Deck 15: Entry Strategy and Strategic Alliances

Question 1

What is a joint venture? What prompted the decision to form NUMMI? How did the joint venture benefit Toyota? What did the arrangement mean to General Motors?

Answer 1

not answer

Question 2

What were the benefits of gaining full control of the Indian joint venture in 2002? Can you think of any drawbacks?

Answer 2

Case summary:
In 1979, Company JJB manufacturer of construction equipments from Country UKK entered into a joint venture with Company ES from Country IND to manufacture backhoe loaders to be sold in Country IND. JJB hold 40% stakes and ES hold 60% stakes in the joint venture. Later, when deregulation took place in Country IND, JJB purchased majority stakes from ES and now the situation was reverse with JJB holding 60% stakes, while ES holding 40% stakes. More later, JJB opened a wholly owned subsidiary in Country IND looking the growth of the nation and its construction requirements. Same was undertaken in Country CH wherein the firm found growth opportunities and opened wholly owned subsidiaries to earn maximum in booming construction industry.
The benefits that Company JJB has obtained by gaining full control of the joint ventures in 2002 in Country IND were that JJB's ability to expand in the country grew manifold owing to the majority stake over the joint venture. The firm thrusted its success upon its utilization of leading-edge manufacturing technologies and relentless product innovations which the company could now bring into role in a partnership wherein it holds majority stakes and carries a complete control over the partnership. The firm also did not fear that its high-end technologies in this partnership will be misused by the partner Company ES and this way the firms was successful in bringing its complete know-how in technology to the country's construction markets.
The drawbacks of gaining full control of the joint venture were that the firm holds the major obligations and legal responsibilities of running a joint venture being a majority owner into it. Anything illegal or incorrect undertaken by the joint venture will create major obligations for JJB.

Question 3

GE used to have a preference for acquisitions or greenfield ventures as an entry mode, rather than joint ventures. Why do you think this was the case?

Answer 3

Case summary:
Company GEE from Country USS has undertaken several acquisitions to enter into foreign markets and expand business arena. The firm believed either to launch itself independently or with acquisition. Initially, the firm used to have only acquisitions to enter foreign markets, but later, the firm also started entering into joint ventures. The firm started accepting less stakes in the joint partnership if the country in which the firm is expanding is unknown to it and the other firm in partnership keeps a good control over the market and the culture of that place. The firms undergoing into joint venture with Company GEE was more than welcoming because of the brand name that the firm carried around the world.
Initially, Company GEE used to prefer acquisitions or greenfield ventures (independent operations) as its entry mode in foreign nations instead of joint ventures. However, with time, the firm started having joint ventures to gain entry to foreign markets. The reason the firm started looking for joint ventures was that the firm believed that it is better to partner with an established firm than to take several risks of operating in foreign countries. Another reason was that the firm was able to buy acquisitions and win majority stakes in the deal but it was quite an expensive affair, and there was no assurance that the acquired firm would be able to provide successful business to GEE. These became the reasons for GEE to look forward to joint ventures to gain entry to foreign markets.

Question 4

Reflect on the success of NUMMI. Did both partners benefit equally from the joint venture? Why or why not?

Question 5

By the early 1970s IKEA had established itself as the largest furniture retailer in Sweden. What was the source of its competitive advantage at that time?

Question 6

Reread the Management Focus on Tesco. Then answer the following questions:
a) Why did Tesco's initial international expansion strategy focus on developing nations?
b) How does Tesco create value in its international operations?
c) In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits of doing this for Tesco? What are the risks? How are those risks mitigated?
d) In March 2006, Tesco announced that it would enter the United States. This represents a departure from its historic strategy of focusing on developing nations. Why do you think Tesco made this decision? How is the U.S. market different from others Tesco has entered? What are the risks here? How do you think Tesco will do?

Question 7

Why is the NUMMI venture ending? What does this imply about the nature of the auto industry, and indeed the global economy?

Question 8

Why do you think IKEA's expansion into Europe went so well? Why did the company subsequently stumble in North America? What lessons did IKEA learn from this experience? How is the company now applying these lessons?

Question 9

A vital element in a successful international market entry strategy is an appropriate fit of skills and capabilities between partners. As such, the Entrepreneur magazine annually publishes a ranking of the "Top Global Franchises". Provide a list of the top 10 companies that pursue franchising as a mode of international expansion. Study one of these companies in detail and provide a description of its business model, its international expansion pattern, desirable qualifications in possible franchisees, and the support and training typically provided by the franchisor. Are there areas where improvement can be made for the company to maintain competitiveness? Provide sufficient justification for your position.

Question 10

What does the closure of the NUMMI plant mean to the Freemont area? Reflect on the negative effects to the host country of foreign direct investment. In your opinion, would the plant have a better chance of remaining open if it involved another company from the U.S. rather than a company from Japan?

Question 11

How would you characterize IKEA's strategy prior to its missteps in North America? How would you characterize its strategy today?

Question 12

Why do you think that GE has come to prefer joint ventures in recent years? Do you think that the global economic crisis of 2008-2009 might have impacted upon this preference in any way? If so, how?

Question 13

Prior to 1997, Diebold manufactured its ATM machines in the United States and sold them internationally via distribution agreements, first with Philips NV and then with IBM. Why do you think Diebold chose this mode of expanding internationally? What were the advantages and disadvantages of this arrangement?

Question 14

What is IKEA's strategy towards its suppliers? How important is this strategy to IKEA's success?

Question 15

Licensing propriety technology to foreign competitors is the best way to give up a firm's competitive advantage. Discuss.

Question 16

What do you think prompted Diebold to alter its international expansion strategy in 1997 and start setting up wholly owned subsidiaries in most markets? Why do you think the company favored acquisition as an entry mode?

Question 17

What is the source of IKEA's success today? Can you see any weaknesses in the company? What might it do to correct these?

Question 18

The U.S. Commercial Service prepares reports known as the " Country Commercial Guide " for countries of interest to U.S. investors. Utilize the Country Commercial Guide for Russia to gather information on this country's energy and mining industry. Considering that your company has plans to enter Russia in the foreseeable future, select the most appropriate entry method. Be sure to support your decision with the information collected.

Question 19

Diebold entered China via a joint venture, as opposed to a wholly owned subsidiary. Why do you think it did this?

Question 20

What are the risks that GE must assume when it enters into a joint venture? Is there any way for GE to reduce these risks?

Question 21

Is Diebold pursuing a global standardization strategy or a localization strategy? Do you think this choice of strategy has impacted upon its choice of entry mode? How?

Question 22

Discuss how the need for control over foreign operations varies with firms' strategies and core competencies. What are the implications of the choice of entry mode?

Question 23

Discuss the issues involved when countries and companies buy farmland in other countries. Is the practice ethical? Why or why not? Are investors from rich countries exploiting the assets of developing countries? Do the investors have a moral obligation to give back to the countries where they have invested?

Question 24

The case mentions that GE has a well-earned reputation for being a good partner. What are the likely benefits of this reputation to GE? If GE were to tarnish its reputation by, for example, opportunistically taking advantage of a partner, how might this impact the company going forward?

Question 25

What is foreign direct investment? Using the information provided in the video, provide an example of foreign direct investment. What factors make countries like Ukraine attractive to foreign investors?

Question 26

A small Canadian firm that has developed some valuable new medical products using its unique biotechnology know-how is trying to decide how best to serve the European Union. Its choices are given below. The cost of investment in manufacturing facilities will be a major one for the Canadian firm, but it is not outside its reach. If these are the firm's only options, which one would you advise it to choose? Why?
a. Manufacture the product at home and let foreign sales agents handle marketing.
b. Manufacture the products at home and set up a wholly owned subsidiary in Europe to handle marketing.
c. Enter into a strategic alliance with a large European pharmaceutical firm. The product would be manufactured in Europe by the 50/50 joint venture and marketed by the European firm.

Question 27

Consider the trend of investing in foreign farm land using different political ideologies. How would those taking a radical perspective view the trend? What arguments would those taking a free market approach make?

Question 28

In addition to its reputation for being a good partner, what other assets do you think GE brings to the table that make it an attractive joint venture partner?

Question 29

Reflect on the costs and benefits of foreign direct investment. How is Ukraine benefiting from investments like the one shown in the video? What adverse effects from the investment do you see? What does your response suggest for other countries such as Cambodia that have been attracting similar investments?

Question 30

Why do you think that Roberto Goizueta switched from a strategy that emphasized localization towards one that emphasized global standardization? What were the benefits of such a strategy?

Question 31

What was the strategic rationale underlying JCB's entry into India in 1979, and China in 2005? Given that capital to fund expansion is limited, does it make more sense for JCB to expand its presence in these markets, as opposed to more developed markets, such as those of Western Europe?

Question 32

What were the limitations of Goizueta's strategy that persuaded his successor, Daft, to shift away from it? What was Daft trying to achieve? Datf's strategy also did not produce the desired results. Why do you think this was the case?

Question 33

Why do you think JCB chose to enter India via a joint venture, as opposed to some other entry mode?

Question 34

How would you characterize the strategy now being pursued by Coke? What is the enterprise trying to do? How is this different from the strategies of both Goizueta and Daft? What are the benefits? What are the potential costs and risks?

Question 35

Why did JCB not simply license its technology to Escorts?

Question 36

What does the evolution of Coke's strategy tell you about the convergence of consumer tastes and preferences in today's global economy?

Question 37

What were the potential disadvantages of JCB's joint venture with Escorts?