Competing in International Markets

Competing in International Markets Paper 

Alliance and Joint Venture Strategies

Alliance and joint venture strategies are considered to be some of the most commonly used international market entry strategies. Uddin and Akhter (2011) makes the observation, this is more so as a consequence of economies becoming more globalized. The use of these international market entry strategies makes it possible for companies having complementary skills to effectively benefit from each other’s strengths. It is essential to take note of the fact that these strategies are mostly preferred in industries such as technological, manufacturing, and real estate.

An alliance as a market entry strategy refers to an international agreement that takes place between two or more firms from different countries. Zamir, Sahar, and Zafar (2014) hold that, an alliance can also be defined as a kind of agreement that takes place between two or more parties for the intent of pursuing a number of agreed upon objectives necessary while the parties maintain their independence in their operations. In this regard, an alliance does not result in the creation of a new company.

According to Uddin and Akhter (2011) the agreement that is created among firms during the formation of an alliance involves a significant amount of cooperation among these firms in any value chain activity such as R&D and sales. Zamir, Sahar, and Zafar (2014) postulates the collaboration that is created in an alliance is in the form of each partner hoping that the benefits they receive from the alliance are much greater in comparison to those from individual efforts. Therefore, the creation of an alliance has the potential to transform competitors into partners that work together toward reaching a mutual goal.

A joint venture as an international market entry strategy refers to a potentially long term investment of funds, resources, and facilities involving two or more companies. Thus, in a joint venture the involved parties come together with the aim of taking on a single project by equally investing in the project. These has the meaning, the funds, resources, and facilities are invested by each party equally. Vivek and Richey (2013) assert that a joint venture once created may be temporary or permanent. Further, following its creation, the joint venture may be incorporated and thus mimic a corporate entity. Zamir, Sahar, and Zafar (2014) points out, a created joint venture just like an alliance allows companies to maintain their independence and identities as individual companies. This is because the creation of a joint ventures does not result in the alteration of the parent companies.  

Through a joint venture firms have the ability to offset each other’s weaknesses with one another’s strengths. Vivek and Richey (2013) note that in a joint venture companies have the opportunity to pursue much larger opportunities than they can do alone. Further, this an excellent way of gaining competitive advantage in a foreign country. It is vital to note that the formation of a joint venture may be done with the objective of running various production facilities in an international market. It is also noteworthy to mention that joint ventures are also sometimes formed in order to allow firms to establish a marketing and distribution presence without having too much cost.