JOINTVENTURE

&STRATEGIC
ALLIANCE
MANOJ MISHRA, CNLU, PATNA.
JOINT VENTURE
• CO OPERATIVE BUSINESS ARRANGEMENT BETWEEN
TWO OR MORE FIRMS
• These firms create new legal entity to fulfil mutual needs
• They share technological skills and specific knowledge
• External Capital
• Synergy in Value
• Toshiba and Sony – memory chip
• GM and Hitachi electronic components for automobiles

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JOINT VENTURE

• JV – contrast to licensing and franchising arrangements each have a

stake

• Non-equity venture one has more stake – Equity venture have equal
stakes

• RATIONALE FOR JOINT VENTURE

• Sharing investment

• Learning – Knowledge acquisition

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JOINT VENTURE

 Augment Financial and Technical ability

 Technological and Management skills

 Diversify the Risk

 Obtain Distribution channel or raw material

 Economies of scale

 Extend business

 Take advantage of tax treatment or political incentives

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JOINT VENTURE

 REASONS FOR FAILURE OF JV

 70% FAIL

 INFLEXIBILITY

 LACK OF COMMITMENT

 LACK OF AGREEMENT

 LACK OF SHARING EXPERTISE AND KNOWLEDGE

 PUBLIC POLICY AND LONG TERM MANAGEMENT

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INTERNATIONAL JOINT VENTURE

 LEGAL REQUIREMENT

 LEARNING PARTNERS SKILLS

 INVESTMENT

 UPGRADING AND IMPROVING SKILLS

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STRATEGIC ALLIANCE

 GENERIC MOTIVES FOR STRATEGIC ALLIANCE

 RIVALS

 SUPPLIERS

 CUSTOMERS

 DESIGN NEW PRODUCTS

 NEW MARKET

 PRE-EMPT COMPETITION

 GENERATE HIGHER REVENUE

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STRATEGIC ALLIANCE
• TYPES OF STRATEGIC ALLIANCE
• COLLUSIONS
• EVOLUTION TO SALE
• ALLIANCES OF COMPLEMENTARY EQUAL
• DISGUISED SALE
• BOOTSTRAP ALLIANCE
• ALLIANCES OF THE WEAK
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MAKING ALLIANCE WORK
• FACTORS MAKING STRATEGIC ALLIANCE WORK
• PARTNER SELECTION
• 3 PRINCIPLE CHARACTERISTIC’S
1. HELPS TO ACHIEVE GOALS –
• MARKET ACCESS
• SHARING COST AND RISK
• NEW PRODUCT DEVELOPMENT
• ACCESS TO CORE COMPETENCIES
2. SHARE VISION OF THE FIRM
3. NO EXPLOITATION
• ALLIANCE STRUCTURE

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MAKING ALLIANCE WORK
• FACTORS MAKING STRATEGIC ALLIANCE WORK
• ALLIANCE STRUCTURE
• PERCENTAGE OF OWNERSHIP
• MIX OF FINANCING
• TECHNOLOGY AND MACHINERY
• DIVISION AND SHARING ACTIVITIES
• STAFFING LOCATION AND CONTROL
• SUCCESS DEPENDS ON
• HOW TO CREATE VALUE?
• HOW VALUE CAN BE MAXIMIZED FOR PARTNERS?
• WHAT ARE THE MECHANISMS FOR CONFLICT RESOLUTIONS?

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MAKING ALLIANCE WORK
• FACTORS MAKING STRATEGIC ALLIANCE WORK
• ALLIANCE STRUCTURE
• NOT GIVE TOO MUCH AWAY
• DIFFICULT TO TRANSFER TECHNOLOGY NOT MEANT TO BE
• ‘WALL OFF’ SENSITIVE TECHNOLOGY
• CONTRACTUAL SAFEGUARDS’
• CROSS LICENCING AGREEMENT
• CREDIBLE COMMITMENT IN ADVANCE
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MANAGING THE ALLIANCE

• MAXIMIZE BENEFITS OF ALLIANCE

• BUILD TRUST AND LEARN FROM EACH OTHER
• BUILD INTERPERSONAL RELATIONSHIP
• ABILITY TO LEARN FROM PARTNER
• MAXIMUM AT LOWER LEVEL OF ORGANIZATION
• LEARN AND APPLY IN OWN ORGANIZATION
• IDENTIFY INFORMATION AND PASS ON TO THE DIVISION
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ADVANTAGES AND DISADVANTAGES OF STRATEGIC
ALLIANCE
ADVANTAGES • DISADVANTAGES

• ENTRY TO FOREIGN MARKETS • LOW COST ROUTE TO

• SHARE COST AND RISKS TECHNOLOGY AND MARKETS

ASSOCIATED
• ZERO SUM GAME
• COMBINE SKILLS AND ASSETS

• TECHNOLOGY STANDARDS FOR

INDUSTRY
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