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Strategic Alliances in
International Business
Presented BY:
Jatin Vaid
1jatinvaid@gmail.com
International Strategic Alliances
 It refers to cooperative arrangements between
potential or actual competitor firms from
different countries.
2jatinvaid@gmail.com
Reasons for Strategic Alliances
1. Spread and reduce costs
2. Specialize in competencies
3. Avoid or counter competition
4. Secure vertical and horizontal integration
5. Learn from other companies
6. Gain location-specific assets
7. Overcome legal constraints
8. Diversify geographically
9. Minimize exposure in risky environment
3jatinvaid@gmail.com
Managing Strategic Alliances
1. Partner Selection: Selecting the right partner
who:
 Helps firm achieve its strategic goals (market access, cost sharing,
product development, gain access to core competencies)
 Shares the firm’s vision for alliance
 Complement each other and not exploit for opportunist gains
2. Alliance Structure: Structured in a way to
safeguard individual interests
 Difficult to transfer technology not meant to be transferred
 Guard against the risk of opportunism by partner
 Ensuring chances of equitable gains
 Extracting a significant credible commitment from partners in advance
4jatinvaid@gmail.com
Managing Strategic Alliances
3. Managing the alliance
 Sensitivity to cultural differences
 Differences in management styles
 Building interpersonal relationships between managers to facilitate
harmonious dealings
 Ability to learn from alliance partners and apply the knowledge within
organizations
5jatinvaid@gmail.com
Types of Strategic Alliances
1. Licensing
2. Franchising
3. Joint Ventures
4. Mergers
5. Acquisitions
6jatinvaid@gmail.com
1. Licensing
 A Co. (licensor) grants right to intangible
property to another Co. (licensee) to use it in
a specified geographical area for a specified
period, in exchange of a royalty.
 Includes: Patents, inventions, processes,
designs, copyrights, trademarks
 Exclusive or Non-exclusive
 E.g. Microsoft office suite, Walt Disney
Company
7jatinvaid@gmail.com
2. Franchising
 It is a specialized form of licensing in which the
franchiser not only sells an independent
franchisee the use of intangible property but also
operationally assists the its’ business on a
continuing basis through sales promotion and
training
 Franchiser maintains considerable degree of
control over operations and processes of
franchisee
 Long-term commitments
 E.g., Domino’s pizza, McDonald’s
8jatinvaid@gmail.com
3. Joint Ventures
 Establishing a firm that is jointly owned by 2
or more otherwise independent firms.
 Firms have an independent existence outside
the joint venture
 Formed to achieve particular objectives
 E.g., Hero Honda, ICICI Prudential life
insurance Co. Ltd.
9jatinvaid@gmail.com
4. Mergers
 Two separate firms combine or are amalgamated
into a single business firm with a new name
 The assets & operations of two firms belonging to
two different countries are combined to form a
new legal entity
 The firms cease to exist independently
 Centurion Bank and Bank of Punjab merged to
form Centurion Bank of Punjab; Capital First and
IDFC Bank; Bank of Baroda and Vijaya Bank &
Dena Bank
10jatinvaid@gmail.com
5. Acquisitions
 Takeover (buyout) of one organization by
another
 Brownfield investment
 A new firm is not formed, rather the smaller
firm ceases to exist independently and is
bought by a larger firm
 Types: Friendly or Hostile
 E.g., Tata motor’s acquisition of Jaguar Land
Rover (JLR); Facebook acquired Whatsapp
11jatinvaid@gmail.com
Problems with Strategic Alliances
1. Relative importance to partners
2. Divergent objectives
3. Control problems
4. Comparative contributions & appropriations
5. Differences in culture
12jatinvaid@gmail.com
References
1. Daniels, J. D., Radebaugh, L. H., Sullivan, D. P., & Salwan, P.
(2010). International Business: Environments and Operations
(Twelfth Edition ed.). New Delhi: Pearson Education.
2. Hill, C. W., & Jain, A. K. (2011). International Business:
Competing in the Global Marketplace (Sixth Edition ed.). New
Delhi: Tata McGraw Hill.
13jatinvaid@gmail.com
Thank You!
14jatinvaid@gmail.com

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Strategic alliances in International Business

  • 1. Strategic Alliances in International Business Presented BY: Jatin Vaid 1jatinvaid@gmail.com
  • 2. International Strategic Alliances  It refers to cooperative arrangements between potential or actual competitor firms from different countries. 2jatinvaid@gmail.com
  • 3. Reasons for Strategic Alliances 1. Spread and reduce costs 2. Specialize in competencies 3. Avoid or counter competition 4. Secure vertical and horizontal integration 5. Learn from other companies 6. Gain location-specific assets 7. Overcome legal constraints 8. Diversify geographically 9. Minimize exposure in risky environment 3jatinvaid@gmail.com
  • 4. Managing Strategic Alliances 1. Partner Selection: Selecting the right partner who:  Helps firm achieve its strategic goals (market access, cost sharing, product development, gain access to core competencies)  Shares the firm’s vision for alliance  Complement each other and not exploit for opportunist gains 2. Alliance Structure: Structured in a way to safeguard individual interests  Difficult to transfer technology not meant to be transferred  Guard against the risk of opportunism by partner  Ensuring chances of equitable gains  Extracting a significant credible commitment from partners in advance 4jatinvaid@gmail.com
  • 5. Managing Strategic Alliances 3. Managing the alliance  Sensitivity to cultural differences  Differences in management styles  Building interpersonal relationships between managers to facilitate harmonious dealings  Ability to learn from alliance partners and apply the knowledge within organizations 5jatinvaid@gmail.com
  • 6. Types of Strategic Alliances 1. Licensing 2. Franchising 3. Joint Ventures 4. Mergers 5. Acquisitions 6jatinvaid@gmail.com
  • 7. 1. Licensing  A Co. (licensor) grants right to intangible property to another Co. (licensee) to use it in a specified geographical area for a specified period, in exchange of a royalty.  Includes: Patents, inventions, processes, designs, copyrights, trademarks  Exclusive or Non-exclusive  E.g. Microsoft office suite, Walt Disney Company 7jatinvaid@gmail.com
  • 8. 2. Franchising  It is a specialized form of licensing in which the franchiser not only sells an independent franchisee the use of intangible property but also operationally assists the its’ business on a continuing basis through sales promotion and training  Franchiser maintains considerable degree of control over operations and processes of franchisee  Long-term commitments  E.g., Domino’s pizza, McDonald’s 8jatinvaid@gmail.com
  • 9. 3. Joint Ventures  Establishing a firm that is jointly owned by 2 or more otherwise independent firms.  Firms have an independent existence outside the joint venture  Formed to achieve particular objectives  E.g., Hero Honda, ICICI Prudential life insurance Co. Ltd. 9jatinvaid@gmail.com
  • 10. 4. Mergers  Two separate firms combine or are amalgamated into a single business firm with a new name  The assets & operations of two firms belonging to two different countries are combined to form a new legal entity  The firms cease to exist independently  Centurion Bank and Bank of Punjab merged to form Centurion Bank of Punjab; Capital First and IDFC Bank; Bank of Baroda and Vijaya Bank & Dena Bank 10jatinvaid@gmail.com
  • 11. 5. Acquisitions  Takeover (buyout) of one organization by another  Brownfield investment  A new firm is not formed, rather the smaller firm ceases to exist independently and is bought by a larger firm  Types: Friendly or Hostile  E.g., Tata motor’s acquisition of Jaguar Land Rover (JLR); Facebook acquired Whatsapp 11jatinvaid@gmail.com
  • 12. Problems with Strategic Alliances 1. Relative importance to partners 2. Divergent objectives 3. Control problems 4. Comparative contributions & appropriations 5. Differences in culture 12jatinvaid@gmail.com
  • 13. References 1. Daniels, J. D., Radebaugh, L. H., Sullivan, D. P., & Salwan, P. (2010). International Business: Environments and Operations (Twelfth Edition ed.). New Delhi: Pearson Education. 2. Hill, C. W., & Jain, A. K. (2011). International Business: Competing in the Global Marketplace (Sixth Edition ed.). New Delhi: Tata McGraw Hill. 13jatinvaid@gmail.com