6 - Engaging in Cross-Border Collaboration

Question 1

What is a strategic alliance?

Answer 1

A formal and mutually agreed collaboration between companies where they pool, exchange, or integrate resources.
They remain separate businesses so alliance is different from a merger or acquisition

Question 2

What are the various arrangements for cross-border collaboration in order of interaction level?

Answer 2

1. Cooperation agreement
2. Patent licensing
3. Franchising
4. R&D Consortia
5. Co-production/Buyback
6. Joint venture

Question 3

What are some of the key motivators for alliance formation?

Answer 3

1. Access to technology, resources, or capabilities
2. Ability to compete on a global scale
3. Cross-industry alliances needed for converging industries to gain interdisciplinary skills
4. Economies of scale and reduction of risk
5. May be necessary if the country doesn’t allow foreign ownership

Question 4

What are the benefits of a joint venture at the time of a crisis?

Answer 4

1. Able to raise capital in unconventional ways using low interest loans or capital from owners
2. Can reduce costs through synergies, integrating supply chains
3. Can increase external borrowing if the venture is underleveraged and can repatriate excess cash for corporate needs

Question 5

What are the risks of competitive collaboration?

Answer 5

1. Benefits may be asymmetrical so one side learns a lot and the other not so much
2. One partner can develop a competitive edge over the other
3. Successful partnerships lead to strengthening of competitors
4. Collaboration may be a precursor to a takeover by a firm

Question 6

What are the 3 pre-alliance tasks?

Answer 6

1. Partner selection
2. Escalating commitment
3. Alliance scope

Question 7

What is included under the partner selection pre-alliance task?

Answer 7

1. Analysis of importance and complementarity of assets and capabilities
2. Estimate the future development of partners and analyze durability of complementarity

Distance barriers and availability of information may hinder this

Question 8

How can we mitigate risks associated with the partner selection pre-alliance task?

Answer 8

1. Assess partner’s willingness to invest resources
2. Ensure clear understanding of project goals
3. Monitor the partnership continuously

Question 9

What is included under the escalating commitment pre-alliance task?

Answer 9

Managers’ enthusiasm can cause unrealistic assessment of the benefits and consequences of a partnership

Question 10

How can we mitigate the risks associated with the escalating commitment pre-alliance task?

Answer 10

Have operational managers that will be involved in implementation also involved in pre-decision negotiations

Question 11

What is included under the alliance scope pre-alliance task?

Answer 11

1. Define a simple and focused scope for the partnership
2. Keep complexity as low as possible

Question 12

How can we mitigate the risks associated with the alliance scope pre-alliance task?

Answer 12

Expand the scope of the alliance gradually as partners develop a better understanding and trust

Question 13

What are the 3 post-alliance tasks?

Answer 13

1. Managing the boundary
2. Managing knowledge flows
3. Providing strategic direction

Question 14

What is included under the managing the boundary post-alliance task?

Answer 14

Management through simple mechanisms such as joint committees or by creating a separate legal entity

Question 15

What is included under the managing knowledge flows post-alliance task?

Answer 15

1. Ensure full exploitation of learning potential
2. Prevent outflow of knowledge that should not be shared
3. Ensure gatekeepers transfer relevant information to other parts of the organization

Question 16

What is included under the providing strategic direction post-alliance task?

Answer 16

Equal distribution of decision making power may hinder management so there should be clear leadership in each task and each partner takes responsibility for different tasks

Question 17

What are the benefits to an individual alliance?

Answer 17

1. Achieve economies of scale by pooling resources and capabilities
2. Obtain access to partner’s complementary assets and skills
3. Obtain access to new skills
4. Reduce competition in the market and increase market power

Question 18

What are the costs to an individual alliance?

Answer 18

1. Start-up costs
2. Ongoing coordination costs
3. Leakage where one partner acts opportunistically and appropriates knowledge form the other

Question 19

What are the benefits to an alliance portfolio?

Answer 19

1. Sharing or re-combining knowhow
2. Reinforcing existing coalitions

Question 20

What are the costs to an alliance portfolio?

Answer 20

1. Conflict resolution among existing alliances
2. Dissolution costs if conflicts with existing alliances are not resolved
3. Redundancy and value cannibalization as a result of a new alliance

Question 21

What is the purpose of the RACI diagram?

Answer 21

To precisely define the various actors and their responsibilities in alliance formation

Question 22

What are the components of RACI?

Answer 22

1. Who is Responsible for performing the task
2. Who is Accountable - who has ownership of the task and who will be in trouble if it’s not done
3. Who needs to be Consulted for input?
4. Who should be kept Informed?