Looks at
The nature of potential alliances
Options of tie-ups available

Having examined the state of our industry in the country of our choice in further detail, the framework of our search for our joint venture/alliance partner has now narrowed down. What we need to do next before actually making our final choice, is to clarify the type of tie-up which is both possible and desirable for us to enter into.

Determining the Options Available

  • What determines the nature of our potential alliance?
  • Towards what kind of tie-up does our corporate strategy point us? (Quick expansion of market share / long-term development, share/gain know-how, etc.)
  • In what direction do our core competencies lead?
  • What are the options possible in the overall scheme of things?
     - Exports?
    - Licensing?
    - Franchising?
    - Management contracting?
    - Contract manufacturing?
    - Technical assistance agreement?
    - Buying into existing business?
    - Taking over existing business?
    - Setting up a joint venture?
    - Setting up a full business system independently?
Sears: Contract Manufacturing

Sears Roebuck department stores in Spain and Mexico carry goods manufactured locally under Sears supervision.

Coca-cola: Licensing

Coca-Cola's global development strategy consists of franchising bottlers and giving them the right to manufacture in their home countries, but supplying the main patented syrup from Coca-Cola's own plants.

Rothmans: Varying Strategies

Rothmans International is building a cigarette factory in St Petersburg, Russia, of which it will own 75%. In Poland and the former Yugoslavia, however, Rothmans has licensing arrangements.

Electrolux: Takeover of Existing Businesses

Electrolux's global growth was achieved via acquisition of various companies around the world, e.g. White Consolidated Industries in the USA, Bendex in the UK and Zanussi Industries in Italy.

Ricoh: Learning Before Take-off

Ricoh entered the US market by working with Savin Corporation that had well-established sales channels and the marketing expertise. Once it acquired the marketing know-how and reached the required level of competitiveness, Ricoh began to sell on its own.

Firming up our Choice of Tie-up

  • Is a rep office all we need now?
  • Would a technology transfer be possible?
  • Are there any other non-investment routes?
  • Or are we going to invest?
  • Will it be a majority/minority equity choice?
  • Is a strategic alliance what we need?

  • How does local legislation affect the potential tie-up in terms of:
    - Ownership
    - Finance
    - Distribution of profits/repatriation
    - Personnel?
  • Is our industry a priority here?
  • Are there incentives involved?
  • What are the bureaucratic delays involved in the various options?
Nocil and Dow Elanco : Environmental Protection

NOCIL of India proposed a joint venture with Dow Elanco of the USA, a global leader in the agrochemical business, for producing and marketing crop protection chemicals in India. The new company's products were expected to have a good market, not only because of the strength and projected growth of Indian agriculture, but also because of the growing demand for pest management products that are high on safety and environmental protection.

Smith Kline and Beecham: Overcoming Barriers

The need to overcome licensing and regulatory restrictions in their major markets of Western Europe and the USA was at the root of the merger between the American pharmaceutical company Smith Kline and the British Beecham. The merged company now identifies itself as a local firm in each market.

Xerox and rank: Early start

At a time when most companies may have focused only on a domestic market that was registering rapid expansion, Xerox looked outwards, opting for a joint venture with the Rank Organisation for overseas production and marketing of photocopying machines.

J P Morgan: Changed Strategy

J P Morgan, the third largest bank in the USA, has in the last few years transformed itself from a conventional commercial bank to a European-style universal bank with a strong emphasis on investment banking and trading functions. The bank's strategy is a global one. Today it is the only institution that is a primary government bond dealer in all seven major industrialized countries.

We have come a long way towards our goal. Starting with a vision statement and strategy definition, our individual company profile and SWOT at a micro level, we took a macro perspective of our industrial sector. Towards locating the optimum country of our choice, we evaluated the menu of possible countries for competitiveness and risk. To establish a best fit, we examined the state of our industry in the chosen country. Lastly the various combinations of possible tie-ups or alliances were examined for suitability.