Chapter 9

International
International Strategic
Strategic Alliances:
Alliances:
Design
Design and
and Management
Management

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Learning Objectives (1 of 3)

•• Know
Know the
the steps
steps for
for implementing
implementing successful
successful
international
international strategic
strategic alliances.
alliances.
•• Describe
Describe how how multinational
multinational companies
companies link link value
value
chains
chains inin international
international strategic
strategic alliances.
alliances.
•• Understand
Understand the the importance
importance ofof choosing
choosing the the right
right
partners
partners for
for alliances.
alliances.
•• Know
Know the
the important
important characteristics
characteristics toto look
look for
for inin
potential
potential alliance
alliance partners.
partners.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Learning Objectives (2 of 3)

•• Distinguish
Distinguish between
between equity-based
equity-based international
international joint
joint
ventures
ventures and
and other
other types
types ofof international
international cooperative
cooperative
alliances.
alliances.
•• Know
Know the
the basic
basic components
components ofof an an international
international
strategic
strategic alliance
alliance contract.
contract.
•• Understand
Understand the the control
control systems
systems and and management
management
structures
structures used
used inin alliance
alliance organizations.
organizations.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Learning Objectives (3 of 3)

•• Appreciate
Appreciate thethe unique
unique problems
problems inin human
human resource
resource
management
management faced faced by
by managers
managers inin alliance
alliance
organizations.
organizations.
•• Realize
Realize the
the importance
importance ofof interfirm
interfirm commitment
commitment and and trust
trust
for
for building
building successful
successful international
international strategic
strategic alliances.
alliances.
•• Understand
Understand how how multinational
multinational companies
companies assess
assess the the
performance
performance ofof their
their international
international strategic
strategic alliances.
alliances.
•• Know
Know when
when companies
companies should
should dissolve
dissolve oror continue
continue their
their
international
international strategic
strategic alliances.
alliances.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Strategic Alliance Issues

•• Although
Although strategic
strategic alliances
alliances are
are aa fast
fast and
and flexible
flexible way
way
toto break
break into
into new
new markets,
markets, they
they are
are inherently
inherently
unstable,
unstable, for
for these
these reasons:
reasons:
•• They
They may
may be be poorly
poorly designed
designed or or managed.
managed.
•• Partnering
Partnering with
with aa company
company from
from aa different
different nation
nation
compounds
compounds management
management difficulties.
difficulties.
•• Partners
Partners may
may disagree
disagree onon how
how toto run
run the
the business.
business.
•• Even
Even profitable
profitable alliances
alliances can
can bebe torn
torn by
by conflict.
conflict.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.1:
Implementing a
Strategic-Alliance Strategy

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Where to Link
in the Value Chain

•• Many
Many benefits
benefits ofof strategic
strategic alliances:
alliances:
•• Gain
Gain access
access toto local
local partner’s
partner’s knowledge
knowledge ofof market,
market,
meet
meet government
government requirements,
requirements, share
share risks,
risks, share
share
technology,
technology,economies
economies ofof scale,
scale, access
access lower
lower cost
cost
raw
raw materials
materials or or labor.
labor.
•• Alliances
Alliances combining
combining same same value-chain
value-chain activities
activities gain
gain
efficiencies,
efficiencies, merge
merge talents,
talents, and
and share
share risks.
risks.
•• Where
Where toto link
link depends
depends on on the
the firm’s
firm’s strategic
strategic objective.
objective.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.2:
Examples of Linking Value Chains
in Strategic Alliances

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.3:
Value-Chain Links in US
International Alliances

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Choosing a Partner:
The Most Important Choice?

•• The
The success
success or or failure
failure ofof aa strategic
strategic alliance
alliance depends
depends
on
on how
how well
well the
the partners
partners get get along.
along.
•• Especially
Especially early
early inin the
the relationship,
relationship, each
each party
party must
must
believe
believe itit has
has aa good
good partner
partner who
who can
can deliver
deliver on
on
promises
promises and and be
be trusted.
trusted.
•• Picking
Picking the
the wrong
wrong partner
partner can
can have
have negative
negative major
major
consequences.
consequences.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Key Criteria for
Choosing a Partner (1 of 3)

•• There
There are
are several
several key
key criteria
criteria for
for choosing
choosing an
an
appropriate
appropriate alliance
alliance partner:
partner:
•• Seek
Seek strategic
strategic complementarity.
complementarity.
•• Prospective
Prospectivepartners
partnersmust
mustunderstand
understandeach
eachother’s
other’s
strategic
strategicobjectives,
objectives,short
short&&long
longterm.
term.
•• Pick
Pick aa partner
partner with
with complementary
complementary skills.
skills.
•• Technical
Technicalcomplementarity
complementarityisismost
mostimportant.
important.
•• Find
Findpartners
partnerswith
withsimilar
similarbut
butnot
notidentical
identicalproducts.
products.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Key Criteria for
Choosing a Partner (2 of 3)

•• Seek
Seek outout companies
companies withwith compatible
compatible management
management
styles.
styles.
•• Seek
Seek aa partner
partner that
that will
will provide
provide the
the “right”
“right” level
level ofof
mutual
mutual dependency;
dependency; partners
partners mustmust rely
rely on
on each
each other.
other.
•• Avoid
Avoid the
the “anchor”
“anchor” partner:
partner:
•• Anchor
Anchor Partner
Partner:: aa partner
partner that
that holds
holds back
back the
the
strategic
strategic alliance
alliance because
because itit cannot
cannot or or will
will not
not
provide
provide its
its share
share ofof the
the funding.
funding.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Key Criteria for
Choosing a Partner (3 of 3)

•• Be
Be cautious
cautious ofof the
the “elephant-and-ant”
“elephant-and-ant” complex.
complex.
•• This
This occurs
occurs when
when two two companies
companies are
are greatly
greatly
unequal
unequal inin size.
size.
•• The
The large
large firm
firm may
may dominate
dominate the
the smaller
smaller firm.
firm.
•• Assess
Assess operating
operating policy
policy differences
differences with
with potential
potential
partners.
partners.
•• Assess
Assess the the difficulty
difficulty ofof cross-cultural
cross-cultural communication
communication
with
with aa likely
likely partner.
partner.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.4:
International Strategic Alliances
for Small Multinational Companies

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Choosing an Alliance Type

•• There
There areare three
three main
main types
types ofof strategic
strategic alliances:
alliances:
•• Informal
Informal international
international cooperative
cooperative alliances
alliances
•• Formal
Formal international
international cooperative
cooperative alliances
alliances (ICAs)
(ICAs)
•• International
International joint
joint ventures
ventures (IJVs)
(IJVs)

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Informal International
Cooperative Alliance

•• An
An Informal
Informal International
International Cooperative
CooperativeAlliance
Alliance is:
is:
•• AAnon-legally
non-legally binding
binding agreement
agreement between
between
companies
companies fromfrom two
two or
or more
more countries
countries toto cooperate.
cooperate.
•• They
They may
may be be agreements
agreements ofof any any kind,
kind, and
and may
may
provide
provide links
links anywhere
anywhere on on their
their value
value chains.
chains.
•• Because
Because there
there isis no
no legally-binding
legally-binding agreement,
agreement,
managers
managers usually
usually limit
limit the
the scope
scope ofof involvement,
involvement,
and
and resist
resist revealing
revealing proprietary
proprietary information.
information.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Formal International
Cooperative Alliances (ICAs)

•• AAformal
formal International
International Cooperative
CooperativeAlliance
Alliance (ICA)
(ICA)
•• Calls
Calls for
for high
high degree
degree ofof involvement
involvement with
with partners.
partners.
•• Usually,
Usually,aa formal
formal contract
contract specifies
specifies what
what each
each
partner
partner will
will give
give and
and receive.
receive.
•• May
May require
require sharing
sharing proprietary
proprietary information,
information, which
which
makes
makes backing
backing out out ofof this
this alliance
alliance more
more difficult.
difficult.
•• Sometimes
Sometimes one one partner
partner may may take
take an
an equity
equity share
share ofof
ownership
ownership ofof thethe other.
other.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 International Joint Ventures
(IJVs)

•• An
An International
International Joint
Joint Venture
Venture isis aa self-standing
self-standing legal
legal
entity
entity owned
owned byby two
two or
or more
more parent
parent companies
companies from from
different
different countries;
countries; each
each has
has anan equity
equity interest.
interest.
•• The
The venture
venture need
need not
not be
be equally
equally owned.
owned.
•• Contributions
Contributions may may bebe cash,
cash, technology
technology or or other
other
resources.
resources.
•• IfIf there
there are
are many
many members,
members, the the entity
entity isis called
called aa
consortium
consortium..
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.5:
Types of Alliances

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Negotiating the Agreement

•• Both
Both formal
formal ICAs
ICAs and
and IJV
IJV require
require aa negotiated
negotiated and
and
signed
signed contract.
contract.
•• Negotiation
Negotiation issues
issues include:
include:
•• Products
Products or
or services
services ofof the
the alliance
alliance
•• Equity
Equity contributions
contributions (cash
(cash or or other
other resources)
resources)
•• Management
Management structure
structure
•• “Prenuptial”
“Prenuptial” agreements
agreements regarding
regarding dissolution
dissolution

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.6:
Selected Questions for a
Strategic-Alliance Agreement

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Organizational Design
in Strategic Alliances

•• Design
Design ofof the
the organization
organization depends
depends on on the
the type
type ofof
alliance
alliance chosen.
chosen.
•• Informal
Informal ICAs
ICAs often
often do
do not
not require
require formal
formal design.
design.
•• Formal
Formal ICAs
ICAs maymay require
require aa separate
separate organizational
organizational
unit
unit housed
housed inin one
one company,
company,with with employees
employees from from
both.
both.
•• IJVs
IJVs are
are separate
separate legal
legal entities,
entities, and
and require
require aa separate
separate
organization
organization toto carry
carry out
out the
the alliance’s
alliance’s objectives.
objectives.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Decision-Making Control

•• There
There are are two
two major
major areas
areas ofof decision
decision making:
making:
•• Operational
Operational decisions
decisions (daily
(daily running
running ofof organization)
organization)
•• Strategic
Strategic decisions
decisions (strategy
(strategy for
for long
long term
term survival)
survival)
•• Majority
Majority owners
owners dodo not
not necessarily
necessarily control
control both
both areas.
areas.
•• IJVs’
IJVs’strategic
strategic decision-making
decision-making takes takes place
place atat the
the level
level
ofof the
the IJV’s
IJV’s board
board ofof directors
directors or or top
top management.
management.
•• InIn non
non equity
equity ICAs,
ICAs, strategic
strategic decisions
decisions remain
remain with with
parent
parent companies.
companies.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management Structures (1 of 3)

•• MNCs
MNCs typically
typically use
use five
five management
management control
control structures
structures
for
for their
their ICAs
ICAs or
or IJVs:
IJVs:
•• 1.1. Dominant
Dominant Parent
Parent::The
The Dominant
Dominant Parent
Parent controls
controls
strategic
strategic and
and operational
operational decision
decision making.
making.
•• Often
Oftenhas
hasmajority
majorityownership
ownership
•• Treats
Treatsthe
theIJV
IJVas
asits
itswholly
whollyowned
ownedsubsidiary
subsidiary
•• 2.2. Shared
Shared Management
Management:: both
both parent
parent companies
companies
contribute
contribute approximately
approximately the
the same
same number
number ofof
managers
managers toto the
the alliance
alliance organization
organization
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management Structures (2 of 3)

•• MNCs
MNCs typically
typically use
use five
five management
management control
control structures
structures
for
for their
their ICAs
ICAs or
or IJVs:
IJVs: (cont’d)
(cont’d)
•• 3.3. Split
Split Control
Control Management
Management:: Partners
Partners usually
usually share
share
strategic
strategic decision
decision making
making and
and make
make functional
functional
decisions
decisions independently.
independently.
•• 4.4. Independent
Independent Management
Management::Alliance
Alliance managers
managers act act
more
more likelike managers
managers fromfrom aa separate
separate company.
company.
•• IJVs
IJVsoften
oftenrecruit
recruitmanagers
managersfrom
fromoutside
outsidethe
theparent
parent
companies.
companies.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Management Structures (3 of 3)

•• MNCs
MNCs typicallytypically use
use five
five management
management control
control structures
structures
for
for their
their ICAs ICAs or
or IJVs:
IJVs: (cont’d)
(cont’d)
•• 5.5. Rotating
Rotating Management:
Management: Managers
Managers fromfrom the
the
partners
partners rotate rotate through
through the
the key
key positions
positions inin the
the
management
management hierarchy. hierarchy.
•• This
This structure
structure isis popular
popular inin developing
developing countries.
countries.
•• ItIt serves
serves toto trains
trains management
management talent
talent and
and helps
helps
toto transfer
transfer expertise
expertise toto the
the developing
developing country.
country.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Choosing a Strategic Alliance
Management Structure (1 of 2)

•• IfIf partners
partners have
have similar
similar technologies
technologies andand know-how,
know-how,
and
and contribute
contribute equally,
equally,aa Shared
Shared Management
Management
structure
structure isis preferred.
preferred.
•• IfIf partners
partners have
have different
different technologies
technologies butbut contribute
contribute
equally,
equally,aa Split
Split Management
Management structure
structure isis preferred.
preferred.
•• IfIf one
one partner
partner has
has aa dominant
dominant equity
equity position,
position, or
or isis
more
more important
important toto one
one partner,
partner,aa Dominant
Dominant
Management
Management structure
structure isis more
more likely.
likely.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Choosing a Strategic Alliance
Management Structure (2 of 2)

•• For
For joint
joint ventures
ventures inin particular:
particular:
•• Mature
Maturejoint
jointventures
venturesmove
movetotoindependent
independentstructures
structuresasasthe
the
joint
jointventure’s
venture’smanagement
managementteam teamgains
gainsmore
moreexpertise.
expertise.
•• Joint
Jointventures
venturesinincountries
countrieswith
withaahigh
highdegree
degreeofof
government
governmentintervention
interventionproduce
produceIJVs
IJVswith
withlocal
localpartner
partner
dominance.
dominance.
•• Independent
Independentmanagement
managementstructures
structuresare
aremore
morelikely
likelywhen
when
the
themarket
marketisisexpanding,
expanding,the
theventure
venturedoes
doesnot
notrequire
requiremuch
much
capital,
capital,or
orthe
theventure
venturedoes
doesnot
notrequire
requiremuch
muchR&D
R&Dinput
input
from
fromits
itsparents.
parents.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Commitment and Trust:
The Soft Side of
Alliance Management
•• Managers
Managers fromfrom both
both failed
failed and
and successful
successful strategic
strategic
alliances
alliances advise
advise the
the importance
importance ofof building
building mutual
mutual trust
trust
and
and commitment
commitment among among partners
partners from
from the
the beginning.
beginning.
•• Commitment
Commitment:: taking
taking care
care ofof each
each other
other andand putting
putting
forth
forth extra
extra effort
effort toto make
make thethe venture
venture work
work
•• Attitudinal
Attitudinal commitment:
commitment: Willingness
Willingness toto dedicate
dedicate
resources
resources and
and efforts
efforts and
and face
face risks
risks toto make
make the
the
alliance
alliance work.
work.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Commitment and Trust:
The Soft Side of
Alliance Management
•• IfIf alliance
alliance partners
partners demonstrate
demonstrate these these aspects
aspects ofof
commitment,
commitment, the the venture
venture willwill develop
develop based
based onon the
the
principles ofof Fair
principles Fair Exchange
Exchange..
•• Fair
Fair Exchange:
Exchange: Fair
Fair exchange
exchange occurs
occurs when
when partners
partners
believe
believe that
that they
they receive
receive benefits
benefits from
from the
the
relationship
relationship equal
equal toto their
their contributions.
contributions.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Calculative Commitment

•• Commitment
Commitment also also has
has aa practical
practical side:
side:
•• Calculative
Calculative Commitment
Commitment:: comes
comes from
from the
the evaluations,
evaluations,
expectations,
expectations, and and concerns
concerns about
about thethe future
future potential
potential
for
for gaining
gaining rewards
rewards from
from the
the relationship.
relationship.
•• Businesses
Businesses require
require tangible
tangible outcomes
outcomes for for aa relationship
relationship
toto continue.
continue.
•• AAstudy
study ofof commitment
commitment inin IJVs
IJVs suggests
suggests thatthat
commitment
commitment increases
increases when
when both
both partners
partners achieve
achieve their
their
strategic
strategic goals.
goals.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Trust

•• Trust
Trust and
and Commitment
Commitment go go hand
hand inin hand.
hand.
•• Credibility
Credibility Trust
Trust:: the
the confidence
confidence thatthat the
the partner
partner has
has
the
the intent
intent and
and ability
ability toto meet
meet promised
promised obligations
obligations and
and
commitments.
commitments.
•• Benevolent
Benevolent Trust:
Trust: the
the confidence
confidence that
that the
the partner
partner will
will
behave
behave with
with goodwill
goodwill andand with
with fair
fair exchange.
exchange.
•• The
The development
development ofof trust
trust between
between alliance
alliance partners
partners
may
may take
take time.
time.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.7:
The Trust/Commitment Cycle

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Why Is Trust Important?

•• Successful
Successful cooperation
cooperation requires
requires alliance
alliance partners
partners toto
contribute
contribute quality
quality inputs
inputs toto the
the organization.
organization.
•• When
When there
there isis no
no trust,
trust, partners
partners hold
hold back
back or or take
take
unfair
unfair advantage
advantage ofof each
each other,
other,making
making failure
failure likely.
likely.
•• Formal
Formal contracts
contracts can can never
never identify
identify all
all issues
issues that
that will
will
arise,
arise, so
so aa trusting
trusting relationship
relationship isis necessary.
necessary.
•• Technology
Technology and and knowledge
knowledge also also include
include tacit
tacit elements
elements
that
that can
can only
only be be shared
shared when
when there
there isis trust.
trust.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Building and Sustaining
Trust and Commitment

•• To
Tobuild
build and
and sustain
sustain trust
trust and
and commitment,
commitment,
Multinational
Multinational managers
managers should
should consider
consider key
key factors:
factors:
•• Pick
Pickyour
yourpartner
partnercarefully.
carefully.
•• Know
Knoweach
eachside’s
side’sstrategic
strategicgoals.
goals.
•• Seek
Seekwin-win
win-winsituations.
situations.
•• Go
Goslowly.
slowly.
•• Invest
Investinincross-cultural
cross-culturaltraining.
training.
•• Invest
Investinindirect
directcommunication.
communication.
•• Find
Findthe
theright
rightlevels
levelsofoftrust
trustand
andcommitment.
commitment.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.8:
The “Right” Levels of
Trust and Commitment

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Assessing the Performance of an
International Strategic Alliance

•• IfIf the
the strategic
strategic intent
intent isis toto produce
produce immediate
immediate results,
results,
use
use standard
standard financial
financial andand efficiency
efficiency measures.
measures.
•• Some
Some strategic
strategic alliances
alliances provide
provide indirect
indirect strategic
strategic
benefits,
benefits, butbut may
may never
never generate
generate profits.
profits.
•• To
Toassess
assess IJV
IJV and
and ICA
ICAperformance,
performance, criteria
criteria other
other than
than
financials
financials mustmust bebe included,
included, such such asas organizational
organizational
learning,
learning, and and subjective
subjective measures
measures like like alliance
alliance
satisfaction
satisfaction and and harmony.
harmony.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 9.9:
Selected Performance Criteria
for Strategic Alliances

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 If the Alliance Does Not Work (1
of 2)

•• IfIf an
an alliance
alliance does
does not
not work,
work, there
there areare two
two choices:
choices:
•• Improve
Improve implementation,
implementation, or or
•• Negotiate
Negotiate anan end
end
•• Know
Know when when toto quit
quit and
and when
when toto invest
invest more.
more.
•• Avoid
Avoid “escalation
“escalation ofof commitment:”
commitment:”
•• Managers
Managers continue
continue inin an
an alliance
alliance longer
longer than
than
necessary
necessary because
because ofof past
past financial
financial and
and emotional
emotional
investments.
investments.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 If the Alliance Does Not Work (2
of 2)

•• Plan
Plan the
the end
end atat the
the beginning.
beginning.
•• Create
Create“prenuptial
“prenuptialagreements”
agreements”atatthethestart
startofofthe
theventure
ventureinin
which
whichthe
thepartners
partnersdecide
decidehow
howtototerminate
terminatethe thealliance.
alliance.
•• The
Theadvantage
advantageofofthe
the“prenuptial”
“prenuptial”isisthat
thatnegotiation
negotiationtakestakes
place
placeatataapositive
positiveand
andfriendly
friendlystage.
stage.
•• Recognize
Recognize that
that death
death ofof the
the venture
venture does
does not
not always
always
mean
mean failure.
failure.
•• Many
Many alliances
alliances are
are short
short term.
term.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Dedicated
Strategic Alliance Units

•• Alliances
Alliances areare so
so common
common that that firms
firms are
are developing
developing
Strategic
StrategicAlliance
Alliance Units
Units toto manage
manage their
their design.
design.They
They
provide
provide processes
processes and and procedures
procedures that that help
help managers:
managers:
•• Identify
Identify the
the need
need for
for an
an alliance
alliance
•• Evaluate
Evaluate partners
partners
•• Negotiate
Negotiate agreements
agreements
•• Structure
Structure the
the alliance
alliance organizations
organizations
•• Develop
Develop specific
specific performance
performance indicators
indicators
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Key Lessons from
Cross-Border Alliances

•• Understand
Understand and and appreciate
appreciate business
business and and cultural
cultural
differences.
differences.
•• Keep
Keep strong
strong executive
executive support
support
•• Communicate.
Communicate.
•• Practice
Practice commitment,
commitment, trust
trust and
and dedication.
dedication.
•• Have
Have “checkpoints”
“checkpoints” asas the
the alliance
alliance isis being
being
implemented.
implemented.
•• Review
Review thethe alliance’s
alliance’s viability.
viability.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Summary

•• The
The use
use ofof international
international strategic
strategic alliances
alliances continues
continues toto
grow
grow inin international
international business.
business.
•• Chapter
Chapter 99 provides
provides aa solid
solid understanding
understanding ofof the
the basics
basics
and
and how
how toto manage
manage strategic
strategic alliances.
alliances.
•• Strategic
Strategic alliances
alliances are
are prone
prone toto failure
failure and
and great
great effort
effort
must
must bebe taken
taken toto make
make them
them successful.
successful.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.