Week 6

Question 1

What are some pros and cons of strategic alliances?

Answer 1

Pros:

• Complementary skills & assets
• Sharing of fixed costs & risks of developing new products/processes
• Gain access to specific markets such as EU where regulations favour domestic companies

Cons:

• Risk of losing competitive advantage to partner
• Success depends on partner selection, structure of alliance and ongoing management

Question 2

When are strategic alliances favourable?

Answer 2

1. The partners’ strategic goals converge whilst their competitive goals diverge
2. Partners can learn from each other while limiting access to their own proprietary skills

Question 3

What are some types of Strategic Alliances?

Answer 3

1. Equity Joint Ventures
2. Project-based Alliance
3. Consortium
4. Cross-licensing Agreement
5. Others (licensing, franchising, cooperation agreements)

Question 4

What are the benefits of Equity modes?

Answer 4

• High profit potential
• High need for control
• Opportunities for new knowledge/learning
• Reputation benefits

Question 5

What are some types of Joint Ventures?

Answer 5

1. Nationality of Partners
   - Traditional
   - Trinational
   - Cross National
   - Intra Firm
2. Ownership
   - Majority
   - Co-owned
   - Minority

Question 6

What are some pros and cons of Joint Ventures?

Answer 6

Pros:

• Local partner’s knowledge mitigates risks
• Shared commitment— limit risks of failure
• Preferential treatment by local government — social costs

Cons:

• High coordination costs
• Risk of creating a competitor or losing control over tech
• Possible opportunistic self-interested behaviour of partner

Question 7

How do you select a partner for a Joint Venture?

Answer 7

Task Related:

1. Knowledge of local market
2. Possess key resources
3. Access to capital

Partner Related:

1. Favourable past associations
2. Similar goals & objectives
3. Trust & reputation

Question 8

What are some contractual considerations in Joint Venture Agreements?

Answer 8

1. Name, Incorporation
2. Responsibilities & contribution of each partner
3. Applicable law
4. Division of profits/earnings

Question 9

What are some pros and cons of Wholly Owned Subsidiaries?

Answer 9

Pros:

• Greatest profit potential
• Strong control
• Least risk of losing control over competitive advantage

Cons:

• Most costly to set up and manage
• Learning curve

Question 10

What are the motivations for a Joint Venture?

Answer 10

1. Resource shortfall
2. Limit risks and commitment
3. Government / Regulatory
4. Competitive / Strategic