‘In a complex, uncertain world filled with dangerous opponents, it is best not to go it alone', (Ohmae, 1989). As globalization leads the world forward, national boundaries diminish and competition increases from less industrialized nations it becomes more and more difficult for firms to maintain their market shares. To define competencies, and to exploit the advantages from combined knowledge is one of many drivers for cooperation between firms.
Firms co-operate in many ways, such as licensing, franchises, turnkey projects, joint ventures, strategic alliances and equity alliances (Daniels & Radebaugh, 2001). This can help firms generate greater revenues, acquire new resources, expand into unknown markets and minimize competitive risk.
[...] For example, exchanging technology with governments for the ability to establish offices and production plants in the country as with the case of the Chinese government during the 1990's (Daniels & Radebaugh, 2001). Most importantly, significant innovations are likely to result from the combining or exchange of knowledge, this may not be possible by one firm initiating alone. MNE's also collaborate to overcome cultural, economic, political and competitive differences in other locations across the world. This can be done in various forms such as agreements in distribution, or in tight relations, like that of a joint venture. [...]
[...] What we must now consider is the barriers to successful cooperations which would be: collaborations importance to each partner, differing objectives between partners, control problems, contribution issues and differences in culture all in greater detail. A barrier to cooperation between firms is that as the environment or situation of the collaboration changes the agreements must reflect the changes. But as the alliance can be based on co-operation, the venture is highly fragile to changes. So changes to the agreements can be a highly sensitive issue and can easily lead to the deconstruction of any agreement, therefore, agreements can be relatively inflexible. [...]
[...] As well as this corporate cultures could cause problems, for example one firm may wish to promote from within, another may want to recruit external people or include sub-contractors. Contributions by each of the partners in a cooperative agreement may vary bringing about suspicion that one is gaining more from the venture then the other. This is especially important with knowledge-based information. It is not unusual that firms may begin an agreement and then leave it once they have obtained valuable information from the partner. [...]
[...] This generates or brings forward those advantages that the firm decides not to purse, these are then licensed or collaborated with other firms to follow-through for the MNE. An example of this is where Coca-Cola licenses its brand name to another firm to exploit its name with modern, fashionable clothing. (Daniels & Radebaugh, 2001). MNE's at various times of extreme global competition also pursue strategies of avoiding direct competition. Doz & Hamel (1998) refer to this as option', where rivals are neutralized. [...]
[...] As a result, Xerox teamed with Fuji to create Fuji-Xerox to distribute copiers in Japan. This allowed Xerox to enter and serve the Japanese market, without the joint venture the Xerox Group would have lost many sales and market share to Japanese producers. (Hill, 2000). MNE's may undertake co-operative measures to reach global markets faster than by growing using its own internal resources. Geographical stretch also allows the firm to be less affected by local country conditions and demand cycles, as well as benefiting from the ability to import/export products where the currency is most favorable. [...]
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