Page 111 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes 1. Incoherent goals, with one business not benefiting greatly from the agreement;
2. Insufficient trust, with each partner company trying to get the better deal;

3. Conflicts over how the partnership works;
4. Potential to reduce future opportunities through being unable to enter into agreements
with your partner’s competitors;
5. Lack of commitment to the partnership; and

6. Risk of sharing too much knowledge and the partner company becoming a competitor.
The main problem with strategic alliances is being able to develop a partnership which is
beneficial to both parties. Often a partnership is beneficial to the smaller business, perhaps due to
the wide-scale distribution channels that are gained, but the benefits for the established business
aren’t quite so clear.

Example: Examples of strategic alliance
India’s TCS and Cisco form Strategic Alliance
1. India’s largest software exporter Tata Consultancy Services (TCS) and US networking
giant Cisco Systems announced an alliance Tuesday to help their customers build next-
generation data centres.
2. Cisco will create its own technology lab on the Tata group company’s campus in the
southern city of Chennai as part of the strategic alliance.
3. Both companies declined to provide financial details of the alliance, which will focus on
India, US and British-based customers in the banking, financial services, telecom and state
sectors.
4. “The alliance offers multibillion-dollar opportunities,” TCS Chief Executive S. Ramadorai
told reporters in Mumbai, without giving precise forecasts.
5. “We believe in catching markets in transition, which makes this alliance crucial,” said John
Chambers, Chairman and Chief Executive of Cisco.

6. “If I had to bet on one country at this moment, it would be India,” Chambers said, adding
he was confident of India’s future strong economic growth.
7. Cisco, which has been in India for over a decade and is a dominant player in the Internet
networking market, had earlier pledged to invest 1.2 billion dollars in the country.
8. It has said it plans to turn the South Asian nation into a platform to service markets
worldwide.
9. Cisco is trying to take advantage of India’s low costs, its pool of technology talent pool and
the expertise of local companies to seize new markets.

6.3.6 recent mergers and acquisitions

Mergers and acquisitions have been very common incidents since the turn of the 20th century.
These are used as tools for business expansion and restructuring. Through mergers the acquiring
company gets an expanded client base and the acquired company gets additional lifeline in
the form of capital invested by the purchasing company. The recent mergers and acquisitions
authenticate such a view.

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