Intercultural Management: MBA Masterclass (MBA Masterclass Series)

In practice, corporations do not enter into collaborative ventures in one go. They generally proceed from low levels of transnational collaboration to increasingly higher levels. Initially they may prefer collaborations where the responsibility for success in a new culture rests with the local collaboration partner. In the BMW case, initially in Thailand responsibility for its operations rested with the local collaboration partner. Subsequently, as BMW's confidence grew it graduated from licensing to wholly owning and managing local facilities. The shift was deemed worthwhile by BMW, even though it sustained hefty termination fees. A corporation progresses from exerting least control to most control by going through the following activities: exporting/importing, licensing, franchising, contracting, going in for a joint venture, and having a wholly owned subsidiary.

Companies need collaborative arrangements when they engage in indirect exporting. Indirect exporting requires companies to market through expert intermediaries.

Franchising is also a term that requires a little explaining. It is a special form of contracting. The franchiser allows a franchisee to have rights over a complete business. In return, the franchiser receives fees and royalty payments. The franchiser usually provides patent or trademark rights, as well as equipment and materials. Examples of international franchisers are US fast food companies like McDonald's and Kentucky Fried Chicken.

A global company can have different collaborative arrangements for different products. It can also have different collaborative arrangements for different markets. Multinational companies function in constantly changing contexts. It is advantageous for them to assess constantly whether their collaborative arrangements are achieving their objectives. In other words, they have to review whether their collaborative arrangements are aligned with their overall corporate strategy.

Multinational corporations need to formulate , implement and review strategy at various levels. Strategy could be for a collaborative arrangement, a local subsidiary, an industry, or for external associates . Ultimately all strategies have to be configured with the overall corporate strategy.

The strategy to be adopted by collaborating partners can be negotiated a priori . If a partner is extremely powerful and dominant, it can negotiate all agreements to its advantage. Where that is not the case, prearrangements are often drawn up to protect the interests of both parties. This is increasingly becoming the case where a transfer of technology is involved. The partner transferring state of the art technology may fear that its buyer will use that technology without paying. The buyer in turn may hesitate to pay in advance for a technology it could find not relevant.

Today, collaborative arrangements are increasingly made within the framework of contracts. Some partners have detailed contracts that cover every possible contingency.