Strategic Alliance Â Case Solution
MECO has neither expertise in the battery manufacturing nor does it want to invest funds and human efforts on this non-core business. However if MECO wants to produce it internally with greater cost control and yield then it has to invest in this non-core business. It has to make a separate division for battery manufacturing and a team that can improve the process and do research and development.
- Why is X willing to provide additional power system components beyond the actual battery itself for a fee? What is happening to the underlying configuration of the alliance? (5 points)
The main reason behind the offer of added components is that, the X wants long term business relationship and wants to show commitment to the company. By these additional components the device will perform better, thus X wants to add maximum to the devices with its batteries.
Since it is charging fee as well, it can also be implied that the X might achieve cost effectiveness from this strategy. The addition of the component might require minor expense and the fee it charge would be standard one. The components that it is offering might be manufactured internally or obtained from a supplier at a lowest cost.X wants to solidify the bond between the both companies and also achieve cost effectiveness.
b)Â Â Â Keeping your answer short, what would be some of the important points of negotiating with X?Â What are some key issues that you need to consider? How would you frame them in your proposal? What are some key issues that X is probably considering? How will these issues show up in Xâ€™s proposals?Â (Provide your answer and supporting rationale in a table for both companies using short bullet points).
|The company can negotiate with X, while emphasizing its brand image in the industry and its expertise. The company can argue that the jointly owned factory should be built in U.S so that our management can work smoothly. While emphasizing U.S factory the company can offer to pursue the co-development.
While the proposal for X, is not attractive. They are less bothered to have work on a matured and old traditional battery line-up. They already have hands-on in that.Â They want to enter in high end and advanced batteries. They have less expertise in that.
|Â·Â Â Â Â Â Â Â Â For the company, this proposal will help to have the batteries on time, as compared to have shipped them from Asia. The competent and yield improvements skills of X can help in increasing the performance of business, in joint venture.
Â·Â Â Â Â Â Â Â Â For company X, they will satisfy their desire to have combined operations and learns and innovate in the advanced battery field. They also gain experience in the U.S market.
|X is considering the issues in transferring this new operation from their location in ASIA to U.S. Thatâ€™s why it gives a counter offer. X also wants to have joint venture in more advanced battery rather than in simple batteries.
Our company is not attracted to work on the advanced batteries and also wants to have joint venture only in the simple mature battery types.
|Â·Â Â Â Â Â Â Â Â For X, the issue might be that they can lose their cost effectiveness in U.S. where the labor cost is higher and labor laws are stricter. Moreover it has the required expertise in simple batteries already therefore X wants to explore in the new advanced batteries.
Â·Â Â Â Â Â Â Â Â Our company wants to have co-development in simple and traditional batteries. The company considers issues such as that the advanced battery research and formulation is a competitive advantage and it feels the proposal risky that might negates the competitive advantage.
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