Global Strategy Book Summary PDF

**Global Strategy book summary** **Chapter 1: Strategizing Around the Globe** **Key Concepts and Definitions** 1. **Strategy** - **Definition:** A firm's theory on how to compete successfully. - **Three Perspectives:** - **Origin:** Rooted in military strategy but adapte...

**Global Strategy book summary** **Chapter 1: Strategizing Around the Globe** **Key Concepts and Definitions** 1. **Strategy** - **Definition:** A firm's theory on how to compete successfully. - **Three Perspectives:** - **Origin:** Rooted in military strategy but adapted for business. - **Plan vs. Action:** Strategy must bridge planning and execution. - **Theory:** A hypothesis that must be tested and refined. 2. **Global Strategy** - **Definition:** Strategy around the globe, not limited to international business. - **Expanded View:** Encompasses both multinational enterprises (MNEs) and domestic firms, highlighting the interplay between foreign entrants and local competitors. 3. **Four Fundamental Questions in Strategy** 4. **Globalization and Semi-Globalization** **Globalization:** The increasing interconnectedness of economies, reducing costs, and barriers to trade and communication. **Semi-Globalization:** Recognition of persistent divides between nations, resulting in uneven integration. *Key Insight:* The world is neither completely globalized nor fully isolated. 5. **Black Swan Events** **Definition:** Rare, unpredictable events with significant impact (e.g., COVID-19 pandemic). **Strategic Implication:** Firms must develop resilience and adapt to unexpected disruptions. **Key Debates** 1. **Globalization vs. Deglobalization** **Globalization:** Continued integration and interdependence of global markets. **Deglobalization:** The retreat from globalization due to political, economic, and cultural resistance. 2. **Strategic vs. Non-Strategic Industries** Strategic industries (e.g., defense, healthcare) may face stricter regulations and are more resistant to foreign competition. 3. **Just-in-Time vs. Just-in-Case Management** **Just-in-Time:** Efficiency-focused supply chains. **Just-in-Case:** Resilience-focused supply chains, prioritizing risk mitigation over efficiency. **Practical Implications** 1. **Strategic Thinking in a Semi-Globalized World** Firms must recognize the dual pressures of globalization and localization to tailor strategies effectively. 2. **Balancing Internal and External Factors** Success hinges on leveraging firm-specific resources (FSA) and adapting to country-specific advantages (CSA). 3. **Adaptation and Resilience** Strategies should account for volatility, uncertainty, and the possibility of Black Swan events. **Case Example: Zoom** - **Background:** Zoom grew exponentially during the COVID-19 crisis by offering frictionless video communication. - **Strategic Insight:** Leveraged ease of use and freemium model to dominate a semi-globalized market. **Chapter 2: Managing Industry Competition** **Industry competition**: Ongoing rivalry among firms within a market, aiming to capture greater market share, profitability, or dominance. Shaped by various forces and strategic choices. Includes: price wars, marketing campaigns, product launches, and other tactics aimed at gaining market share Intensity of competition: - The number of competitors - Industry growth rates (low =\> fierce competition) - Product differentiation - Exit barriers **Strategic groups:** A subset of firms within an industry that adopt similar strategies and compete directly with each other. Differentiated by: - Pricing strategies (premium pricing, low-cost) - Product differentiation (luxury, mass-market) - Distribution channels (e-commerce, physical retail) - Geographic focus (regional, global reach) Why do they matter? - More focused competition: helps firms predict competitive behavior - Barriers within groups: entry into a strategic group can be challenging due to barriers like reputation, or specialized technology - Impact on strategic decisions: a firm might decide whether to reposition itself to enter a better group or defend its current position **The Five Forces Framework (Porter's Five Forces)** A foundational model for analyzing industry competition: - **Rivalry Among Competitors**: The intensity of competition between existing firms in the market. High rivalry often reduces profitability. - **Threat of New Entrants**: Potential competitors entering the market can erode market share and profits. Barriers to entry play a critical role in deterring new players. - **Bargaining Power of Suppliers**: The ability of suppliers to influence prices and terms can impact a firm\'s cost structure and profitability. - **Bargaining Power of Buyers**: Buyers can demand lower prices or higher quality, putting pressure on firms. - **Threat of Substitutes**: Alternative products or services that fulfill the same needs can limit pricing power and profitability. **Lessons from the Five Forces Framework** - Firms should assess all forces to identify the strongest and weakest threats. - Understanding these forces helps in developing effective strategies to enhance competitive advantage. **Three generic strategies** - **Cost leadership:** competing by offering products at the lowest cost while maintaining acceptable quality. - **Differentiation:** providing unique products or services that justify premium pricing. - **Focus strategy:** targeting a specific market niche with tailored products or services. **Debates in industry competition** - **Clear vs. blurred industry boundaries:** industries evolve, making it harder to define strict boundaries - **Industry rivalry vs. strategic groups**: competition may not occur across the whole industry but within defined groups sharing similar strategies - **Integration vs**. **outsourcing:** firms must decide between controlling the supply chain or relying on external providers - **Outsourcing:** turning over all or part of an activity to an external supplier to enhance the performance of the firm - **Integration:** firm's strategic decision to internalize certain stages of its value chain, either by - Backward integration: acquiring and owning upstream suppliers such as raw material suppliers - A car manufacturer acquires a steel plant - Forward integration: acquiring or owning downstream entities such as distributors or retailers - Apple owning and operating its own retail stores - **Stuck in the middle vs. hybrid strategies:** - **Stuck in the middle:** a firm fails to commit to either cost leadership or differentiation, resulting in poor competitive positioning - **Lacks clear competitive positioning, leading to poor performance** - **Hybrid strategies:** a firm combines elements of cost leadership and differentiation successfully to appeal to a broader market while maintaining cost efficiency and quality - **Ikea:** scandi style & cost leadership **Practical applications** - **Strategic positioning:** understanding where a firm stands relative to competitors and how to position itself effectively - **Analyzing trends:** using the Porter's five forces to anticipate changes in competitive dynamics - **Balancing trade-offs:** choosing between competing priorities, such as integrating vs. outsourcing, based on firm-specific conditions **Chapter 3: Leveraging Resources and Capabilities** **Resources**: tangible and intangible assets a firm possesses, such as financial, physical, technological, and organizational resources **Capabilities:** the ability to deploy resources to perform activities in ways that enhance value **The resource-based view (RBV)** Proposes that competitive advantage derives from resources that are Valuable, Rare, Inimitable, and Organized (VRIO) **VRIO framework** 1. Value: does the resource enable a firm to exploit opportunities or neutralize threats? 2. Rarity: is the resource rare among competitors? 3. Imitability: can competitors easily replicate or substitute the resource? 4. Organization: is the firm structured to exploit the full potential of the resource? **Resources, capabilities, and the value chain** **Value chain analysis:** a tool to understand how a firm's activities create customer value. The goal is to break down a firm's activities to identify areas where value is added for customers and where improvements can enhance competitive position. It helps to pinpoint which activities contribute to a firm's competitive position. It includes: **Primary activities:** the core operations directly involved in creating and delivering the product or service - **Inbound logistics**: receiving, storing, and distributing raw materials - **Operations**: transforming inputs into finished products - **Outbound logistics**: distributing products to consumers - **Marketing and sales**: promoting and selling the product to customers - **Service**: after-sales support; maintenance or customer service **Support activities:** the secondary processes that support the primary activities - **Infrastructure:** administrative, finance, and planning processes - **Human resource management:** recruiting, training, and retaining talent - **Technology development:** innovations in processes, products, or services - **Procurement**: acquiring resources like raw materials or services By analyzing each activity, firms can identify areas where they can improve efficiency, enhance differentiation, and reduce costs without compromising quality. The value chain is an integrated system. By optimizing one activity, a ripple effect can be created across the chain. - **Firms enhance competitiveness by optimizing each part of the value chain** **From SWOT to VRIO** **SWOT:** identifies strengths, weaknesses, opportunities, and threats but lacks depth in resource analysis. **VRIO:** builds on SWOT by analyzing internal resources more carefully to identify sources of sustainable advantage. **Static vs. dynamic capabilities** **Static resources:** fixed assets or capabilities that provide a baseline competitive position **Dynamic resources:** the ability to adapt and renew resources in response to changing environments **Debates and extensions:** **Firm-specific vs. industry-specific determinants** Firm-specific advantages (FSAs, such as innovation or brand strength) often outweigh industry-level factors. **Domestic vs. international resources:** Firms must balance leveraging home-country strengths with cross-border adaptability. **Key learnings** - Align resources with strategic goals - Invest in hard-to-imitate capabilities **Practical implications** Leaders should: 1. Identify and develop VRIO resources 2. Continuously adapt capabilities to evolving global challenges 3. Optimize value chain activities to sustain competitive advantage **Chapter 4: Emphasizing Institutions, Cultures, and Ethics** Core understandings of the chapter 1: **Understand institutions** **Institutions:** humanly devised constraints that structure human interaction (and behavior). Divided into formal and informal components. **Institutional framework:** a framework of formal and informal institutions governing individual and firm behavior **Formal institutions**: institutions represented by laws, regulations, and rules **Informal institutions**: institutions represented by norms, cultures, and ethics **Institution-Based View:** strategy must consider state and societal influences beyond industry and resources Propositions of institutional view: 1. Firms act rationally within institutional constraints 2. Informal institutions gain prominence when formal systems fail Institutions are supported by regulative, normative, and cognitive pillars: - **Regulatory pillar**: coercive laws and regulations - **Normative pillar**: values and norms influencing behaviors - **Cognitive pillar**: internalized beliefs guiding actions **Institutional distance:** the extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries Canadian firms might find Hong Kong preferable to mainland Chine for expansion, despite similar cultural distance, because the institutional systems (lega, regulatory) in Hong Kong and Canada are more aligned. **Homework on Institutional Systems** Firms must conduct thorough research into the **formal (laws, regulations)** and **informal (norms, cultures, ethics)** systems of the target market. Example: **Regulatory environments often dictate entry modes** (e.g., joint ventures versus wholly owned subsidiaries), while informal norms **influence consumer preferences**. **Implication:** Firms that fail to understand these systems risk non-compliance, reputational damage, or inability to compete effectively in foreign markets. 2: **Strategic role of culture**: Culture is essential for navigating strategic choices and varies significantly across dimensions such as power distance, individualism, and masculinity **Culture dimensions** - **Power distance:** Acceptance of unequal power distribution - **Individualism/collectivism:** focus on personal vs. group identity - **Masculinity/femininity:** gender role differentiation (masculine: females mostly in caring professions, feminine: more women occupy positions that reward assertiveness and men work more in caring positions) - **Uncertainty avoidance:** tolerance for ambiguity - **Long-term orientation:** emphasis on future rewards **Cultural distance:** the difference between two cultures along some identifiable dimensions **Implications**: can affect international transactions, making domestic dealings easier than cross-border ones. Cultural dimensions affect how firms operate across borders. **Cross-Cultural Intelligence** Building **cultural awareness** and fostering **cross-cultural communication skills** is critical for smooth operations in diverse regions. Training programs for managers can help reduce miscommunication and foster better relationships with local partners, employees, and governments. **Implication:** High cross-cultural intelligence minimizes misunderstandings, builds trust, and increases the likelihood of success in international ventures. **3: Ethics in Strategy:** Ethics influences firm behavior through norms and laws, and ethical strategies can build resilience and trust​ **Ethics:** norms and standards governing conduct Different firms adopt different views on ethics: - **Negative:** ethics adopted for legitimacy - **Positive:** ethics from intrinsic motivation - **Instrumental:** ethics as a profit strategy **Strategic responses**: firms react to ethical challenges with strategies that can be: - **Reactive**: firms deny responsibility and do less than required to address ethical challenges - **Defensive:** firms admit responsibility but fight it, doing the least that is required - **Accommodative:** firms accept responsibility and do all that is required to address the problem - **Proactive**: firms anticipate responsibility and go beyond what is required by actively improving ethical standards and practices **Ethical Integration into Strategy** Companies should not view ethics as an **external constraint but as a core component of their strategic planning**. Ethical strategies can involve proactive corporate social responsibility (CSR) initiatives and adopting globally recognized standards like ISO certifications. **Implication:** Ethical integration enhances brand reputation, stakeholder trust, and long-term sustainability, creating a competitive advantage. **Key debates** **Opportunism and collectivism** Individualistic cultures show less trust but broad fairness: collectivist cultures foster in-group trust but out-group exploitation **Cultural vs. institutional distance** Strategic focus varies between cultural norms and systemic institutional differences **Strategic Implications of chapter 3:** - Companies are more likely to enter culturally similar or institutionally aligned markets early in their internationalization process. - Over time, as firms gain confidence and capabilities, they may extend to culturally and institutionally distant markets - **Managing Cultural and Institutional Distance:** Companies entering culturally or institutionally distant markets must adapt their strategies to bridge these gaps. - **Adaptation Strategies:** Tailoring products and operations to fit local cultural expectations. - **Aggregation Strategies:** Standardizing operations where feasible to gain economies of scale. - **Implication:** Firms that appropriately balance adaptation and standardization can mitigate risks associated with cultural and institutional differences while capitalizing on global efficiencies. **Chapter 5: Growing and Internationalizing the Entrepreneurial Firm** **Key definitions** **Entrepreneurship:** the identification and exploitation of previously unexplored opportunities **Entrepreneur:** an individual who identifies and explores previously unexplored opportunities **International entrepreneurship:** a combination of innovative, proactive, and risk-seeking behavior crossing national borders to create organizational wealth **Social entrepreneurship:** innovative, proactive, risk-seeking entrepreneurial behavior aimed at achieving social goals **Small and medium-sized enterprises (SMEs):** firms with fewer than 500 employees in the U.S. or fewer than 260 in the EU **Comprehensive model of entrepreneurship** Entrepreneurship is informed by three strategic perspectives: - **Industry-based view:** focuses on interfirm rivalry, entry barriers, and substitute products or services - **Resource-based view:** centers on the VRIO framework - **Institution-based view:** highlights the impact of formal (laws, regulations) and informal (cultural norms, values) institutions **Five key strategies for growing entrepreneurial firms** 1. **Growth:** expanding market share and firm capabilities 2. **Innovation:** developing new products, services, or business models; fosters competitive advantage 3. **Networking:** building relationships to leverage resources and information 4. **Financing and governance:** securing funding (venture capital, IPOs) and ensuring effective management structures 5. **Harvest and exit:** planning strategic exits, such as acquisitions, IPOs, or shutting down **Internationalization strategies** Entrepreneurial firms internationalize through two pathways: **Entering foreign markets** - **Direct exports:** selling home-country products abroad - **Licensing/franchising:** granting rights to foreign firms for a fee - **Foreign Direct Investment (FDI):** establishing operations in foreign markets, like: - **greenfield investments** (wholly owned subsidiaries) - establishing new wholly owned subsidiaries in foreign countries from scratch - gives more control over the operations and better protection of proprietary technologies to the investing firm compared to licensing or franchising - **come with significant costs and complexity** - require a substantial capital outlay and managerial commitment - Higher level of commitment and risk for the investing firm - **strategic alliances with foreign partners** - cooperative agreements between potential or actual competitors - can be formal contracts like joint ventures or informal arrangements without legal binding - allows firms to: - share risks and resources in foreign markets - gain access to local knowledge and networks - enhance competitive positioning globally - challenges: potential conflicts over decision-making and sharing proprietary knowledge - **acquisitions of foreign firms** - firms acquire existing entities in the target market, allowing faster access to established networks, customers, and operations - costly and complex operation but offers a ready-made presence in the foreign market **Staying domestic while serving international customers** - **Indirect exports via intermediaries** - SMEs export their products through domestic-based intermediaries who serve as middlemen linking them to overseas buyers - Intermediaries handle international complexities, helping SMEs without direct global operations reach foreign customers - **Becoming a supplier to foreign firms** - SMEs can secure contracts to supply products or services to foreign firms operating within their home market - allows them to internationalize indirectly by leveraging their partnerships with foreign entrants - **Becoming a licensee or Franchisee of foreign brands** - operating under the name and model of an established foreign brand - **Joining as an alliance partner of foreign direct investors** - collaborating with foreign investors entering their domestic market, enabling them to tap into international expertise - **Harvesting and exiting through sell-offs** - selling their business or assets to foreign entrants **Critical debates** **Traits vs. institutions**: Examines whether entrepreneurial success is influenced more by individual traits (risk-taking) or environmental factors (formal institutions: business-friendly regulations; informal institutions: social norms that legitimize entrepreneurship as a legit career choice) **Slow vs. rapid internationalization** Contrasts gradual international expansion with the "born global" approach. - **Slow internationalization (Stage model):** - firms follow a gradual approach, starting with culturally and geographically close markets before expanding further - Ikea waited 20 years before expanding to Norway, illustrating the value of accumulated experience - critics of rapid internationalization warn that without sufficient preparation, firms may struggle in foreign markets - **Rapid internationalization (Born global)** - Firms like Logitech demonstrate that small, agile firms can internationalize quickly due to reduced costs of entry (the advancements in technology, particularly the internet and e-commerce) - Advocates argue that small, agile firms without established domestic commitments can outcompete traditional rivals - While born global strategies may appear advantageous, stage models caution against the risk of premature expansion into unfamiliar markets **High-growth entrepreneurship vs. ethically questionable behavior** The pursuit of rapid growth in start-ups often leads to ethical dilemmas: - **High-growth entrepreneurship** - Rapid expansion and achieving dominance in the market, often called \"blitzscaling.\" - Strategies like blitzscaling prioritize speed and scale to secure market dominance, often at the expense of traditional profitability - Prioritizes speed over efficiency - Encourages innovation, risk-taking, and agility - Relies on aggressive strategies to capture market share quickly - Firms like Uber aggressively expanded despite massive financial losses - The relentless drive for growth can sometimes stretch resources, compromise operational stability, and ignore long-term sustainability - **High-Growth Entrepreneurship** sees risk-taking as a calculated strategy within legal and ethical frameworks - **Ethically questionable behavior** - Some entrepreneurs resort to unethical practices to gain attention, secure funding, or attract customers - Notable cases include Theranos and The Honest Company, which faced legal action for deceptive practices. Critics argue that the high-pressure environment of venture capital-funded growth fosters a culture of rule-breaking, often justified under mantras like \"move fast and break things\" - **Ethically Questionable Behavior** involves deliberate violations of ethical standards for expediency, undermining long-term trust and success **Strategic Implications** Entrepreneurs should: - Develop deep industry knowledge to identify opportunities - Leverage unique resources and networks - Advocate for supportive institutions to enhance entrepreneurial activity - Approach internationalization with calculated boldness **Chapter 6: Entering Foreign Markets** **Liability of foreignness**: refers to the inherent disadvantages foreign firms face due to their outsider status. It manifests in institutional differences and consumer biases. **The comprehensive model for foreign market entry** **Strategy tripod:** - **Industry-based view:** highlights the competitive dynamics and entry barriers in host markets - **Resource-based view:** uses the VRIO to analyze firm capabilities critical for market success - **Institution-based view:** focuses on regulatory, trade, and currency risks **Strategic questions for entry** - **Where to enter** - driven by location-specific advantages, such as access to resources, market potential, efficiency, and innovation opportunities - influenced by **cultural and institutional distances** - **When to enter** - **First-mover advantages:** benefits include market share capture and customer loyalty - **Last-mover advantages:** learning from early entrant's mistakes and lower market entry costs - **How to enter** - **Scale of entry:** large-scale entries show long-term commitment but carry higher risks, while small-scale entries minimize risk but may limit market penetration - **Entry models** - **Nonequity models:** exports, licensing and franchising, characterized bu lower risk and resource commitments - **Equity models:** joint ventures (JVs) and wholly owned subsidiaries (WOS) involve greater resource commitment and control **Key frameworks and theories** **OLI advantages** - **Ownership advantage:** benefits of owning resources abroad - **Location advantage:** specific benefits of operating in certain locations - **Internationalization advantage:** benefits of integrating operations within a single organization **Dissemination risk:** risk of proprietary knowledge being imitated or diffused **LLL Framework (linkage, leverage, learning):** emphasizes emerging market firms' strategies for global expansion - challenges the traditional OLI framework by focusing how emerging-market multinationals achieve competitiveness in the global arena - The LLL Framework explains how firms without traditional advantages (e.g., strong brands or cutting-edge technologies) can still succeed globally by being agile, building strategic partnerships, and continuously adapting to international challenges Huawei: - **Linked** with global firms to access technology and resources through joint ventures. - **Leveraged** its cost-efficient manufacturing and scale economies to provide competitively priced products. - **Learned** global best practices in R&D and marketing to refine its products and approach over time. **Key debates in foreign market entry** **Liability vs. asset of foreignness:** under some conditions, foreignness can serve as a competitive advantage (perceived quality of foreign products) **Global vs. regional diversification:** examines the trade-offs between broad international reach and focused regional strategies **Strategic Implications for Action** - Understand host industry dynamics. - Develop overwhelming resources and capabilities to counter liabilities. - Adapt to both formal and informal institutional rules. - Align market entry strategies with long-term strategic goals​ **Chapter 7: Making Strategic Alliances and Networks Work** **Key definitions** - **Strategic alliances:** voluntary agreements of cooperation between firms. These include contractual (nonequity-based) and equity-based agreements - **Contractual alliances:** strategic alliances based on contracts, including co-marketing, R&D contracts, licensing, without shared ownership - **Equity-based alliances:** alliances involving shared equity, such as joint ventures, strategic investments, and cross-shareholding - **Strategic networks:** alliances among multiple firms, competing as a group against others, often called constellations **Comprehensive model of strategic alliances and networks** Strategic alliances are analyzed using the strategy tripod, encompassing: 1. Industry-based considerations: collaboration among rivals, entry barriers scaled by alliances, and vertical alliances with suppliers/buyers 2. Resource-based considerations a. Value: must create benefits that outweigh the costs b. Rarity: rare relational capabilities provide an edge c. Imitability: unique firm-specific and relationship-specific capabilities d. Organization: effective organization ensures alliance success 3. Institution-based considerations e. Formal institutions: regulatory frameworks addressing antitrust and entry requirements f. Informal institutions: normative (social pressures to form alliances) and cognitive (internalized belief in alliances' value) **Formation of alliances** 1. **Decision to cooperate or not:** evaluate potential synergies and risks 2. **Choice of contractual vs.** **equity models:** consider cost, control, and required commitment 3. **Positioning the relationship:** align strategic goals and establish mutual trust **Evolution of alliances** 1. **Combating opportunism** a. **Walling off capabilities:** protect critical assets through contracts b. **Mutual hostage-taking:** commitments to ensure collaboration, like investing in resources that are valuable to each other but difficult to redeploy outside the alliance. creates a balance of power. for example, joint ownership of specialized facilities or co-developed patents can serve as mutual hostages. 2. **Transition from strong ties to weak ties** c. **Strong ties:** deep, enduring relationships between partners. High-quality exchanges but resource-intensive. i. Example: Boeing and its key suppliers such as Spirit AeroSystems, are deeply embedded in Boeing's production processes and share extensive technical knowledge and coordination systems. ii. Can be rigid, as partners become reliant on each other, reducing their ability to explore new opportunities d. **Weak ties:** cost-effective, less intensive, more casual alliances that provide access to new opportunities and diverse networks at lower costs. iii. Weak ties are particularly valuable for innovation, as they connect firms to a broader range of knowledge and markets. A licensing agreement with minimal direct engagement is an example of a weak tie. - In evolving alliances, firms often **start with strong ties** to establish trust and deep collaboration. Over time, as they stabilize, firms may **shift to weaker ties** to maintain flexibility, reduce costs, and tap into wider networks. This progression allows firms to balance commitment with adaptability. **Performance of alliances:** 1. **Alliance-level drivers:** influence the success of an alliance based on the characteristics of the partnership itself a. **Equity structure**: equity-based alliances often lead to deeper integration and stronger alignment of goals b. **Learning opportunities**: successful alliances allow partners to acquire knowledge, skills, or capabilities from each other, enhancing the competitiveness of both firms c. **Partner compatibility**: cultural, strategic, and operational compatibility of the partners is crucial; misalignment in goals, communication, or corporate styles can lead to reduced performance - **alliance-level drivers ensure the partnership functions well** 2. **Parent firm-level drivers:** focus on how the individual firms participating in the alliance influence its success d. **Strategic alignment**: the extent to which the alliance aligns with the parent firm's long-term goal and core strategies: alliances that complement a firm's strategic vision are more likely to succeed e. **Effective management capabilities**: the ability of the parent firms to manage and support the alliance, including monitoring performance, resolving conflicts, and maintaining the relationship - **parent firm-level drivers ensure each firm\'s internal strategy and capabilities support the alliance\'s success** **Key debates** **Majority JVs or Minority JVs** - **Majority JVs** - One partner holds a larger ownership stake (\>50%) and typically **controls decision-making** within the venture - This structure serves as a **control mechanism,** enabling the dominant partner to steer the alliance's strategic direction - Often chosen in industries where **tight control over operations, quality, or intellectual property** is essential, such as in high-tech sectors - **Majority JVs prioritize control and alignment with the lead firm's strategic goals** - **Minority JVs** - A partner holds a smaller stake (\