Alliance

A strategic alliance was defined in Bartlet as a means for companies to access new markets internationally but at a reduced risk, and without having to invest in global infrastructure themselves. The merger is a way for companies to share expenses and risks in R&D, marketing, and product development. Alliances are an alternative to global mergers and acquisitions, and create informal or even formal ties between companies, many of whom compete in some areas of business, but collaborate in others. In our lecture, we analyzed the manufacturing Joint Venture, as well as marketing and R&D cooperative agreements, involving licensing and franchising agreements as alternative to formal Joint Ventures (or Mergers and Acquisitions).

A good example of an alliance is the joint venture between Xerox and Fuji Xerox in the global printer business (Bartlet). This alliance was formed between the American printer pioneer Xerox, and the Japanese film company, Fuji, and has grown into the most successful JV between an American and a Japanese firm in history. At the time the alliance was formed, Xerox was looking for a cost efficient means to enter into the Japanese market, and to do so with approval from the Japanese government. The Joint Venture that was originally formed between Xerox (RX) and Fuji Films was mainly set up as a technology licensing venture in which Xerox passed on the license and know-how to produce their patented technology. Over time, however, the technology patents expired, but the alliance continued to grow in importance to both companies. The joint venture itself is now a very large player in the world wide printer market, with its own R&D, production, marketing and sales departments.

At the time that Xerox formed the alliance with Fuji, Xerox had many options about how to enter the Japanese market. Rather than forming a formal JV, they could have licensed the technology. Upon reflection, I think Xerox was very lucky to have made the decision that they did, and to have made the strategic alliance with Fuji Xerox. Many companies in the US are in a position today where they must choose between outsourcing production to a cheaper producer offshore, or to form a joint venture overseas. It is clear to me that the easier short term solution is to license the technology and enter into an outsourcing agreement. Xerox, on the other hand, has taught me the value in going the more difficult route of forming a formal joint venture with an offshore company. If Xerox had followed the outsourcing route, they would have lost the connection with the production of their products. As technology changed over the years, and as Xerox lost their patent protection and their monopoly, they faced greater and greater competition. They needed to innovated, but for many years they had forgotten how to do so. By keeping their ties to the production in Japan, they were able to make it through those years and to keep on developing new products for their future. I realized that the joint venture benefited both parties. On one hand, Xerox was able to benefit from being closer to their competition in Japan, as well as insight into Japanese management techniques and efficiency / quality focus. Fuji Xerox benefited from marketing their products under the Xerox name brand, and having access to US market and innovation. The joint venture continues today because both parties still gain value.