What are the risks of forming a strategic alliance with a foreign company?
Discussion Questions 1. What are the risks of forming a strategic alliance with a foreign company? Consider things like
selling through a distributor based in a particular country, outsourcing to a factory in a particular country, a cross-distribution alliance, and so forth.
2. What strategies might you consider using against established competitors with low costs and sig- nificant market share? Which of these might be best and why?
3. Imagine a firm 100% owned by a family whose wealth derives entirely from the firm’s operations. The family has so far refused requests to go public or sell any equity position to outside investors. Would such a firm be likely to continue its current successful ways, pursue a related-diversification strategy, or pursue an unrelated-diversification strategy?
4. In 1984, General Motors (GM) and Toyota created and operated a joint venture (JV) in California called NUMMI—New United Motor Manufacturing, Inc.—to produce vehicles that would be sold by both companies. In June 2009 GM withdrew from the venture, and in March 2010, Toyota transferred the remaining production to its other plants. In forming the JV, GM was interested in learning how to manufacture high-quality small cars from Toyota, and Toyota was interested in gaining access to GM’s U.S. distribution network and in reducing the political liability associated with local content laws. Which of the two firms, in your opinion, might have derived most benefit from the JV while it lasted? Why?
5. Strategic alliances are often thought of as a way of getting help to compete instead of going it alone. In what ways might one be better than the other?
6. A recent newspaper article about Apple, Inc., said, in part: “The company . . . is increasingly evolving from a computer maker into a multi-product international powerhouse and a major force in the entertainment and publishing industries” (Puzzanghera & Sarno, 2011). How do you think it could have transformed itself in such a short time? In other words, what strategies do you think it used—either simultaneously or not—in the process?
CHAPTER 1Section 1.7 The Strategic-Planning Process and Strategic Decision Making
Participants in Strategic Planning A critical dimension of strategic planning is who gets to participate in the process. In a few companies, only the CEO participates with the mindset that whatever he or she says goes. In others, the top- management team participates, which is better, and then relays what has been decided to lower management levels and employ- ees in general. In still others, the participants include those who will help implement the plan, that is, middle managers and key other people in addition to top manage- ment. This last inclusive approach is the best. Section 8.6 outlines a suggested strategic-planning process and elaborates on the importance of involving the right people in the process.
Because the outcomes of strategic planning are so dependent on who participates, the particular process used, and the information on which decisions are based, it is clear that doing strategic planning remains very much an art. It is a highly creative yet disciplined process that draws on the individuals’ and group’s intuition, experience, know-how, and powers of persuasion.
While the strategic-planning process is relatively straightforward, actually doing it is much more difficult for a number of reasons. People seldom agree on where the company stands right now and how it is performing, whether because they have a limited perspective, don’t have access to the same data, or have personal or hidden agendas. Sometimes politics gets in the way of candor and truth. The information that the company and its people possess, for example on customers and competitors, may be incomplete, dated, inaccurate, or irrelevant, while the information they most need is often unavailable. Lastly, the planning horizon is typically three to five years in the future, a future that is unknown, ambiguous, and changing before our very eyes.
Strategic Decisions Besides deciding on a vision and the best strategy for achieving it, strategic planning is often used to make other strategic decisions. Strategic decisions differ from operational or tactical decisions primarily in that their complexity and consequences are more consequential for the organization. For this reason strategic decisions tend to get made only after appreciable analysis, discussion, and debate, and typically involve a number of people in the decision. Examples of strategic deci- sions include selecting a strategy, deciding which company to acquire or merge with, choosing which technology to adopt, deciding whether to form a strategic alliance and with whom, to fran- chise rather than expand with owned facilities, which new CEO to hire, whether to sell the busi- ness, whether to enter another industry or segment, and so on.
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In some companies, only the CEO does strategic planning. Oth- ers use a selected top-management team to implement the plan to lower management.