Brendan Oluoha 02/15/2012 Chapter 6: Engaging in Cross- Border Collaboration: Managing across Corporate Boundaries What is a Strategic Alliance?

A formal and mutually agreed commercial collaboration between companies The partners pool, exchange or integrate specific business resources Yet they remain separate businesses, making alliances distinct from mergers and acquisitions Strategic Alliances One of innumerable forms of commercial interaction One of four forms/modes of investment Why Strategic Alliances Technology and Knowledge Exchange Global Competition Industry Convergence Economies of Scale Reduction of Risk Alliance as an Alternative to Mergers Risks and Costs of Collaboration Assisting Competitor/Creating New Competitor Possible Take-Over Allowing Knowledge Access while Preventing Acquisition Management of the Venture o Direct vs. Indirect Communication o Trouble with Accents and Fluency o Differing Attitudes toward Hierarchy and Authority o Conflicting Norms for Decision Making o Cultural Dimensions Differences in Culture Popular View Says JVs are: A transitional organization form. Less profitable.

Impossible to manage. A sure way to lose ones technology. Only undertaken as a last resort.

Objective Reality Average age of international JVs nearly 10 years (similar to greenfield startups; longer than acquisitions). Profitability identical with other organizational alternatives. Managing has become easier, so usage up. 40% of all investments in Asia Pacific are JVs. Objective Reality (contd) Some companies which possess strong technology often prefer to use JVs. (i.e., Japanese firms with a Kyousei - group coordination philosophy) The days of government regulation forcing the use of JVs are behind us. Joint Venture Checklist Test the strategic logic. Do you really need a partner? For how long? Does your partner? How big is the payoff for both parties? How likely is success? Is a joint venture the best option? Ensure congruent performance measures exist. Joint Venture Checklist (contd) Partnership and fit. Does the partner share your objectives for the venture? Does the partner have the necessary skills and resources? Will you get access to them? Will you be compatible? Can you arrange an engagement period? Is there a comfort versus competence trade-off? Joint Venture Checklist (contd) Shape and design. Define the ventures scope of activity and its strategic freedom vis--vis its parents. Lay out each parents duties and payoffs to create a win-win situation. Ensure that there are comparable contributions over time.

Establish the managerial role of each partner.

Control in Joint Ventures One parent dominates the ventures decision making (but is this a joint venture?) Parents are both involved in decision making shared split Joint Venture Checklist (contd) Doing the deal. How much paperwork is enough? Trust versus legal considerations? Agree on an endgame. Joint Venture Checklist (contd) Making the venture work. Give the venture continuing top management attention. Manage cultural differences. Watch out for inequities. Be flexible.