Cross cultural management 3e by cullen ch08

Chapter International Strategic Alliances: Design and Management Copyright© 2004 Thomson Learning All rights reserved Learning Objectives •• Know Know the the steps steps for for implementation implementation ofof successful successful international international strategic strategic alliances alliances •• Understand Understand how how toto link link value value chains chains inin international international strategic strategic alliances alliances •• Understand Understand the the importance importance ofof choosing choosing the the right right partners partners for for alliances alliances •• Know Know the the important important characteristics characteristics toto look look for for inin potential potential alliance alliance partners partners Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Know Know the the differences differences between between equity-based equity-based international international joint joint ventures ventures and and other other types types ofof international international cooperative cooperative alliances alliances •• Know Know the the basic basic components components ofof an an international international strategic strategic alliance alliance contract contract •• Understand Understand the the control control systems systems and and management management structures structures used used inin alliance alliance organization organization Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives •• Appreciate Appreciate the the unique unique problems problems inin human human resource resource management management •• Realize Realize the the importance importance ofof interfirm interfirm commitment commitment and and trust trust •• Understand Understand how how companies companies assess assess the the performance performance ofof their their international international strategic strategic alliances alliances •• Know Know when when companies companies should should continue continue or or dissolve dissolve their their international international strategic strategic alliances alliances Copyright© 2005 South-Western/Thomson Learning All rights reserved Strategic Alliances Issues •• Increasingly Increasingly popular popular strategy strategy toto develop develop new new product product and and toto expand expand into into new new markets markets •• However, However, strategic strategic alliances alliances are are very very risky risky and and unstable unstable •• Failure Failure rate rate ofof 30% 30% to to 60% 60% •• Even Even profitable profitable alliances alliances can can be be torn torn by by conflict conflict Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.1: Implementing a Strategic-Alliance Strategy Copyright© 2005 South-Western/Thomson Learning All rights reserved Where to Link in the Value Chain •• Alliance Alliance combining combining same same value-chain value-chain activities activities are are toto gain gain efficiencies, efficiencies, merge merge talents, talents, or or share share risks risks •• Upstream/downstream Upstream/downstream alliances alliances serve serve the the objective objective ofof low-cost low-cost supply/manufacturing supply/manufacturing •• Operations/marketing Operations/marketing alliances alliances provide provide access access toto markets markets •• Depends Depends on on the the objective objective that that the the firm firm seeks seeks toto achieve achieve Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.2: Linking Value Chains in Strategic Alliances: Some Examples Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.3: The Mixture of Value-Chain Links Copyright© 2005 South-Western/Thomson Learning All rights reserved Choosing a Partner: The Most Important Choice? •• Key Key criteria criteria for for picking picking an an appropriate appropriate alliance alliance partner partner •• Seek Seek strategic strategic complementarity complementarity •• Understand Understand objectives objectives and and seek seek complementarity complementarity •• Pick Pick aa partner partner with with complementary complementary skills skills •• One One that that enhances enhances but but does does not not necessarily necessarily duplicate duplicate an an alliance alliance partner’s partner’s skills skills Copyright© 2005 South-Western/Thomson Learning All rights reserved Critical HRM Problems and Issues •• •• •• Staffing Staffing the the alliance alliance workforce workforce Assigning Assigning managers managers strategic strategic or or operations operations tasks tasks Performance Performance assessment—needed assessment—needed for for retention, retention, promotion promotion and and salary salary decisions decisions •• Loyalty—managers Loyalty—managers may may often often feel feel dual dual loyalty loyalty •• To To parent parent and and toto alliance alliance Copyright© 2005 South-Western/Thomson Learning All rights reserved Critical HRM Problems and Issues •• Career Career development—must development—must provide provide clear clear information information on on how how alliance alliance assignments assignments fitfit within within careers careers •• Cultural Cultural differences differences •• Training Training Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.7: HRM Issues in Strategic Alliances Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.7: HRM Issues in Strategic Alliances Copyright© 2005 South-Western/Thomson Learning All rights reserved Commitment and Trust •• Commitment: Commitment:putting putting forth forth extra extra effort effort toto make make the the venture venture work work •• Attitudinal Attitudinal commitment: commitment: willingness willingness toto dedicate dedicate resources resources and and efforts efforts and and face face risks risks toto make make the the alliance alliance work work •• IfIf partners partners demonstrate demonstrate these these aspects aspects ofof commitment, commitment, alliance alliance will will develop develop based based on on fair fair exchange exchange •• Occurs Occurs when when partners partners believe believe that that they they receive receive benefits benefits from from the the relationship relationship equal equal toto their their contributions contributions Copyright© 2005 South-Western/Thomson Learning All rights reserved Calculative Commitment •• Commitment Commitment also also has has aa practical practical side: side: calculative calculative commitment commitment •• Alliance Alliance partner partner evaluations, evaluations, expectations, expectations, and and concerns concerns regarding regarding potential potential rewards rewards from from the the relationship relationship •• Businesses Businesses require require tangible tangible outcomes outcomes for for aa relationship relationship toto continue continue Copyright© 2005 South-Western/Thomson Learning All rights reserved Trust •• •• Commitment Commitment and and trust trust go go hand hand inin hand hand Credibility Credibility trust: trust: confidence confidence that that the the partner partner has has the the intent intent and and ability ability toto meet meet promised promised obligations obligations and and commitments commitments •• Benevolent Benevolent trust: trust: confidence confidence that that the the partner partner will will behave behave with with goodwill goodwill and and with with fair fair exchange exchange Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.8: The Trust/Commitment Cycle Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Is Trust Important? •• When When there there isis no no trust, trust, partners partners hold hold back back or or take take advantage advantage ofof each each other other •• Formal Formal contracts contracts can can never never identify identify all all issues issues that that will will arise arise •• Technology Technology and and knowledge knowledge also also include include tacit tacit elements elements that that can can only only be be learned learned through through trust trust Copyright© 2005 South-Western/Thomson Learning All rights reserved Building and Sustaining Trust and Commitment •• •• •• •• •• •• •• Pick Pick your your partner partner carefully carefully Know Know each each side’s side’s strategic strategic goals goals Seek Seek win-win win-win situations situations Go Go slowly slowly Invest Invest inin cross-cultural cross-cultural training training Invest Invest inin direct direct communication communication Find Find the the right right levels levels ofof trust trust and and commitment commitment Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.9: The “Right” Levels of Trust and Commitment Copyright© 2005 South-Western/Thomson Learning All rights reserved Assessing the Performance of an International Strategic Alliance •• IfIf strategic strategic intent intent isis toto produce produce immediate immediate results, results, standard standard financial financial and and efficiency efficiency measures measures can can be be used used •• Other Other strategic strategic alliance alliance provide provide indirect indirect strategic strategic benefits benefits •• IJV IJV and and ICA ICAperformance performance criteria: criteria: often often must must include include criteria criteria other other than than financial, financial, such such as as organizational organizational learning learning Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.10: Selected Performance Criteria for Strategic Alliance Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 8.10: Selected Performance Criteria for Strategic Alliance Copyright© 2005 South-Western/Thomson Learning All rights reserved If the Alliance Does Not Work •• •• •• •• •• Negotiate Negotiate an an end end or or improve improve implementation implementation Know Know when when toto quit/invest quit/invest more more Avoid Avoid “escalation “escalation ofof commitment” commitment” •• Companies Companies continue continue inin an an alliance alliance longer longer than than necessary necessary because because ofof financial financial and and emotional emotional investments investments Plan Plan end—“prenuptial end—“prenuptial agreements” agreements” Death Death not not always always failure failure Copyright© 2005 South-Western/Thomson Learning All rights reserved ... potential potential partners partners •• Assess Assess the the difficulty difficulty ofof cross- cultural cross- cultural communication communication with with aa likely likely partner partner Copyright©... Split management management structure structure preferred preferred •• IfIf one one partner partner has has dominant dominant equity equity position position •• Dominant Dominant management management... Copyrightâ 2005 South-Western/Thomson Learning All rights reserved Management Structures Split Split control control management management control: control: partners partners usually usually share