Chapter 13 international starategic alliances

Chapter 13 international starategic alliances - Chapter 13...

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Chapter 13: International strategic alliances A strategic alliance is a business arrangement whereby two or more firms choose to cooperate for their mutual benefit. Globalization can be a very expensive process, particularly when a firm must perfectly coordinate R&D, production, distribution, marketing, and financial decisions throughout the world in order to succeed. A firm may lack all the necessary internal resources to effectively compete against its rivals internationally. The high costs of researching and developing new products alone may stretch its corporate budget. Thus, a firm may seek partners to share these costs. Or a firm may develop a new technology but lack a distribution network or production facilities in all the national markets it wants to serve. Accordingly, the firm may seek out other firms with skills or advantages that complement its own and negotiate agreements to work together. Cooperation between international firms can take many forms, such as cross- licensing of proprietary technology, sharing of production facilities, cofounding of research projects, and marketing of each other's products using existing distribution networks. Such forms of cooperation are known collectively as strategic alliances. A joint venture (JV) is a special type of strategic alliance in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents. Joint ventures are normally established as corporations and are owned by the founding parents in whatever proportions they negotiate. Although unequal ownership is common, many are owned equally by the founding firms. A firm wishing to enter a new market often faces major obstacles, such as entrenched competition or hostile government regulations. Partnering with a local firm can often help it navigate around such barriers. A strategic alliance may allow the firm to achieve the benefits of rapid entry while keeping costs down. Strategic alliances can be used to either reduce or control individual firms' risks. A firm may want to learn more about how to produce something, how to acquire certain resources, how to deal with local governments' regulations, or how to manage in a different environment information that a partner often can offer. Firms may also enter into strategic alliances in order to attain synergy and competitive advantage. These related advantages reflect combinations of the other advantages discussed in this section: the idea is that through some combination of market entry, risk sharing, and learning potential, each collaborating firm will be able to achieve more and to compete more effectively than if it had attempted to enter a new market or industry alone. The four benefits are easy of entry market, shared risks, shared knowledge and expertise
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This note was uploaded on 04/02/2012 for the course EPSC 200 taught by Professor Jensen during the Winter '08 term at McGill.

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Chapter 13 international starategic alliances - Chapter 13...

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