1. To avoid import barriers, licensing requirements and other protectionist legislation. Japanese automotive manufacturers, for example, use alliances such as the GM - Toyota venture, or subsidiaries, to produce cars in the United States so as to avoid import quotas. -
2. To share the costs and risks of the research and development of new products and processes. In the semiconductor industry for example, where each new generation of memory chips is estimated to cost over $1 billion to develop, those costs and the rapid technology&l evolution typically require the resources of more than one, or even two, firms. Intel, for example, has alliances with Samsung and NMB Semiconductor for DRAM technology development; Sun Microsystems has partners for its RISC technology, including NV. Philips, Fujitsu, and Texas Instruments. Toshiba, Japan's third largest electronics company, has over two dozen major joint ventures and strategic alliances around the world, including partners such as Olivetti, Rhone-Poulenc, and GEC Alstholm in Europe, LSI Logic in Canada, and Samsung in Korea. Fumio Sato, Toshiba's CEO, recognized long ago that a global strategy for a high-tech electronics company such as his necessitated joint ventures and strategic alliances.
3. To gain access to specific markets, such as the EU, where regulations favor domestic companies, which was one of the enticements for Chrysler to ally with Daimler-Benz. Firms around the world are forming strategic alliances with European companies to bolster their chances of competing in the EU and to gain access to markets in Eastern European countries as they open up to world business. Chun Joo Bum, chief executive of the Daewoo Electronics unit, acknowledges that he is seeking local partners in Europe for two reasons: (1. to provide sorely needed capital (a problem amidst Asia's economic woes); (2. to help them navigate Europe's still disparate markets, saying, “1 need to localize our management. It is not one market.
Market entry into some countries may only be attained through alliances - typically joint ventures. South Korea, for example has a limit of 18 percent on foreign investment in South Korean firms. 4. To reduce political risk whi1e making inroads into a new market. Maytag Corporation, for example, determined to stay on the right side of the restrictive Chinese government while gaining market access, formed a joint venture with RSD, the Chinese appliance maker, to manufacture and market washing machines and refrigerators; Maytag also invested large amounts in jointly owned refrigeration products facilities to help RSD get into that market. Coca- Cola - a global player with large-scale alliances - is not beyond using some very small-scale affiances to be “political” in China. The company utilizes senior citizens in the party's neighborhood committees to sell coke locally. 5. To gain rapid entry into a new or consolidating industry and to take ad vantag of synergies. Technology is rapidly providing the means for over lappin and merging of traditional industries such as entertainment, com puters and telecommunications in new digital-based systems, creating an
information superhighway. As evidenced by such partnerships as the
MCI - WorldCom merger in August 1998, such developments are necessitat in strategic alliances across industries in order for companies to gain rapid
entry into areas in which they have no expertise or manufacturing capabilities competition is so fierce that they cannot wait to develop those resources
alone. Many of these objectives, such as access to new technology and to
new markets, are evident in AT&T's network of alliances around the world,
as shown in Exhibit 74. Agreements with Japan's NEC, for example, give
AT&T access to new semiconductor and chip-making technologies in order
to learn how to better integrate computers with communications Another
joint venture with Zenith Electronics wifi allow AT&T to codevelop the next
- generation of high-definition television (HDTV).
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