International Joint Ventures
and Alliances
• Motivations – Complementarities vs. Size:
– Market access
– Risk / experience (lack of / superior)
– Too small / resource pooling
– Intense competition
– Technology (lack of / superior)
– Learning
Motivation: Size
Acme Inc.
U.S.
Braunschweiger AG
Germany
Motivation: Complementarities
Acme Inc.
U.S.
Braunschweiger AG
Germany
International Joint Ventures
• Cooperative activities:
– R&D
– Manufacturing
– Marketing
– Sourcing
– Service
– Everything?
International Joint Ventures
• Forms of agreement:
– Equity vs. arms-length contract/agreement
• Structure:
– Ownership (50-50 … 51-49 … 90-10)
– Contribution ($, technology, plant, marketing)
– Strategic and operations roles & responsibilities
• Active vs. Passive (strategic option)
• Value-chain scope
Cooperative Modes
• Independent
– Act as two separate companies; no constraints
• Coordinated / Complementary
– Act as two separate companies with
established operational, product, or
geographic domains or constraints
• Joint
– Act as single company
Independent R&D
Acme Inc.
U.S.
Braunschweiger AG
Germany
Independent R&D
Coordinated Marketing
Acme Inc.
U.S.
North
America
Braunschweiger AG
Germany
European
Union
Independent R&D
Coordinated Marketing
Joint Manufacturing
Acme Inc.
U.S.
Braunschweiger AG
Germany
North
America
European
Union
A-B Mfg. SA, Mexico
Pressures for Global Efficiency
International Strategy:
Managing Dual Pressures
High
Low
Low
High
Pressures for Local Responsiveness
Multidomestic Strategy
Acme Inc.
U.S.
Germany
Mexico
Japan
Entry?
Multidomestic Strategy
Acme Inc.
U.S.
Germany
Mexico
Malaysia
REMEMBER: IJV is also an entry mode
IJV in Multidomestic Strategy
Acme Inc.
U.S.
Braunschweiger AG
Germany
Cervesa SA
Mexico
Sashimi LTD
Japan
IJV in Global Strategy
Acme Inc.
U.S.
Braunschweiger AG
Germany
Cervesa SA
Mexico
Sashimi LTD
Japan
IJV in Transnational Strategy
Acme Inc.
U.S.
Braunschweiger AG
Germany
Cervesa SA
Mexico
Sashimi LTD
Japan
Learning and IJVs:
1984: The NUMMI Alliance
GM
Toyota
NUMMI
1986: Application of Knowledge I
GM
Toyota
TMM-K
NUMMI
Toyota learned how to:
• Tap into US preference
• Work in US environment
1990: Application of Knowledge II
GM
Saturn
Toyota
NUMMI
GM learned:
• Lean manufacturing
• Quality
1999: The Fuel Cell Alliance
GM
Toyota
Alliance
Learning Race(s)
GM
Race to
Technology
#2
Toyota
Ford
Race to
Technology
#1
Daimler-Chrysler