2. INTRODUCTION
Forms of foreign market entry strategies move
along a of choice factors such as control, risk,
investment intensity, and potential profitability,
starting from an export activity and continuing
with licensing (franchising, foreign
manufacturing, contract production) and various
forms of FDI (portfolio investments, JVs, M&A,
and greenfield investments), and concluding with
strategic alliances options.
3. CONCEPT
Co-operative relationships between two
companies even competitors that have decided
to share resources to undertake a specific,
mutually beneficial project and achieve mutual
goals while remaining independent
organizations and maintain theirs autonomy .
• Less involved and less permanent than a joint
venture.
4. CHARACTERISTICS OF ACTUAL
STRATEGIC ALLIANCES
Strategic alliances are currently gaining in
popularity, partly due to the characteristics of the
agreement (namely maintaining independency
while pooling forces together to achieve a
common goal) and partly due to market
globalization conditions that require access to
resources and networking structures of a much
larger scale and scope than ever before.
5. FACTORS PROMOTING ALLIANCES
Strategic alliances help companies:
• To find new market entries.
• To shaping of industry evolution.
• To develop a more effective process.
• To expand into a new market or develop
an advantage over a competitor.
• Learning and applying new technologies.
• To rounding out a product line.
• To among other possibilities.
7. TYPES OF STRATEGIC ALLIANCES
Collaborative agreements between
businesses can take a number of forms
and are becoming increasingly common as
businesses aim to get the upper hand over
their competitors.
The main types of strategic alliances are
listed below:
• Profit strategic alliances
• Nonprofit strategic alliances
8. • Joint Ventures • Franchising
• Outsourcing: The 1980s was the decade where outsourcing really
rose to prominence, and this trend continued throughout the 1990s
to today, although to a slightly lesser extent.
• Affiliate Marketing: Affiliate marketing has exploded over recent
years, with the most successful online retailers using it to great
effect. The nature of the internet means that referrals can be
accurately tracked right through the order process. Amazon was the
pioneer of affiliate marketing, and now has tens of thousands of
websites promoting its products on a performance-based basis.
• Technology Licensing: This is a contractual arrangement whereby
trade marks, intellectual property and trade secrets are licensed to
an external firm. It’s used mainly as a low cost way to enter foreign
markets. The main downside of licensing is the loss of control over
the technology – as soon as it enters other hands the possibility of
exploitation arises.
9. • Product Licensing: This is similar to technology licensing except
that the license provided is only to manufacture and sell a certain
product. Usually each licensee will be given an exclusive geographic
area to which they can sell to. It’s a lower-risk way of expanding the
reach of your product.
• R&D: Strategic alliances based around R&D tend to fall into the joint
venture category, where two or more businesses decide to embark on
a research venture through forming a new entity.
• Distributors: If you have a product one of the best ways to market it
is to recruit distributors, where each one has its own geographical
area or type of product. This ensures that each distributor’s success
can be easily measured against other distributors.
• Distribution Relationships: This is perhaps the most common form
of alliance. Strategic alliances are usually formed because the
businesses involved want more customers. It’s a win-win agreement –
the bank gains through offering a great deal to their customers, the
insurance company benefits through increased customer numbers,
and customers gain through receiving an exclusive offer.
10.
11. DIFFERENCE BETWEEN
STRATEGIC ALLIANCE JV
Milly, Fred and James are all naturopaths The Joint Venture however over the
located in different areas around a city. course of their relationship as Milly, Fred
They decide to get together to help each and James get to know and trust each
other with promotion. They do a number other they start to discuss new
of things together. They share a stand at opportunities and they see the potential
an expo, they run a shared advertisement of offering natural therapies treatments
in a natural therapies magazine. They to rural locations. So they decide to set up
even do purchasing together to reduce a Joint Venture to open a mobile natural
costs. All these are alliance strategies. therapies clinic to visit rural towns.
12. ADVANTAGES
Strategically it is a strong alliance when is composed with the
best in each field and the resulting solution is stronger than any
of the part.
• Get instant market access, or at least speed your entry into a
new market.
• Exploit new opportunities to strengthen your position in a
market where you already have a foothold.
• Increase sales.
• Gain new skills and technology.
• Develop new products at a profit.
• Share fixed costs and resources.
• Enlarge your distribution channels.
• Broaden your business and political contact base.
• Gain greater knowledge of international customs and culture.
• Enhance your image in the world marketplace.
13. DISADVANTAGES
There are some inevitable trade-offs to consider:
• Weaker management involvement or less equity stake.
• Fear of market insulation due to local partner's presence.
• Less efficient communication.
• Poor resource allocation.
• Difficult to keep objectives on target over time.
• Loss of control over such important issues as product
quality, operating costs, employees, etc.
14. EXAMPLES
For example, an oil and natural gas company
might form a strategic alliance with a research
laboratory to develop more commercially viable
recovery processes. A clothing retailer might form
a strategic alliance with a single clothing
manufacturer to ensure consistent quality and
sizing. A major website could form a strategic
alliance with an analytics company to improve its
marketing efforts.
15.
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