MGCR 382 Chapter Notes - Chapter 13: Transfer Pricing, Investment, Joint Venture

96 views4 pages
MGCR382 Chapter 13 Notes: International Strategic Alliances
Strategic alliances business arrangements whereby two or more firms choose to cooperate for their mutual
Cross-licensing of proprietary technology, sharing of production facilities, cofounding of research
projects, and marketing of each other’s products
Joint venture a special type of strategic alliance in which two or more firms join together to create a new
business entity that is legally separate and distinct from its parents. Joint ventures are normally established as
corporations and are owned by the founding parents in whatever proportions they negotiate
The founding firms may jointly share management, with each appointing key personnel who report back
to officers of the parent
One parent may assume primary responsibility
An independent team of managers may be hired to run it (often preferred, because independent
managers focus on what is best for the JV)
A formal management organization allows a joint venture to be broader in purpose, scope, and duration than
other types of strategic alliances.
A non-JV may be formed to allow the partners to overcome a particular hurdle that each faces in the
short run. A JV will be more helpful if the two firms plan a more extensive and long-term relationship
A non-JV has a narrow purpose and scope, such as marketing a new smartphone in Canada. A JV might
be formed if firms wanted to cooperate in the design, production, and sale of a broad line of
telecommunications equipment in North America
Non-JVs are often formed for a specific purpose that may have a natural ending relatively less stable
than JVs
Benefits of Strategic Alliances
Ease of Market Entry
A firm wishing to enter a new market often faces major obstacles, such as entrenched competition or
hostile government regulations
May allow the firm to achieve the benefits of rapid entry while keeping costs down
Many countries are so concerned about the influence of foreign firms on their economies that they
require MNCs to work with a local partner if they want to operate in these countries
At other times, governments strongly encourage foreign companies to participate in joint ventures in
order to promote other policy goals
Shared Risk
Strategic alliances can be used to either reduce or control individual firms’ risks
Shared risk is an important consideration when a firm is entering a market that has just opened up or that
is characterized by much uncertainty and instability
Shared Knowledge and Expertise
A firm may want to learn more about how to produce something, how to acquire certain resources, how
to deal with local governments’ regulations, or how manage in a different environment
Synergy and Competitive Advantage
Through some combination of market entry, risk sharing, and learning potential, each collaborating firm
will be able to achieve more and to compete more effectively than if it had attempted to enter a new
market or industry alone
Unlock document

This preview shows page 1 of the document.
Unlock all 4 pages and 3 million more documents.

Already have an account? Log in

Get OneClass Notes+

Unlimited access to class notes and textbook notes.

YearlyBest Value
75% OFF
$8 USD/m
$30 USD/m
You will be charged $96 USD upfront and auto renewed at the end of each cycle. You may cancel anytime under Payment Settings. For more information, see our Terms and Privacy.
Payments are encrypted using 256-bit SSL. Powered by Stripe.