27 Strategic Alliances Strategic Alliance An agreement in which companies merge turnkey resources, costs, risks, technology and people Joint Venture A strategic alliance in which two existing companies work together to form a third independent company, which forms strategic alliances, combines key resources, costs, risks, technologies and people. The most common strategic alliance is a joint venture that is formed when two existing companies work together to create a third business. The two founding companies remain intact and unchanged, except that they are now co-owners of the new joint venture. 3.3 2 What is Global Business? Once you have read this section, you should be able to discuss the impact of global affairs and the trade rules and agreements that govern it. The business is the purchase and sale of goods or services. The purchase of this manual was a commercial transaction. It was the sale of your first car. That`s how we paid for babysitting or mowing the lawn. Global business is the purchase and sale of goods and services by people from different countries.
28 Joint-Ventures Benefits Business Avoids Tariff and Non-Tariff Barriers for Market Entry Participating companies bear only a portion of the costs and risks that benefit small local partners Benefits 3.3 19 Forms for Global BusinessCoopative Contracts Strategic Contracts Export Wholly Owned Affiliates Global New Ventures Historically, companies have generally followed the globalization model. This means that companies are transitioning from a national company to a global company in sequential phases. When companies manufacture products in their home countries and sell them to customers abroad, they export. If an organization decides to expand its activities globally but does not want to make significant financial commitments, it will sign a cooperation contract with a foreign contractor who will pay the company a fee for the right to manage this activity in its country. There are two types of cooperation agreements: licensing and franchising. Under a licensing agreement, a national company, the licensee, receives royalties to allow another company, the licensee, to manufacture its product, sell its service or use its brand in a specific foreign market. A franchise is a collection of connected businesses in which the manufacturer or distributor of a product or service, the franchisor, the entire company is authorized to another person or organization, the franchisee. Companies that make strategic alliances combine significant resources, costs, risks, technologies and people. The most common strategic alliance is a joint venture that is formed when two existing companies work together to create a third business. The two founding companies remain intact and unchanged, except that they are now co-owners of the new joint venture.
About one third of multinational companies enter the foreign market through 100% subsidiaries. Unlike licenses, franchises or joint ventures, 100% are owned by the parent company. However, three trends have come together to allow companies to skip the phase model as they become global.
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