3.9: Rationale for and Benefits of Global Strategic Alliances Flashcards
Covers content from: Chapter 7 - Global Alliances
What is a Strategic Alliance?
(just for context - don’t need to memorise)
A strategic alliance is designed to be a collaborative strategy between a variety of businesses formed over a pre determined time frame with the objective of creating mutual benefit.
What is the Rationale for a Global Strategic Alliance?
A company may enter into a strategic alliance for some of the following reasons:
- to expand into a new market,
- improve its product line,
- or develop an edge over a competitor
Strategic Alliances allows two (or more) businesses to work toward a common goal that will benefit both.
What are some Benefits of a Global Strategic Alliance?
(just for context - don’t need to memorise)
- rapid entry into new markets
- reduce the threat of competition by forming an alliance with competitors
- increased sales and market share
- access to expertise
- established distribution channels
- knowledge of culture/customs in target country
What are the 5 types of Global Strategic Alliances?
- outsourcing
- acquisition
- mergers
- joint ventures
- franchising
What is the Rationale for Outsourcing?
The act of moving non-core activities of a firm away from internal operations, and allowing an external specialist party (firm, agency, etc.) to provide or conduct the activities instead. E.g. engineering, payroll and human resources.
What are some Benefits of Outsourcing?
- potentially lower labour costs through the classification of workers as sub contractors not employees
- improve quality of processes by outsourcing to heavily specialised firms
- allows management to focus on core competencies of the business
What is the Rationale for an Acquisition?
When one business buys another to expand into new or greater markets. Can be a hostile acquisition (without the consent of the board of directors) or friendly (purchases majority shares).
What are some Benefits of an Acquisition?
- established customer base able to be utilised
- increased market share by combining customer bases
- skip start-up process that requires expensive and time-heavy research and development
What is the Rationale for a Merger?
The permanent combination of two or more firms where shareholders of two businesses become the shareholders of a new merged business. This strategy is similar to an acquisition but both companies involved are typically of similar size and agree to form a new business.
What are some Benefits of a Merger?
- increased market share
- access to funds/assets to facilitate business growth - economies of scale
- reduces competition for the firm by merging with its competitor
What is the Rationale for a Joint Venture?
A joint venture is an arrangement where two or more businesses join forces to become one entity for a particular purpose or project. Unlike acquisitions and mergers, joint ventures are for specific periods of time and partners remain separate legal entities.
What are some Benefits of a Joint Venture?
- high specialisation in job, share skills
- same objectives which compliment each other (viability)
- access to greater resources, including specialised staff/technology (decreases costs)
What is the Rationale for Franchising?
A franchise is an agreement between two parties: the Franchisor and the Franchisee. The franchisee is allowed to use the brand name, logo, trademark, products/services and business model of the franchisor in return for a franchise fee and royalty
What are some Benefits of Franchising?
- well established brand, reputation and product
- healthy/strong business model
- assistance with leasing, site development, design/equipment purchasing, financial assistance
