INTERNATIONAL

STRATEGIC ALLIANCE
MODULE 3 – INTERNATIONAL BUSINESS
 WHAT IS INTERNATIONAL STRATEGIC
ALLIANCE
• International Strategic Alliance • A strategic alliance is entered into
(SA) is a corporate restructuring to gain geographical presence,
strategy. achieve economies of
• It is an agreement between two scale through alliance for
entities to pool their resources manufacturing, or gain access to
for achieving a common research/technology, etc.
business goal.
TYPES OF STRATEGIC ALLIANCE

• Horizontal Strategic Alliance • Vertical Strategic Alliance

• It is an alliance between • This kind of alliance is largely
companies operating in the seen between upstream and
same business area. In other downstream value chains of
words, companies that were firms’ products.
competitors previously now join
hands to enhance their
competitiveness against other
competitors in the market.
WAYS OF ENTERING INTO A STRATEGIC
ALLIANCE
1. Joint Venture: Joint Venture is an alliance where two or more entities
enter to pool up their resources in the new entity to achieve the
tangible business objective.
2. Equity Participation: This is an alliance where one entity acquires a
substantial equity stake in another entity, so it has control to drive
business decisions.
• In 2010, Panasonic invested $30 million into Tesla.
• The investment was intended to help build a stronger alliance
between the two companies and to more rapidly advance the electric
vehicle market expansion. As one of the world's leading battery cell
manufacturers, Panasonic's skillset blended strongly with Tesla's
ambition of incorporating proprietary packing using cells from multiple
battery suppliers.
3. Non–Equity: Entities involved in International SA agree to share their core
competencies (expert knowledge) in order to create a competitive advantage.
Since the creation of a new entity does not take place, it does not require equity
participation.

• Barnes & Noble and Starbucks, each member of the alliance simply brings
their resources to the alliance for the other party to capitalize upon. A more
simple contractual obligation is agreed upon for the two entities to pool
resources and capabilities together.
TYPES OF STRATEGIC ALLIANCES

https://youtu.be/ol8BRnOFBBM Video
REASONS FOR STRATEGIC ALLIANCES
• Gaining access to a restricted market (China)
• Gaining a foothold in new marker
• Increase the speed of development of new products
• Maintain leadership position
• Leverage upon the benefits like economies of scale, lower cost
• De-risking the R&D efforts
• Gain market power (especially pricing power)
• Gain access to know-how
• Pool resources to fund large capital-intensive projects
• Gaining a competitive advantage against competitors
STRATEGIC ALLIANCES
Advantages
• May result in gaining customers, especially
ones in unfamiliar markets
• May generate additional revenue and
increase profitability
• May diversify a company's revenue stream
• May reduce operational risk of a company
due to the addition of unique assets
• May positively influence the brand and
perception of the company
Disadvantages
• May require more work in collaborating and
communicating with larger teams
• May result in one side getting a better deal
than the other (even if this wasn't what was
planned)
• May result in conflict should the alliance
members disagree on longer-term strategy
• May negatively influence the brand and
perception of the company