Module 4
Module 4
Module 4
• The need:
• 1. Risk mitigation
• 2. Adaptation to market changes
• 3. Resilience in economic uncertainty
• 4. Enhanced revenue stability
• 5. Competitive advantage
• 6. Customer base expansion
• 7. Chaptalizing on synergies
• 8. Future-proofing the business
Horizontal Expansion of a Global Business
• Why?
• 1. Market share enhancement
• 2. Economies of scale
• 3. Competitive advantage
• 4. Diversification of product port-folio
• 5. Enhanced research and development
• 6. Streamlined supply chain
Horizontal Expansion Cont:-
Attractions:
❖ Helps avoid the risks and costs of building a new operation
from the ground floor
❖ Teaming with another company that has complementary
skills and assets may increase the probability of success
Pitfalls:
❖ Requires the sharing of profits if the new business succeeds
❖ Venture partners must share control – conflicts on how to
run the joint venture can cause failure
❖ Run the risk of giving critical know-how away to joint
venture partner
• 1. Joint Venture: A joint venture is established when the parent companies establish a
new child company. For example, Company A and Company B (parent companies)
can form a joint venture by creating Company C (child company).
• 2. Equity strategy alliance: An equity strategic alliance is created when one company
purchases a certain equity percentage of the other company. If Company A purchases
40% of the equity in Company B, an equity strategic alliance would be formed.
• 3. Non-equity strategy alliance: A non-equity strategic alliance is created when two or
more companies sign a contractual relationship to pool their resources and
capabilities together.
Value Creation in Strategic Alliances
https://www.youtube.com/watch?v=z7M1vQTvkx4
Components of a Business Model