Strategic Partner Selection: Key Business Considerations

Key Considerations for Strategic Partner Selection

1. Compatibility of Goals

2. Complementarity of Resources

3. Cooperative Culture

4. Commitment

5. Capability

Resource Complementarity

• The extent to which one party’s contributed resources are complementary to the other party’s resources, resulting in synergies pursued by both.
• The greater the resource complementarity between foreign and local parents, the higher the new value added owing to superior integration of complementary resources pooled by different parents.
• Resource complementarity also reduces governance and coordination costs and improves the learning curve.

Cooperative Culture

Cooperative culture concerns the extent to which each party’s corporate culture is compatible, thus leading to a more cooperative atmosphere during GSA operations.

Maintaining cooperation can become difficult for partners from different cultures.

A company must look closely at compatibility in organizational and management practices with a potential partner.

Commitment

• The extent to which each party constantly and continually contributes its resources and skills to joint operations and is dedicated to enhancing joint payoffs.

Commitment Counters Opportunism and Fosters Cooperation

• When GSAs face unexpected environmental changes, commitment serves as a stabilizing device offsetting environmental uncertainties.

Strategic Capabilities

Strategic capabilities of a partner firm include these areas:

• Market Power
• Marketing Competence
• Technological Skills
• Relationship Building
• Industrial Experience
• Corporate Image

Organizational Capabilities

Organizational capabilities include organizational skills, previous collaboration, learning ability, and foreign experience.

Negotiating Tactics

• Negotiating tactics affect the bargaining process as well as outcomes.
• Assembling the negotiating team is a critical element in creating a workable alliance.

Managerial Control

Managerial control is achieved through equity ownership. Controlling entities:

• Nominate and appoint key personnel.
• Set agendas of the board of directors.
• Establish major managerial policies and procedures.
• Retain budget control.
• Set contract stipulations.
• Allocate resources.
• Shape interpersonal relationships.