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In an era of great flux in the commercial world large companies are breaking up while others are coming together The mode of entry we have selected for our product is by a joint venture The advantages in doing this is we share the risk and cost of doing business and benefit from local firms knowledge culture and language The disadvantage of doing this is we share control of the company and we may have conflicting interests or ideas Alliances enable companies to make incremental commitments to an unfolding strategy a useful feature when environmental uncertainties preclude decisions that are more definite In addition the partial commitments involved in alliances leave the company with resources to invest in more than one such arrangement then spreading and diversifying risk At the same time however the open-ended nature of an alliance means that if not managed carefully it can unravel and nullify all the potential benefits If the partial commitments of the members are not enough to compel them to act co-operatively the alliance can be a recipe for strategic gridlock Joint Ventures are most useful in hedging your bets when there is uncertainty among competing future outcomes This kind of uncertainty is common to the dot-com world in which there are likely to be one or only a few winners In but hedging and risk sharing strategies the company takes a passive role after forming its alliances As events unfold the company is protected from excessive loss because of its portfolio of alliances However alliances are also used in the more active management of risk One common use of alliances is to change the capabilities and strategic position of a company Other companies have used mergers and acquisitions for the same purpose Daimer-Benz did so in acquiring Chrysler becoming a German-US automotive group When should a company under pressure to change business capabilities or market position use a joint venture or alliance Differences in cost apart
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