE AND NATIONAL CULTURES


NEGOTIATION AND DESIGN

LEGAL STRUCTURELEGAL STRUCTURE

ORGANISATIONAL DESIGNORGANISATIONAL DESIGN

THE APPOINTMENTS OF EXECUTIVESEXECUTIVES

MANAGEMENT CONTROLMANAGEMENT CONTROL

THE DISTRIBUTION OF VALUETHE DISTRIBUTION OF VALUE

THE REPORTING AND COMMUNICATION PROCESSTHE REPORTING AND COMMUNICATION PROCESS

THE CONFLICT RESOLUTION MECHANISMSTHE CONFLICT RESOLUTION MECHANISMS

© Andrey Medvedev

MANAGEMENT CONTROLIN STRATEGIC ALLIANCES SHARED MANAGEMENT

DOMINANT PARENT

MIXED DECISION-MAKING– SHARED STRATEGIC DECISION-MAKING

AND SEPARATED FUNCTIONAL-LEVEL DECISION-MAKING

INDEPENDENT MANAGEMENT

ROTATING MANAGEMENT


MIXED DECISION-MAKING:RENAULT – NISSAN In 1999, CEOs of Renault Renault and NissanNissan

signed an agreement for a total partnershiptotal partnership.

The two companies are operating independently, but their strategic orientation and the organisation of synergies are supervised by a joint management company, Renault-Nissan BVRenault-Nissan BV.

© Andrey Medvedev

DOMINANT PARENT MANAGEMENT: AVTOVAZ – GM In 2001, AvtoVAZAvtoVAZ, Russia's biggest car maker, General MotorsGeneral Motors, and

the European Bank for Reconstruction and DevelopmentEuropean Bank for Reconstruction and Development (EBRD) created a joint venture for manufacturing VAZ-2123 "Niva" carsunder the Chevrolet (Chevy-Niva) brand.

A new manufacturing plant was built in Togliattiwith the capacity 75 thousand cars per year.

Investment in the project totalled $332 million.AvtoVAZ and GM each holds 41.5 percent stakesin the project, EBRD has 17 percent.

According to the agreement,GM took management controlGM took management controlof the joint venture from Day One.

© Andrey Medvedev

REACHING ADVANTAGESIN STRATEGIC ALLIANCES

EASE OF MARKET ENTRY

KNOWLEDGE AND EXPERTISE SWAP

SYNERGY AND COMPETITIVE ADVANTAGE

SHARED RISK


SYNERGIES IN ALLIANCE:RENAULT – NISSAN

Renault-Nissan Purchasing Organisation Renault-Nissan Purchasing Organisation (RNPO)sources 75 percent of the Alliance 2006 world-wide purchases.

Common platforms are being developed. Cross-manufacturing operations. Common distribution in Europe. Common information system. Exchange of best practices.


ALLIANCE DISSOLUTION

MOST ALLIANCES REPRESENT A TEMPORARY CO-OPERATIONTEMPORARY CO-OPERATION

ENDINGS OF STRATEGIC ALLIANCESARE EITHER STRATEGIC PURPOSE FULFILMENTPURPOSE FULFILMENTOR A FAILUREFAILURE OF THE ALLIANCE

INTERNATIONAL STRATEGIC ALLIANCE FAILURE RATEFAILURE RATEIS AROUND 30–60 PERCENT


ALLIANCE DISSOLUTION:CLOETTA FAZER

In June, 2008, the principal owners of Cloetta Fazer ABCloetta Fazer AB – Oy Karl Fazer Ab (“Fazer Group”) and AB Malfors Promotor – who together own approximately 78.5 percent of the votes in Cloetta Fazer,have struck an agreement concerning a de-merger of Cloetta Fazer.

Through the de-merger, Cloetta Fazer creates the two future companies CloettaCloetta and Fazer ConfectioneryFazer Confectionery.

The new Cloetta intends to apply for a listing on the OMX Nordic Exchange Stockholm.

Fazer Confectionery will be consolidated in the privately held Fazer Group.


INTERNATIONAL NETWORKS:MNCs AND INDEPENDENT FIRMS

INTERNATIONAL NETWORK COULD BE ORGANISEDON THE BASE OF MNC’S SUBSIDIMNC’S SUBSIDIААRIESRIES

INDUSTRIAL NETWORK COULD ALSO INCLUDEINDEPENDENT PARTNERS,WHICH CREATE A STRATEGIC ALLIANCESTRATEGIC ALLIANCETOGETHER WITH MNC’S SUBSIDIARIES

international business strategies andrey g. medvedev, professor september 29, 2009 cems mim...

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