Successful Strategic

Alliances & Joint

Ventures
Joint Ventures and Alliances can deliver more shareholder value
than Mergers and Acquisitions can, but getting them off the ground
can trip you up in unpredictable ways
-Harvard Business Review

Strategic Alliance
A voluntary, formal arrangement between two
or more parties to pool resources to achieve a
common set of objectives that meet critical
needs while remaining independent entities.

involve exchange, sharing, or codevelopment of products, services,

procedures, and processes

Allowing each partner to concentrate on

activities that best match their
capabilities
Learning from partners & developing
competences that may be more widely
exploited elsewhere
Adequate suitability of the resources &
competencies of an organization for it to
survive
Significant differences between the
Risk sharing reduces risk for both parties
objectives
Irreconcilable differences in business
culture and management styles
Opportunistic behavior by any
participant
Loss of control over such important
issues as product quality, operating

Joint Venture
Acontractualagreement joining together
two or morepartiesfor the purpose of
executing a particularbusinessundertaking.
Allparties agreetosharein
theprofitsandlossesof theenterprise

Shared contribution of equity;

Shared authority, control and
responsibilities; Shared Revenues
& Losses; Shared Assets

Helps an organization to enter in to new

markets or new product lines
Access to increased resources and
improved expertise & technology
Helps to build credibility with a particular
target market by choosing a well
established and credible partner in that
market
Reduces risk due to loss & expense
sharing
Time consuming and difficult to set up
Differences in the cultures and
management styles of the organizations
may lead to a lack of cooperation and
coordination
The individual partners may not treat
the JV as an integral part of their
business and may lead to lack of

Strategic Alliances & Joint Ventures

Critical Success
Factors

Partners strategic compatibility:

Good communication, cooperation and
coordination among partners
Common goals and shared vision among
partners
Dedication towards the success and long
term sustainability of the JV
Due diligence

Factors hindering the

success

Lack of understanding between the partners

Lack of patience and motivation among

partners

Entry of a wholly owned subsidiary of a

partner in the same business and market
(E.g.. Hero Honda)

Benefits lower than the expectations

Proper sharing of profits and benefits among

partners

JV should work towards the benefit of all the

partners

Operational Difficulties due to geographical

location of the partners

Differences and conflicts between partners

Disney-HP Alliance

Disney Background

ablished 1923
unders: Walter Disney and Roy Disney
ney bought audio oscillators from HP
d created Fantasia
ney Business segments:
Media Networks
Parks and Resorts
Studio Entertainment
Consumer Products

HP Background

Established 1939
Founders: Bill Hewlett
and Dave Packard
First Product: audio
oscillator
HPs 3 main core areas:
The Personal
System Group
The Imaging and
Printing Group
The Technology
Solutions Group6

The Alliance
In 1937 Disney become one of HP's first
customer, when Walt Disney purchased a
customized oscillator produced in the garage
HP
andHP
Disney
are celebrating 21 years as an
where
was founded
official strategic alliance HP being Disney's
official technology partner
An arrangement worth $50-60 million USD a
year for HP
Their most well known cooperative project yet,
is Mission: SPACE - a simulator of a trip to Mars
Also created a headset that gives non-English
speaking guests translations of the stories that
are part of the various rides and attractions at
Disney World

HP and Disney Alliance

"The merging of Entertainment and
technology products
Disney's interest in the technology, as
more consumers enjoy 'entertainment
PC' to read, listen and play
HP 's interest in content creators and
providers to build the stronger market.
An alliance with complementary skills
can eliminate duplication of skills of
the other partner and at the same
time can increases the chance for
successful partnership.

Mission: Space

10 years alliance agreement

Located in Walt Disney World Resort at
Epcot theme park, Florida
Provide the environment of space trip
The sites also include the following activiti
Mission: Space Pavilion
Mission: Space Attraction
Mission: Space Advanced Training Lab
Mission: Space Cargo Bay
8

Strategic Fit
Mission: Space
The mission of The Walt Disney
Company is to be one of the
world's leading producers and
providers of entertainment and
information. Disney seeks to
develop the most creative,
innovative and profitable
entertainment experiences and
related products in the world.
To check strategic fit
1) Comparing mission statement of
Disney to HP
2) Can two companies strengthen up

Whats in it for Stakeholders?

Stakeholders include employees, customers,
owners, and executive managers
First benefit increasing in market
shares through co-branding
Second benefit earned cost saving from
the alliance by sharing resources
Third benefit increase in productivity
by:
increased production capacity and
market share
Improved product/service quality
improved communications and working
relationships

Alliance Structure
Disn
ey

HP

NAS
A

Enhanced
entertainment
experiences
Team of
Imagineers

Development of
new technologies
$ 100 m.
computer system
Support what
makes the Disney
experience
magical

Future Direction

The Innovation Dream Home

Technology from HP to Disney:

HP
HP
HP
HP
HP
HP
HP

TouchSmart PC
Blackbird 002 Desktop
Pavilion HDX Entertainment Notebook
SL4778N 47-inch MediaSmart TV
MediaSmart Server EX475
MediaSmart Connect
iPAQ510 Voice Messager

Provide Scientific
Info.
10

Key Success Factors

A win-win situation for both partners
Factors to success are:
HP gives opportunity to the Walt Disney to make their
dream come true concept success
Disney developed an easier access to their customers
Both enjoy revenue
Co-branding; created market power to the both of them
Add Value to both brands
Better image for their firms and stakeholders
Strengthen HP as the leader of the technological
industry, and reinforce of how the Walt Disney is the
giant enterprise in the entertainment and media world
Win-Win situation for both firms

- Productivity Increases: increase their

quality as well as the number of units being
produced
- Partnering with the Experienced: share
information on what they do best and then
focus on their constraints and develop ideas
- Alliance also increases productivity by
adding:

Market intelligence

Market forecast

Improved product quality

Improved working relationships

Improved communication

Improvement of products/services
11

Volvo-Eicher Joint
Venture :
VE Commercial
Vehicles

About the Joint Venture

Formed in 2008, as a 50:50 JV
between the two companies
Headquartered in New Delhi

Strategic Goals in forming the

JV:

Comprises of five business verticals:

Eicher Trucks and Buses

Volvo Trucks India
Eicher Engineering Components
VE Powertrain
Eicher Engineering Solutions

Employs over 11,000+ people as of

date

Eicher: to become a larger

player and build a global
presence in the commercial
vehicle business
Volvo: to crack the small and
medium-truck segment in
India

Eicher - Background
Established in 1948, to import tractors
Started importing 6 tonne trucks from
Japan in 1986
In 1997, started developing its own
truck investing INR 25 crore and 6
years in the process
Volvo was identified as a partner that
could add muscle to the companys
efforts the JV was successfully signed
in 2008

Eicher recognized the growing demand

for technologically advanced trucks
and buses in the rapidly expanding
Indian economy
While it was possible for the company to
invest in R&D and go alone, it would take
a lot of time and effort
Tata Motors and Ashok Leyland, its main
competitors, were ahead in the race by
leaps
There was also a risk of failure which
would have cost the company dearly
A need for a foreign partner that was
established in the segment was
therefore recognized to bring more
funds, system, and technology

How did Volvo gain?

Volvo had two main goals, in forming the JV:

Volvo
wanted
to expand
commercial vehicle business the Indian market, but
1. Expand
market
share inits
India
its trucks were deemed expensive in the geography. Its trucks, manufactured in Europe,
2. Use
manufacturing
Indiaunfortunately
as a base to export
otherdemand
developing
were
superior
qualitycapability
vehiclesinthat
hadtolittle
innations
developing nations.
To lower production costs, it needed to use a low cost manufacturing base existing in
India an opportunity perfectly provided by Eicher. Volvo selectively infused
technology in the JV, to raise quality and maintain low costs.

VECV Stakeholding and Control

Volvo held a 45.6% share in the newly formed VECV; further, it acquired an
8.4% stake in Eicher (the company divested the stake by 2015) pumping
around INR 1082 crore in the venture
Board structure:

Depicts a
Par Ostberg: Non-executive Chairman & Volvo nominated director
balanced power
Bertil Thoren: Volvo nominated director
distribution in

Joakim Hjerpe: Volvo nominated director

the Joint Venture
Siddhartha Lal: Managing Director & Eicher nominated director
initiative
Raul Rai: Eicher nominated director
Prateek Jalan: Eicher nominated director

What each bring to the table?

Eicher

Volvo

Eicher transferred its CV, components

and engineering solutions businesses
into VECV
Leadership in LD / MD segments
Specialist skills and experience in
developing low cost, better performance
products
Wide dealer network
After sales infrastructure for LD/MD
Cost effective operations

Volvo demerged Volvo Truck Indias

sales & distribution business from
Volvo India Pvt Ltd.

Global expertise
Leadership in product technology
Good infrastructure facilities
Well-defined processes & controls
Brand image and customer relationships

Common Goal: To be recognized as the industry leader driving modernization in

commercial transportation in India and the developing world

Strategic Goals
Objectives
Seen as a
leading
CV group
in India

Most innovative products

Comprehensive network
Proactive solution/service
provider
Lean organization

Recogniz
ed
competiti
ve
advantag
es

"Best of
both"
company
culture

Culture incorporating best of Eicher

values and Volvo Way
Professionalism, honesty, people
caring to attract best talents in
industry

Best fuel economy

Reliable products
Superior service quality
Safety and comfort setting industry
standards

Wanted position in Operations FY2015

External Environment
Implication
Continued tightening of
emissions and safety
norms
Better enforcement of
regulations on
overloading
Better highways and
increased road
networks

VECV Strategy

Legacy investments of
players less meaningful

VECV investing early in fully-built vehicles and higher

emission norms

Right-load vehicles;
potential to change
value-proposition

Products highly suitable for right-load and mild overload conditions

Higher speeds; increased

mileage of vehicles/ year

Better and more reliable engines and driveline

Increasing difficulty in
sourcing drivers

Drivers will be more

influential in purchase
decision

Better comfort and features for drivers; plan to build

brand with drivers off-product as well

Professionalization of
transportation/ logistics

Total cost of ownership

approach to buying
vehicles

Value-selling approach; premium products with better

efficiency and turnaround time; world-class aftermarket and vehicle quality

Improved dependability
of supplies required

Vehicle quality and after-market excellence

More modern trucks with

right cost-structure and
value

Developing innovative products that are closely

aligned to emerging customer needs

End-use demands on
logistics/ supply-chain
Market shifts faster
towards premium
domestic segment

Tata Starbucks Joint

Venture

We look forward to bringing the Starbucks Experience to customers in

India by offering high quality arabica coffee, handcrafted beverages,
locally relevant food, and legendary service.

Tata Starbucks Ltd.

About Tata Global Beverages and
Tata Coffee
Tata Global Beverages is a part of the
global Tata Group. Tata Global
Beverages is a global beverage
business and the worlds second largest
tea company
Tata Coffee is a subsidiary of Tata
Global Beverages. It is Asias largest
coffee plantation company and the
3rdlargest exporter of instant coffee in
the country

About Starbucks
Since 1971, Starbucks Coffee Company
has been committed to ethically sourcing
and roasting the highestqualityarabicacoffee in the world
Today, with more than 17,000 stores
around the globe, the company is the
premier roaster and retailer of specialty
coffee in the world
Through their unwavering commitment to
excellence and guiding principles, they
bring the uniqueStarbucks Experienceto
life for every customer through every cup

The Company produces more than

10,000 MT of shade grown Arabica and
Robusta
at its of
19TATA
estates
in
Trustcoffees
and legacy
combined
with the iconic brand image of Starbucks
South India and its two Instant Coffee

Tata Starbucks Ltd.

Tata
Starbucks
Ltd.is
a
50:50
joint
venture
company,
owned
by
Tata Global BeveragesandStarbucks Corporation, that owns and operatesStarbucks
outlets in India. The outlets are brandedStarbucks "A Tata Alliance". Starbucks,
through an agreement withTata Coffee, serves coffee that is 100% locally sourced
and
roasted.
Objective
of Tata Coffee behind this
Objective of Starbucks Corporation

Alliance
The agreement will
allow Tata coffee to
provide roast coffee bean to Starbucks in
India.
Get opportunity to jointly invest in
additional facility for export to other
markets.
Starbucks will help by providing new
technologies for the promotion of
responsible agronomy practices.
A long term relationship will be formed with
this Memorandum of Understanding with

To tap huge emerging market of India.

India has a growing coffee retail market
replicate its success in China
Help increase its profitability due to its
declining market and over dependence on
US market.
To have access to the high quality Arabica
coffee.

Tata Starbucks Ltd.

Strengths

Weaknesses

High Brand Visibility. (International

popularity of the Starbucks brand.)

Image of luxury coffee outlets.

Ethical and Environmental Practices.

High price of Starbucks coffee

Marketing and positioning skills of

Starbucks.

Coffee dominant business only

Access to TATA's premium Robusta and

Arabica coffees (Sourcing Agreement).

Certain rigid standards and policies at

outlets. (They apply the same business
models and formulas, regardless of culture
and values of the country they are
operating in like no smoking policy, etc.)

Tata as a cultural fit for Starbucks will help

in building core competencies of each other

Previous Attempts by Starbucks

Kishore Biyani's Future Group three years ago - rejected by the Foreign
Investment Promotion Board
Jubilant Foodworks

Tata Starbucks Ltd.

Tata-Starbucks Synergy
The MoU will create avenues of collaboration for sourcing and roasting green coffee beans in Tata
Coffees Coorg, India facility
Tata and Starbucks will jointly explore the development of Starbucks retail stores in associated retail
outlets and hotels
In accordance with the MoU, the two companies will collaborate on the promotion of responsible
agronomy practices, including training for local farmers, technicians - the two companies will also
explore social projects to positively impact communities in coffee growing regions where Tata operates
At a later phase, both Tata Coffee and Starbucks will consider jointly investing in additional facilities
and roasting green coffee for export to other markets
A partner like Starbucks would also help Tata Coffee tap the domestic market opportunity. Currently,
almost 65% of Tata Coffee's sales come from its Eight Oclock Coffee Co. unit in the U.S

Tata Starbucks Ltd.

Tata-Starbucks Synergy
Tata Coffee has rich expertise in the bean-to-cup value chain, with an unyielding focus on quality. It has
won global accolades for its premium coffees - a dedicated supplier to cafes across the country and
specialty roasters across the globe
Starbucks Coffee Company is the premier roaster and retailer of specialty coffee in the world. Starbucks
has a long association with India. For the last seven years, the company has been ethically sourcing coffee
beans from India and contributing to several social programs in the country Synergy in core values
between the companies
With the thousands of coffee farmers within the Tata ecosystem. India can be an important source for
coffee in the domestic market, as well as across the many regions globally where Starbucks has operations
Tata has a cultural fit with Starbucks which will help in building core competencies of each other - Tata has
met all the stringent standards and conditions followed by Starbucks such as quality, soil, water, pest,
waste and energy management, forest and biodiversity conservation to workers welfare, wages and
benefits

Tata Starbucks Ltd.

Threats

India is a tea-based culture - The Indian hot-beverage market is dominated by tea

Homegrown brands dominate the retail coffee market. Coffee Caf Day (CCD)
pioneered the concept of specialty coffee in India followed by Qwikys and Barista Coffee
Lower per capita income in India. High price of coffee is felt as a barrier in the South
and the North
Other fast food chains like that of McDonalds, Dunkin Donuts, Burger King, etc., already
have the infrastructure in place and are instead adding quality coffee to their menus to
compete with Starbucks
Rising prices of coffee are putting pressure on the profit margins of the company

Thank You