International Joint Ventures and Alliances

• Motivations – Complementarities vs. Size: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 AGGermany

Motivation: Complementarities

Acme Inc.U.S.

Braunschweiger AGGermany

International Joint Ventures

• Cooperative activitiesCooperative activities:– R&D

– Manufacturing

– Marketing

– Sourcing

– Service

– Everything?

International Joint Ventures• Forms of agreementForms of agreement:

– Equity vs. arms-length contract/agreement

• StructureStructure:– 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

• IndependentIndependent– Act as two separate companies; no constraints

• Coordinated / ComplementaryCoordinated / Complementary– Act as two separate companies with

established operational, product, or geographic domains or constraints

• JointJoint– Act as single company

Independent R&D

Acme Inc.U.S.

Braunschweiger AGGermany

Independent R&DCoordinated Marketing

Acme Inc.U.S.

Braunschweiger AGGermany

NorthAmerica

EuropeanUnion

Independent R&DCoordinated Marketing

Joint ManufacturingAcme Inc.

U.S.Braunschweiger AG

Germany

NorthAmerica

EuropeanUnion

A-B Mfg. SA, Mexico

International Strategy:Managing Dual Pressures

Pre

ssur

es f

or G

loba

l Eff

icie

ncy

Pressures for Local Responsiveness

High

Low

HighLow

Multidomestic Strategy

Germany

Mexico

Japan

Entry?Entry?

Acme Inc.U.S.

Multidomestic Strategy

Germany

Mexico

Malaysia

REMEMBER: IJV is also an entry modeREMEMBER: IJV is also an entry mode

Acme Inc.U.S.

IJV in Multidomestic Strategy

Acme Inc.U.S.

Braunschweiger AGGermany

Cervesa SAMexico

Sashimi LTDJapan

IJV in Global Strategy

Acme Inc.U.S.

Braunschweiger AGGermany

Cervesa SAMexico

Sashimi LTDJapan

IJV in Transnational Strategy

Acme Inc.U.S.

Braunschweiger AGGermany

Cervesa SAMexico

Sashimi LTDJapan

Learning and IJVs:1984: The NUMMI Alliance

GM Toyota

NUMMI

1986: Application of Knowledge I GM Toyota

NUMMI

TMM-K

Toyota learned how to:• Tap into US preference• Work in US environment

1990: Application of Knowledge II GM Toyota

NUMMISaturn

GM learned:• Lean manufacturing• Quality

1999: The Fuel Cell AllianceGM Toyota

Alliance

Learning Race(s)

GM

Toyota

Ford

Daimler-Chrysler

Race toTechnology

#1

Race toTechnology

#2