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THE CASE IS ATTACH AS WELL IS THE CHAPTER 6 NOTES
A. CASE SELECTION. Case 6-2 “Eli Lilly in India: Rethinking the Joint Venture Strategy.” (p. 376 of the 8th edition of the textbook)
B. ANSWER THE FOLLOWING QUESTIONS:
1. Review the types of strategic alliances described in Ch. 6. Based on information presented in the case, what type of strategic alliance would you say applies to the Lilly-Ranbaxy joint venture (i.e., traditional or modern form)? Be sure to explain your position and support your choice with facts from the case. (50 pts)
2. Identify and discuss what you would say are the three (3) main achievements of the joint venture? (50 pts)
C. IMPORTANT INSTRUCTIONS:
1. Answer all questions using complete sentences. Points will be deducted for using a bulleted/numbered list format. NO BULLETS!!!
2. DO NOT do any additional research outside of what is presented in the case.
Your analysis must be based only on information presented in the case and chapters/notes.
3. Do not focus on the detailed financial data (balance sheets, etc.) presented in the case. Do not do any in depth financial analyses.
4. DO NOT simply summarize the information already provided in the case, except when using as supporting information for a point you are making.
5. Answer the case in a Word doc. The case must be turned in as a Word doc attachment in the Eli Lilly Case Dropbox in Canvas.
6. Please number the question you are answering. You do not have to retype the question.
7. Put your name and ID on the first page. The case analysis should be approximately 300-500 words (total) excluding the title page and questions. The paper must be
MAN 4633 Chap. 6 – 8th ed.
Page 4 of 4
A. WHY STRATEGIC ALLIANCES?
1. STRATEGIC ALLIANCES
a. Described as: the variety of inter-firm cooperation agreements, ranging from shared research to formal joint ventures and minority equity participation
b. Forms of alliances include:
i. Traditional joint ventures, with these characteristics:
· Formed between senior MNE in and industrial country and junior partner in less-developed country
· Goal was for senior MNE to gain new market access for existing products
· Local partner provides market expertise, protection from government intervention
· Local partner gains access to new products and knowledge
ii. Modern form of alliances, characteristics:
· Typically formed between partners in industrialized countries
· Focus on creating new products and technologies
· Likely formed for short duration
2. MOTIVATIONS DRIVING FORMATION OF STRATEGIC ALLIANCES
a. Technology exchange – MNEs forced to form R&D partnerships due to increase in interdisciplinary and inter-industry innovations (e.g., telecommunications, medical equipment, electronics).
b. Global competition – smaller MNEs must join forces to compete against single dominant market leaders.
2. MOTIVATIONS DRIVING FORMATION OF STRATEGIC ALLIANCES (continued)
c. Industry convergence – several high-tech industries are beginning to overlap due to complexity of technological skill set needed to compete and survive in the industry (e.g.,, HDTV)
d. Economies of scale and reduction of risk –
i. Partners can pool resources to increase economies of scale
ii. Partners and share and leverage specific strengths of each other
iii. Sharing different and complementary resources can reduce cost of duplication.
e. Alliances as alternative to mergers – create alliances when political, legal or regulatory constraints prohibit mergers (e.g., code-sharing in airline industry when foreign ownership is prohibited)
B. RISKS AND COSTS OF COLLABORATION
1. Risks of Competitive Collaboration:
a. Asymmetrical benefits – one may use partnership to gain competitive edge over the other (e.g., one partner learns skills from the other but is reluctant to share its own).
b. Control of investments – one partner keeps control over key investments (e.g., in product development, marketing, manufacturing). Other partner becomes dependent.
c. Risk of “learning by doing” – one partner uses knowledge gained from the alliance to compete against the other partner. (i.e., risk of strengthening a competitor)
d. Risk of takeover – fear that alliance may result in the acquisition of one partner by the other.
2. Cost of Strategic and Organizational Complexity
a. Risk and rewards of collaboration become more complex because they must be shared (i.e., allocated) between partners
C. BUILDING AND MANAGING COLLABORATIVE VENTURES
1. Challenges of Building Cooperative Ventures
a. General challenges include
i. Strategic and environmental disparities among partners – individual partners may have opposing strategic objectives
ii. Lack of common experience and perception base – may have different administrative heritages, different organizational cultures
iii. Difficulties in inter-firm communications – e.g., due to different languages, culture
iv. Conflicts of interest and priorities – regarding objectives.
v. Personal differences among managers – due to management teams from different cultural/national backgrounds
b. Pre-alliance Challenges
Challenges faced by firms prior to joining forces with a partner.
i. Analyzing the partner’s strategic and organizational capabilities – often difficult due to lack of adequate information.
ii. Escalation of commitment – managers involved in planning alliance reluctant to back out.
Solution: operational managers responsible for implementation involved in planning.
iii. Defining scope of alliance – problem overstating the scope of the partnership.
Scope more difficult to define due to:
· Complicated cross-ownership of equity
· Need for cross-functional coordination
· Number and scope of joint activities
C. BUILDING AND MANAGING COLLABORATIVE VENTURE (continued)
2. Challenges of Managing Cooperative Ventures
a. Managing the boundary
i. Setting organizational boundary structures to separate the alliance from the partners’ operations. May use:
· Separate legal entity
· One or both partners given operational control
· Joint committees.
ii. Choice of boundary structure depends on scope. Higher level of interdependent tasks needs structure with more decision-making integration (likely through separate entity).
b. Managing knowledge flows
i. Need to exploit knowledge generated by the partnership
ii. Each needs to protect internal knowledge it does not want to share with the other partner (i.e., appropriability theory).
c. Set up effective governance structure –
i. To provide proper strategic direction.
ii. “Distributive” equality (i.e., win-lose) in negotiations/governance not necessarily desirable (may lead to ineffectiveness). Use “integrative” equality based on relevant task/expertise instead.