STRATEGIC ALLIANCE AND

INTERNATIONAL STRATEGIES
PPT 8
Strategic Alliance Strategies
• A strategic alliance exists whenever two or more independent ganizations
cooperate in the development, manufacture, or sale of products or services.
• Can be grouped into three broad categories:
• A non-equity alliance, cooperating firms agree to work together to develop,
manufacture, or sell products or services, but they do not take equity
positions in each other or form an independent organizational unit to manage
their coperative efforts
• Licensing agreements, by which one firm allow others to sell products
• Supply agreements, by which one firm agree to supply others
• Distribution agreements, by which one firm agrees to distribute the
products of others
 • Equity alliance, cooperating firms supplement contracts with equity holding in
alliance partners. Example: General Motor importing small cars manufactured by
Isuzu, GM purchased 34.3% of Isuzu's Stock
• Joint venture, cooperating firms create are a legally independent firm in which they
invest and from which they share any profits that are created
• Sources of interfirms
• Economies of scale
• Learning from competitors
• Managing risk and sharing costs
• Facilitating tacit collution
• Low cost entry into new markets
• Low cost entry into new new industries
• Low cost exit from industries and industry segments
• Managing uncertainty
Strategic Alliance Strategies
• Ways of cheat in strategic alliance
• Adverse Selection, potential partner misrepresent the value of the skills and
abilities they bring to the alliance
• Moral Hazard, patners provide to the alliance skills and abilities of lower
quality than they promised
• Hold Up, partners exploit the transaction specific investments made by others
in the alliance
International Strategies
• Firms that operate in multiple countries are implementing international strategies
• Potential sources of economies of scope for firms pursuing international
strategies
• Gaining access to new customer for current products or services
• Gaining access to low cost factor of production
• Developing new core competencies
• Leveraging current core competencies in new ways
• Managing corporate risk
International Strategies
• Governments create trade barriers for a wide variety of reasons:
• to raise government revenue,
• to protect local employment,
• to encourage local production to replace imports,
• to protect new industries from competition,
• to encourace foreign direct investment, and
• to promote export activity