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This essay describes global drivers leading to the increased emergence of strategic alliances (SAs) and cross-border joint-ventures (JVs) and implied potential benefits for multinational firms (MNEs).

Applying Yip’s framework ¹ (viz. appendix), drivers and benefits are analysed. It will be shown that importance of drivers and likelihood benefits hinge upon the MNE and its industry and determine its engagement in SAs and JVs.

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A MNE is a firm ‘headquartered in one country [but with] operations in other countries’ ¹ .

A strategic alliance means two firms collaborating to mutually profit from market share, knowledge and resources. The point is ‘for a company to emerge from an alliance more competitive than when it entered it’ ² .

An international (cross-border) joint venture is ‘an agreement between two or more partners to control an overseas business’ ³ . ‘Joint ventures may fill intermediate-term needs but may also mortgage the long-term global future’ ⁴ . *OREDO'ULYHUV

‘Industry globalisation drivers are externally determined [and] create the potential for a multinational business to achieve the benefits of global strategy’ ¹ . These drivers’ relative importance varies across industries and firms.

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MNE’s home markets are either too small to sustain growth (Nestle in Switzerland) or are saturated. Therefore, MNEs face the pressure to expand abroad to ensure future profits. Companies must obey global quality standards, as ‘almost every product mar-

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ket in the major world economies has foreign competitors’ ² . The emergence of global players puts pressure on competitors to either expand their market, too.

This driver is important to every MNE. No industry or firm operating internationally can ignore this change.

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The emergence of free trade zones (e.g. Nafta, EU, Mercosur) opens previously protectionist markets, abolishing tariffs and trade barriers, thus creating new market potential. So does deregulation and privatisation in MOE states. The same applies to privatising formerly nationalised industries in Europe (e.g. telecom, railway companies).

The Euro makes prices transparent, letting businesses and customers perceive saving opportunities. Implied competition and price harmonisation put pressure on companies to penetrate existing markets further or to develop new ones.

Greater openness and interdependence of the world economy allows MNEs to allocate capital and labour optimally worldwide, thus achieving maximum efficiency (Heckscher-Ohlin theorem).

Again, this driver cannot be ignored by any industry or MNE.

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Emerging global technology standards force companies to adapt. Useful economic lives of new technologies become shorter, due to shortened product life cycles. Many new ‘technology investments are too expensive to amortise in one market only’ ³ .

This driver’ s importance highly depends on the MNE’ s industry. Chip producer Intel must continuously buy global state-of-the-art technology. B2B technology leads to cost savings for manufacturers, but has few advantages for service companies. Phar-

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maceutical companies’ production technology has not changed significantly despite global markets. &XVWRPHUV

New global customer segments emerge as well as new social classes with high buying power (eg. Brazilian middle class). A global youth taste as well as global top-ends of markets force MNEs to supply globally (Levi’ s, Gucci).

Customers can now easily compare prices by the Internet and are more critical against advertising. This makes it difficult to penetrate markets further. Therefore, new markets must be conquered.

This driver is very important for highly culture and consumer bound industries (fashion, luxury goods), but unimportant to MNEs supplying other businesses (e.g. Caterpillar, industrial machine manufacturers).

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Product development costs amortise slower due to short product life cycles. Highefficiency production is taken for granted when competing internationally. Therefore, companies must look out for other cost savings such as global sourcing (VW), supply chain reorganisation (Dell) and worldwide distribution systems (UPS).

This factor is important for global retailers (Tesco) and logistics providers (Fedex) but less important for banks.

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In general, as a studies in Turkey ¹ and Latin America ² show, MNEs want to access markets, foreign partners wants to benefit from MNE knowledge and resources. The factors’ relative importance for the MNE now influences the benefits than can be achieved by SAs and JVs. These benefits are now examined.

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