Lecture 4 - Alliances and International Joint Ventures Flashcards
What is the definition of an alliance?
a collaborative agreement between companies without forming a new legal identity
What is the definition of a joint venture?
involves creating a new seperate legal entity owned by the participating companies
What are the two types of relationships in alliances and IJVs?
Transactional and Relational
What is a transactional relationship?
only considers the flow of assets between actors in the relationship
transactional can be used to describe Donal Trumps policies, wanting to make deals that slightly favour the US, in terms of imports, to balance budget deficits
What are the 5 key principles that underpin how an alliance works?
1) Focus on how youll work together
2) Use lead indicators to monitor progress during the project rather than lag indicators afterwards
3) Leverage differences - these are the basis of complementarity
4) Emphasis on relational rather than contract based (transactional) governance of the alliance
5) Manage internal stakeholders as much as external ones
Explain the 1st key alliance principle
1) Focus on how you will work together
This needs to include explicit discussion of anticipated work routines and frequency of delivery points, not just higher level expression of goodwill and good sentiment
Explain the 2nd key alliance principle
2) Use lead indicators to monitor progress during the project rather than lag indicators afterwards
Momentum seeps out of a project after initial enthusiasm and disillusionment quickly follows
Regular feedback and measuring of achievements reminds of the goals and forms a narrative to alliance structure
Explain the 3rd key alliance principle
3) Leverage differences - these are the basis of complementarity
Alliances are generally formed to realise the synergistic effects of complementary resources
Explain the 4th key alliance principle
4) Emphasis on relational ratehr than contract based (transactional) governance of the alliance
Successful alliance activity relies on volitional contributions - offering something without expecting immediate reward
Contractual governance is defensive and delimited, offering contributions within the terms of the contract without exceeding it
Explain the 5th key alliance principle
5) Manage internal stakeholders as much as external ones
Alliance champions exist within firms, and are the people most heavily involved and their enthusiasm is not shared for long
Without good integration of alliance activities within the host firms, performance will be lower
What are the fit dimensions in alliances?
Strategic resources
Capabilities
Value proposition
Engagement platforms (e.g. advertising, point of sale, brand messages)
Market demand
What are examples of different cultures within alliances?
A culture where the organisational values and social norms prevalent in the two firms are congruent
A culture where senior managers from both frims involved in this project compatible approaches to business dealings
A culture where the goals and objectives of both firms are compatible with eachother
What is an international joint venture?
A seperate legal entity which has its own resources but also draws on parent companies
There are clear boundaries between the IJV and individual organisations
Often involves one local partner, and ownership may vary
Provide an advantage that IJVs provide over other expansion modes like exporting, licensing, and contract manufacturing
IJVs provide potentially better long term financial payback in comparison with these entry modes
