Professional Documents
Culture Documents
1. 2. 3. 4.
technology 5. Derisking the business model (to beat the business cycle variations)
JOINT VENTURES
If the gains that the participants hoped to achieve could be realized through JV or SA only!
CONTRACTUAL AGREEMENTS
Eg. Contract between a company and its supplier: When will a contract suffice and when not? Eg. When a product requires a specific development commitment; when a buyer provides funding for a development;
eg. Biotechnology and pharmaceutical firms
JOINT VENTURES
In a JV, two or more companies combine certain
assets and work toward jointly achieving a business objective. Usually, the time period of this combination is defined and limited in duration. In a JV, the companies involved maintain their own separate business operations and combine to exist apart as they did before the joint venture. This venture is then formally created as a business entity such as a separate corporation or partnership.
Eg. Renault has done JVs with Nissan motors and Mahindra & Mahindra
STRATEGIC ALLIANCES
The relationship and the agreement are less
formal than in a JV In a JV, a separate entity is created, whereas in a SA, the agreement and the relationship are less formal.
Eg. Common in Airline and computer industries
Enhancing R & D
Eg. Pharmaceutical companies can gain access to technology provided by biotech firms that may not be available to the drug companies.
Governance of SA
In case of an acquisition, the governance process is hierarchical such that the acquirer pays for and
receives the right to control the target. It governs the target in a manner that facilitates growth of the wealth of the acquirers shareholders. The governance of SA is bilateral and is determined by the agreement the alliance partners enters into as well as by factors such as the non-legal commitment of the alliance partners to make the alliance succeed.
experience with alliances were more likely to be successful in future alliances i.e., there is a learning curve and companies do better at alliances the more they do them. The companies that had a dedicated alliance function, such as a department dedicated to overseeing alliances that the company entered into, were more likely to be successful with their alliances. Eg. HP, Eli Lilly