THE GLOBAL LOGIC OF

STRATEGIC ALLIANCES

BY,
GROUP 7
NARESH BHOLE(PGPJ03031)
NISCHAL UPRETI (PGPJ03034)
 INTRODUCTION
• Globalization mandates the alliances and thus make the
important part of strategy. For example:- A foreign company
entering into the domestic country will make alliance with
the local company.
• Generally, there is a fear that alliances may create tragedy
like foreign companies conquering the domestic market.
Firms fear that both foot dragging and early exit will born
fear, and would behave like a Trojan Horse.
• Managers have been very slow experimenting with Strategic
Alliances, However they have been ready to experiment
with long term contractual relationships and JVs.
 INTRODUCTION
• Firms fear that both foot dragging and early exit will
born fear, and would behave like a Trojan Horse.
• Alliances are important in the global environment as
companies do not want to establish a full system in each
country where they do business. For example, Glaxo tied
up with first class partners of Japan and hence gained
revenue from sales.
 THE CALIFORNIAZATION OF NEED
• Customer only look out for one thing “VALUE”
• The customers check for best products at lower prices if
possible.
• Customers don’t care about the country of the products.
• Customers check design, quality, price, design, value etc.
THE CALIFORNIAZATION OF NEED
 THE DISPERSION OF TECHNOLOGY
• In today’s era many company depends on the technology
that is provided by other company.
• No company is having their own completely technology set
up.
• It is necessary to operate with the partners in order to gain
technological help.
• For example:- IBM made PC’s with the help of Lotus
Development Corporation, Apple relies on the Samsung for
the hardware component.
THE DISPERSION OF TECHNOLOGY
 THE IMPORTANCE OF FIXED COST
• Companies need to define the strategies that their partners can
maximize the fixed cost. Example:- R&D, employees, brand
name , technologies are fixed cost and be utilized effectively.
• Company needs to invest in the fixed cost such as brand
promotion.
• However, in long term it changes to variable cost due to
adjustment in investment.
• Variable cost focuses on boosting profits whereas fixed cost
focuses on boosting sales.
• Maximizing the fixed cost generally comes with the help of
global alliance.
 DANGER OF EQUITY
• Both the companies that are joint-ventured should have
good relationship among themselves.
• One company having 100% control doesn’t mean that they
are better managed.
• Control should not be the objective of joint venture,
strategy, values and culture should match between
themselves. Example: Hewlett Packard and Yokogawa
gained profits by following good strategy.
• Two obstacles of joint venture are misunderstanding of
contracts and parent company superior behavior.
• To overcome obstacle going global is the solution. For
example Nissan distributes Volkswagen in Japan,
Volkswagen sells 4 wheel drive in Europe.
• Non-equity-dependent can also maximize the contribution
to the fixed cost.
 THE LOGIC OF ENTENTE
• The main purpose of alliance is that company should get return on sales
(ROS) rather than ROI.
• Company that form alliance should not be one sided as it ruins the
relationship.
• Global alliance should be such that it should take benefits from the
domestic players.
THANK YOU