Question

Do you agree with below paragraphs? why or why not? Write 200-250 words and give example .

Many business alliances are driven by an intent to mitigate risk especially when entering new markets. This is particularly true when comes to expanding internationally.

While it’s pretty common for large corporations to operate in foreign markets through joint ventures or wholly owned subsidiaries, testing the waters by engaging in a strategic alliance would make even more sense especially at the beginning. Global expansion is a complex strategy surrounded by numerous types of risks such as political, cultural, legal, currency risks etc. Creating a strategic alliance with a local company familiar with the current market conditions, consumers preferences, political and legal environment, regulatory requirement can substantially increase the chances to make international expansion a success. The set of valuable skills and resources provided by a partner in the strategic alliance would help to navigate the nuances in the new market and speed up the process of achieving common business goals and objectives. Needless to say that business alliances also create an alternative path for growth and later down the road can be excellent acquisition vehicles.

Starbucks entered wide, but complex Indian market in October 2012 through a 50/50 Joint Venture with Tata Global Beverages and currently operates 167 stores mostly in metro areas. Two global beverage giants share similar values and were able to offer the consumers both Starbucks’ traditional as well as ethnic Indian style products. Tata’s knowledge of local market and wide expertise in food and beverage industry made Starbucks global expansion to India go smooth and quite successful.

Answer 1

The strategy for mitigating risk followed by many business by strategic alliance are quite commonly followed. The alliance with tata global beverages is quite sensible to go with. The marketing staretgy followed was only to target the elite group because of the pricing poilicy. Also the outlets were opened only in the metro cities . The business is always risky when it is targeted to very small set of people with lesser number of stores. The luxury drinks are always the one with high risk and high rewards. The business has high margins because they are targeted to elite groups. Also as the risks are shared the rewards are also shared.