Case Summary 

of The Global Logic of Strategic

Alliances
Entente: the striking of an alliance

In today’s world of rapidly globalizing markets and industries, it’s essential to a company’s strategy to
form alliances.

Why don’t some companies form alliances?

- Alliance means sharing control
- Fear that the alliance will turn out to be a Trojan horse that affords potential competitors easy access to
home markets
- Alliances represent, at best, a convenient, quick-and-dirty means of entry into foreign markets
- And unless managers understand the long-run strategic value of entente (alliances), they’ll grow
frustrated when it proves not to be as cheap and easy

Why are alliances a necessity?

1) Convergence of Consumer Needs and Preferences: Consumers in Japan, US, and Europe seek the
same kinds of lifestyles and products. When individuals buy stuff, they do not care about the
origin/country from which it was produced. They buy it because it represents the kind of value they’re
looking for. 
2) Rapidly Spreading Technology: Technology is becoming more generally available and that makes time
even more of a critical element in global strategy. Nothing stays proprietary for long. And no one player
can master everything. Thus, operating globally means operating with partners leading to a further spread
of technology.
3) Escalating Fixed Costs: To compete in the global arena, companies must incur immense fixed costs.
They’ll need partners who can help them amortize their fixed costs over a much larger market base. With
a partner, the company can also join forces together to maximize contribution to each other’s fixed costs.

Dangers of Equity: Let equity into the picture and companies start to worry about control and return on
investment. Having control does not necessarily mean a better managed company. Joint ventures have
two obstacles: 1) contract; when things change the partners don’t try to compromise and adjust.. they look
to the contract and start pointing fingers. 2) parent companies do not give subsidiaries space to grow and
they react poorly when subsidiaries want to expand into the areas the parents want to keep for
themselves. To make alliances work, firms need to change from a focus on ROI to ROS (return on sales).
An ROS focus means the managers will concern themselves with the ongoing business benefits of the
alliance.
ICL’s Do’s for Successful Collaboration:
1) Treat the collaboration as a personal commitment
2) Anticipate that it will take up management time
3) Mutual respect and trust are essential
4) Both partners must get something out of it. Mutual benefit is vital
5) Make sure to form a tight legal contract
6) Recognize that markets change and be flexible
7) Have mutual expectations of the collaboration and its time scale
8) Get to know your opposite numbers at all levels socially
9) Appreciate that cultures are different
10) Recognize the partner’s interests and independence
11) Have corporate approval
12) Celebrate achievements together