1) Why are strategic alliances more critical today than in earlier times?

Ever-changing market dynamics due to globalization, decrease in product lifecycle, need to scale-
up operations and mandate to innovate for sustenance are few factors urging organizations to seek
strategic alliances. Economies of scale, improved strategic position & access to larger markets and
learning opportunities are some of the explicit advantages gained by forming an alliance, with
relatively lower financial risks as compared other forms of co-operation between companies.

2) With reference to both readings, what might be the most important motives for Indian firms to
form alliances?

When compared to organizations that originate from mature markets like Americas and Europe,
Indian firms have arguably farther lengths to travel in the innovation race, especially in automobile
and aligned industries where cutting production costs, learning and innovation at faster pace are
game changers. Current economic conditions catalyze earning capacity amongst Indian middle
class, creating space & opportunity and igniting hunger for growth within Indian firms.

These environmental conditions lure Indian firms to form alliances with motive to learn and adopt
new technologies, scale up operations, cut-down costs and in some cases expand global presence
with minimal financial risks, R&D costs and demanding establishment / capital requirements,
which otherwise turnout to be limiting parameters.

3) What is Volkswagen’s (VW)’s current situation in India (at the time of the case)? What is the
business opportunity in India for VW? Does VW need a partner? Why or why not?

VW entered India in 2001 and has gained market share close to 1% as of 2016. Though it has
world class production facility, high manufacturing costs and waning customer confidence has
caused VW to be non-competitive in Indian Market.

Passenger vehicle segment, growing at CAGR of 10.09% provides huge market potential for
automobile manufactures in the country. The focus areas of VW like sports utility segment
witnessed tremendous growth rate of 29.91% during fiscal year 2016-17, promising growth
opportunities.

VW might consider partnership to gain deeper understanding of Indian market, scale up production
capacities and achieve economy of scale, to seize the growth opportunities in India, thereby
increasing market share, with relatively less capital and risks.

4) Do you think VW and Tata make for good partners? Assess the business case for an alliance.

The alliance between Tata Motors and VW would give both the companies an opportunity to
leverage each other’s strengths and helps in cutting-down production costs, achieving economies
of scale and exposure to advanced technologies in providing better transportation solutions.
However, the conflicting interests of both the players – maximizing the market share in India and
globally might result in misleading goals in the long term and increases the risk of failure.
Alternatively, Tata and VW might consider a complex alliance with clear cut terms to ensure
focused engagement of partners for achieving desired outcomes for both the companies.