TUM-BWL SS2011 - Organisation Zusammenfassung
Transcript of TUM-BWL SS2011 - Organisation Zusammenfassung
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Organisation ! Lehrstuhl: Welpe01 - Introduction
Organisation = made of people, labourdivision, pursuit of shared goals/objectives
Org. exist because Specialisation / division of labour Economies of scale/scope Manage external environment Economize on Transaction cost Exert power/ control
--> trade-off:
Division of labor & specialisation (efciency gains) Need for coordination (resource consumption)
-> Agency problem-> Lack of knowledge -> Managing interdependency-> Lack of motivation
Evolution of the moderncorporation
Business Environment Strategic Changes OrganisationalConsequences
Early 19th cent
Late 19th cent
Early 20th cent
Late 20th centry
Poor transport Specialised rms, local markets Simple mgmt structures
Railroads, telegraph,industrialisation
Geographical & verticalexpansion
Line/Staff separation, functionalstructures & accounting syst.
Road transport,communication, nancialmarkets, world trade
Product diversication,multinational growth
Multidivisional structures
Rapid innovation, IT Competitive advantage,Outsourcing
Matrix structure,Decentralization, alliances &networks
02 - Organisation Theories
Different org. theories because of multiple aspects/ factors in organisations Individual, group, organisational factors (see effectivenes) External environment Performance / Humanistic orientation No simple, linear causal relationships
--> Contingency = Situational approach due to high organisational variance (-> no stable laws apply)! -> adapt best available knowledge to situation
Individual effectiveness-> Ability, skill, knowledge, attitude, motivation
Group effectiveness-> Cohesiveness, leadership, structure, status
Organisational effectiveness-> Environment, technology, strategy, structure, culture
Beaurocratic Theory (Max Weber, 1864- 1920)
1800: Organisation = extension of families, hiring based on favoritism, subjectivity --> growth uncovered inefciency
Proposition for efcient / rational bureaucracy: Dened authority (hierarchy) + assigned responsibilities Objective criteria for evaluation of performance / suitability of staff Fixed salaries for administrators
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Administrative theory (Henri Fayol, 1841 - 1925)Management has two distinct functions:
Coordination Specialisation
Scalar principle : Hierarchical distribution of power, pyramidstructure
Unity of command : Only one superior Span of control : Optimal no. of subordinates Exceptions principle : lower lvl employees handle routine
events, managers for more complex tasks
Departmentalisation : Similar tasks / functions that needcoordination grouped within same unit
Line / Staff functions : Line contributes directly to pursuit ofprimary organisational goals, staff adds support activities
Scientic management (Frederick Taylor, 1856 - 1915) Decisions abt organisational- job design based on scientic study Method to deliver greatest output :
Standardised procedures Qualied human capital Work planning Incentives to increase output --> Link of output to payment -> Employees improve wages, Shareholders increase surplus
Neo-Classical theories Classical theories only concerned with Meso- (Group) and Macro-level (Org) --> Neo-classical theories focus on micro
Importance of human needs / relations Expectancies of employees Give-and-Take relationships
Hawthorne Studies Human relations more important than physical work conditions -> socio-economic factors inuenced performance Psychological factors strongly inuence performance--> Turning point: People s roles extend beyond work in organisations, multiple and divergent needs
Behavioral decision theory (Simon & March)
Bounded rationality : individuals only capable to act rational to certain extent Limited by imperfect knowledge, evaluation of future outcomes, incapability to consider all alternatives
--> Facilitate decision making by reducing complexity and uncertainty Division of Labor -> Problems are divided in sub-problems, Individuals confronted with subsets of goals/ alternatives Standardisation of processes Hierarchy limits decision space of subordinates Communication aids in diffusion of information Indoctrination establishes trust culture, less supervision required, company goals/ values/ mission are internalised
Institutionalism Companies perform when perceived by larger environment
to have legitimacy to exist Environment composed of norms/ values of external
stakeholders
Legitimacy : Organisation s actions = desirable, appropriatewithin system of norms/ values
Isomorphism : similarity among org s in population Coercive = pressure by other organisations/ society Mimetic = imitate competitor to increase legitimacy Normative = indirect adoption of norms through
exchange of employees, knowledge transfer
. . .
Insitutions have and assign property rights
4Property Rights
AbususChange of the property
Usus fructusRight to any benefit from
the property
UsusUse of the property
Ius abutendi
Right to transfer or sellthe property
Property rights are defined and protected within state laws, normally within constitutionor bill of rights
Property rights are assigned to legal not necessarily natural personsProperty is not a relationship between people and things, but a relationship betweenpeople with regard to things
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Capabilities exist when resources have been purposely integrated to achieve task Development of capabilities that lead to competitive advantage evolve over time! --> based on developing, carrying and exchanging information / tacit knowledge through human capital
Core competencies : resources and capabilities that serve as a source of competitive advantage over rivals! --> characterise activities that rm performs exceptionably well/ through which unique value is added
Human capital : sum of skills, knowledge, generalattributes of people in an organisation
does not depreciate, but enhances through use critical resource: superior knowledge abt customers,
markets, technologies and competitors used to gain competitive advantage
05 - Inside the corporation (II)
Managers w/ requisite knowledge for capability building = key resource for development of capabilities Capability = path dependent (competence today is result of past developments)
Linkages between resources & capabilities (see chart in 04) Organisational culture:
Shared perceptions, common values and behavioral norms Capacity to comprehend one another/ collaborate without direction --> mutual adjustment
Organisational Structure (see 07) Management system
IS allowing organisational members to identify changing circumstances/ actions of workers Incentive systems to promote cooperation and motivation
Strategic intent Effective leadership that communicates drive and direction of organisation
Capabilities can act as barriers: development over long time/ embodied in culture and structure --> rigidity, inertia! --> the more developed capabilities, the narrower repertoire/ adaption to new circumstances
Dynamic capabilities : Reconguration of internal and external competences to address rapidly changing environment! --> capacity to change may be regarded as organisational capability
Acquiring capabilities Mergers & Acquisitions: acquiring desired capability developed in another rm to shorten development! --> major risks, e.g. irreversible investmt/ surplus of acquired resource needs integration -> culture clashes Strategic Alliances: cooperative relationship between rms to reduce costs/ risks and transfer knowledge
Internal development: Focus and sequencing Obtaining resources easy, challenge = integration of resources to achieve task Requires organisational design / managemt systems and is facilitated by culture / strategic intent Building superior capabilities requires leveraging resources by concentration within units / aggregation among units Focusing within units implies sequential development -> incremental evolution
Incubation in seperate organisational units may foster capabilities through different cultures, structures and systemfrom existing rm --> combines exibility of startups w/ resources of established players
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Knowledge management Systematic leveraging of information and expertise to improve organisational innovation, responsiveness, competence Firm = assemblage of knowledge assets --> value created by deploying knowledge Knowledge mgmt = most important resource, provides overview of interlinkages betw. knowledge development,
transfer, utilisation activities Explicit knowledge = easy to exploit but difcult to protect from rivals -> weak basis for sustainable advantage Tacit knowledge = slow / costly to transfer, but strong basis for sustainable comp. advantage
Tacit -> Tacit knowledge = Socialisation
Tacit -> Explicit knowldg = Externalisation
Explicit -> Tacit knowldg = Internalisation
Explicit -> Explicit knowldg = Combination
Strategic Leadership Ability to anticipate, envision, maintain exibility
and empower others to create strategic change
Leaders guide rm according to vision / mission Vision = picture of what rm wants to be/ achieve Mission = specic businesses in which rm wants
to compete/ customers it intends to serve Transactional Leadership: engaging followers through exchange between them / leaders, typically done through
formalisation of rules/ establishing hierarchy and correcting behavior Transformational Leadership: motivating followers to exceed expectations of others, continuosly enrich capabilities,
place interests of organisation above own
06 - Inside the corporation (III)
Productivity of manufacturing processes increased --> lower prices, offshoring Service quality contingent upon management of strategies, systems / employees meeting needs, expectations Service innovation creates new markets and are more likely generating high returns Service innovations characterised by two dimensions:
Type of benet : New core benet vs. Existing benet by new delivery Type of service : Can consumption be separated from production?
Factors that foster market-creating innovations:1. Scalable business model2. Comprehensive CRM3. Investment in employee performance4. Operational innovation (Process design)5. Brand differentiation
Characteristics of service rms Characteristics of manufacturing rms
Intangible output Simultaneous production & consumption (no storage) Labor- and knowledge intensive Customer interaction high Quality difcult to measure Rapid response time Location important
Tangible product Products stored in inventory Capital asset-intensive Little b2c interaction Human element may be less important Quality directly measured Longer response time Site of facility depends on transport
Flexible Manufacturing Systems : link manufacturing components that previously were isolated, e.g. robots,machines, product design and engineering integrated through IS
---> allows companies to produce customized products in mass production
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Lean Manufacturing: Cut waste and improve quality by training employees in continuous improv / problem solving requires adequate organizational system --> decision making, culture that supports employee participation focus: people (e.g. Toyota)
Key advantage of exible manufacturing: products ofdifferent size / type to fulll customer needs
--> customer satisfaction.
Mass Customisation : Firm applies technology andmanagement methods to provide product variety andcustomisation through exibility & quick responses
--> produce enough variety to satisfy broad range of need Mass Production : Standard goods at affordable prices
Department Design Analysis of nature of department s technology leads to design
structure of department Analysability : Tasks reduceable to mechanical steps Variety : Unexpected situations / contingencies
Dimensions of dept design: Formalization : Standardisation, division of labor Decentralisation: Decisions centralised vs Delegation Workers skills Span of control Communication and coordination : frequency, medium
Types of interdependence among departments Pooled : work does not ow between units
Each Dept. contributes to common good/ independent Mediating technologies
! --> standardisation Sequential : Outputs of one Dept. = inputs to another
Effectiveness depends on prior Department Greater need for horizontal mechanisms Long-linked technologies
! --> planning Reciprocal : Output depend mutually on each other
intensive technologies required! --> mutual adjustment
07 - Organisational and structure design
Organisational Structure Organisational Design
Pattern of jobs and groups of jobs in an organisation
Important cause of individual and group behaviour Regularity of predictable activities
Process by which managers select and manage aspects of
structure and culture so that an organisation can controlnecessary activities to achieve its goals Management decisions and actions that result in specic
organisation structure
Differentiation = breaking up work in array of tasks Integration = task coordination to achieve goals Depicted by org. chard representing authority
Umbrella concept including structural and process issues Considers unit grouping, size, planning and controlling
systems, behavior formalisation, centralisation
Organisational design = important:
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Positive effects of good design Ability to deal with contingencies Achieve competitive advantage Manage diversity Raise efciency (e.g. cross functional IS) Innovation
Negative effects of poor design: Decline in prots / sales Loss of contro l over Org. structure / culture Inability to adapt to change Slow value creation
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Dimensions of Organisational DesignStructural:
1. Formalisation : Reliance on written documentation (e.g.procedures, regulations)
2. Specialisation (Differentiation): Degree of subdivision of tasksinto separate jobs (e.g. extensive -> narrow range of tasks)
3. Hierarchy of Autonomy4. Centralisation
5. Professionalism : Level of formal education / training ofemployees6. Personnel Ratios / Span of command: Ratio of ppl in various
departments
Contextual:1. Size : Measured for aggregates2. Organisational technology : Tools used to turn inputs into outputs3. Environment : All elements outside organisation4. Goals and Strategy/ Mission : Goals dene purpose and competitive techniques which set it apart from other org s, Strategy
is plan of action describing resource allocation / activities dealing with environment to reach goals! ! --> Together dene scope of operations and relationship with employees, customers and competitors
5. Culture : Set of shared key values, beliefs, norms of employees
5 Key Design decisions
1. Division of Labor (Differentiation vs. Integration) Personal Specialities (occupational and professional specialities) Horizontal : Division as necessary by natural sequence of tasks Vertical (Hierarchy): From low to high-level managers
Economies on coordination, increased adaptability Increased no. of hierarchy = more face-to-face control Problems of Tall vs. Flat structures:
Communication (long decision time, distortion, manipulation) Motivation (Less responsibilty, passing problems up hierarchy) Bureaucratic cost Parkinson s Law (Multiply subordinates to enlarge empire)
2. Departmentalisation (Homogeneous vs. Heterogeneous) Individuals requiring most coordination should work within same department Grouping into: Tasks, Product, Geography, Process
Group to achieve economies of scale / scope , learning Functional Structure : similar functions, work processes grouped together
Conditions: Small number of similar products, few locations, one major customer type Advantages: Learning / Spill-over effects through peer supervision, especially for
cooperation-savvy work Disadvantages: Communication, measurement, location
Divisional Structure : organised according to outputs Advantages: Increased organisational effectiveness (synergies), control through prot
centers Disadvantages: Divisional relationship, coordination between divisions, transfer pricing,
commuication
Matrix Structure : incorporates two grouping approaches simultaneously Appropriate only if high cross-functional efforts needed, e.g. NPD-Process Advantages: Reducing cross-functional barriers, Increasing cost/ quality awareness across
departments, Effective use of expertise as needed, Know-how synergies Disadvantages: Lacks bureaucratic structure and stable expectations, no clearly dened
hierarchy/ chain of command
Virtual Network : loosely connected cluster of separate components, Depts. =separate organisations Connected for information diffusion, can be spread worldwide Advantages: Cost economies Disadvantages: Coordination problems -> the more complex value creation the higher Integrating effort, Trust
3. Span of Control (Narrow vs. Wide) Number of subordinates under direct management, increases expontially The more complex task, the smaller efcient span Advantages of wide spans = Lower coordination costs, BUT loss of control possible
4. Authority (Centralised vs. Decentralised) Advantages of centralisation : Top Mgmt coordinates activities, assures goals are met Disadvantages: Little focus on long-term strategic decisions Advantages of decentralisation : exibility, responsiveness, motivation Disadvantages: Coordinating effort substantially increased, agency problems
5. Formalisation (Standardised vs. Mutually adjusted) Formalisation = use of written rules / procedures to standardise operations -> proper actions for given situation Mutual adjustment = Own judgement rather than standardised rules to address probem Advantages: Better control of employee behavior Disadvantages: Rules/ routine vs. innovativeness, openness and exibility
. . .
Goals andStrategy
SizeEnvironment
. .
Culture Technology
Structure1. Formalization2. Specialization
3. Hierarchy of authority4. Centralization5. Professionalism6. Personal ratios
The organization
Structuraldimensions
Contextualdimensions
Structural dimensions:Provide
Labels to distinguishkey, internalcharacteristics of anorganisationA basis to compare thecomposition of
organisations
Contextual dimensions:Characterizeorganizations as awhole and the broader organizational setting
Sources: Daft et al. (2007 . 17-20
. . .. .
10 interactions 4 interactions
Self Organizing Team Hierarchy
Tightly-coupled, integrated system: Changein any part of the system requires system-
wide adaptation
Loose-coupled, modular hierarchy:Partially-autonomous modules linked by
standardized interfaces permitsdecentralized adaptation and innovation
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Engineering Marketing Manufacturing
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ProductDevision 2
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Marketing Manufacturing
Product Devision 2
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Mechanic Structure Organic Structure
Individual specialisation : Employees work seperately andspecialise in clearly dened task
Simple Integrating Mechanisms : Hierarchy clearly denedand serves as major mechanism
Centralisation : Authority to control tasks kept at top lvl Standardisation : Extensive use of rules and SOPs to
coordinate tasks, work process = predictable
Joint specialisation : Teamwork, coordination of actions Complex Integrating Mechanisms : Task forces Decentralisation : Authority delegated to all lvls, most
communication is lateral Mutual adjustment : Extensive use of face-to-face contact,
work process relatively unpredictable
08 - Organisational design and performance management
Performance = heavily routed to inteded purpose of organisation, mostly nancial protability
Strategic Control Systems: Tools that allow managers to monitor and evaluate whether given strategy and structure are working as intended and
how they could be improved or changed to achieve goals Used to create incentives Important because of impact on competitive advantage, e.g. efciency, innovation, quality and cust. service Effective systems are: exible , provide accurate information and support decisions in a timely manner .
Personal control system : Shape and inuence behavior of person in face-to-face interaction Direct supervision by manager, peer supervision --> prevents free-riding
Output control system : Managers estimate performance goals, then compare actual performance
Often incentives are linked to performance -> motivate employees at all levelsBehavior control system : Establishment of comprehensive system of rules / procedures Intent not to specify goals, but to standardise means of achieving them
Three typical control strategies Bureaucratic Control Market Control Clan Control
Description
Requirements
When to use
Use of rules, policies, hierarchyof authority, standardisation
Use of price mechanisms toevaluate performance, e.g.divisional structures -> prot
Use of social characteristics,such as culture, shared values
Rules, standards, legitimateauthority
Prices, competition, exchangerelationship
Tradition, trust
Large organisations with stableenvironment and routinetechnology
Outputs can be priced,competitive bidding available-> management accting
Small departments, uncertanity
Complementing nancial performance measures: Performance goals = long-term BUT performance targets = short term --> add non-nancial measures and targets Avoid mistakes:
Not linking measure to strategy Not validating links (e.g. does measure really evaluate performance) Not setting right performance targets Measuring incorrectly
Strategic reward systems Managers have to decide which behaviors to reward --> measure desired behavior, then link reward-system Extrinsic rewards vs. intrinsic rewards Systems should encourage:
1. Attraction/ retention of valued staff2. Predictability of behavior3. Above average performance4. Working exibility
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Classication of rewardsystems, key characteristics
Feature to which paymentis tied
Presence of in centive Usu al freq uency ofpayment
Unit to which basis ofpayment is related
Flat time - time rates
Output incentives
Merit Rating
Performance-related pay
Gain Sharing
Prot Sharing / ESOP
Fulllment of agreed hoursof work
No Weekly / monthly, additionalhours deffered
Individual
Set formula relating to lvl ofoutput or sales
Yes, may be entirelydependent on workachieved or bonus
Weekly Individual, workgroup,department
Performance assessedsubjectively by supervisor
Yes, usually lump-sumbonuses. May be weak ifcriteria clear, mistrust
Deferred bonus, increasedwage
Individual
Performance assessedaccording to agreed criteria,objective
Yes, Lump-sum bonuses Varies, 6-monthly orannually
Individual or group
Increase in productivity / saving in cost / improvementin exibility
Yes, may be one-offpayment or bonusguaranteed whileimprovement lasts
Varies Plant-wide, limited tospecic groups that are partof agreement
Increase in organisationsprot / dividend payment
Yes, but weak and indirect Long deferred, protdistribution yearly, dividendsemi-annually
Whole company or prot-center
Considerations of reward systems
Trade-off between ne-tuning pay policies and cost of establishing Simplicity vs. complexity of reward systems Standardisation vs. Differentiation of reward systems Relatively xed vs. Flexible and adaptable Inuence on individuals motivation/ performance vs. Fostering harmonious collective relationship
09 - Vertical integration and the scope of the rm
Business Strategy = how a rm competes in particular are of businessCorporate Strategy = where a rm competes --> Scope of the rm
Product Scope : Firm s product range (specialised vs. broad) Geographical Scope : Optimal geographical spread of activities
Vertical Scope : Range of vertically linked activitiesVertical integration = ownership of vertically related activities along value chain! --> indicator is EVA to sales revenueRecent trends: downsizing and refocusing as result of greater turbulence in bus. environment / ICT efciency
Cost of linkages in value chains within rms: Administrative / bureaucratic cost of organising production within markets: Transaction Cost
Relative cost between the 2 = decision mechanism Transaction Cost : Cost in excess of actual amount paid to input supplier
Vary with required amounts of transaction specic investments, uncertainty and frequency of transactions Relatively high when:
competitive market is missing (e.g. monopolistic supplier -> relative bargaining power too high --> integrate) hold up through transaction specic investment
Relatively low when: Differences in optimal scale present (e.g. 40k rubber boots needed, but MES is at 100k --> outsource) Distinctive capabilities needed Strategically different businesses (special capabilities needed to manage integration of rubber boots) Incentive problems (mkt offers high power incentives -> efciency gains/ quality improvmt., internal mkt does not) Competitive effects of vertical integration (if monopoly @ one stage of value chain, integration cannibalises prot) Flexibility needed --> uncertain demand/ new combination of technical capabilities/ risk
Considerations for Outsourcing decisions:
Characteristics of Vertical Relationship Implications
How many rms? Transaction-specic investments needed? External transaction subject to tax / inhibitive regulation?
Uncertainty of exchange relationship high? Optimal scale given? Strategically similar stages? Market demand / Risk?
The fewer the greater transaction cost (monopol. sup. --> VI) Investments increase advantage of VI Can be avoided by internal production --> VI
Difculty of contracting, reliability threatened -> VI If not, outsource The greater, the higher advantage of VI over outsourcing Higher uncertainty --> need for exibility --> outsource
Marius Scholinz TUM BWL - SS2011 !
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10 - Guest Lecture, Dr. Eberl of Siemens AG
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Types of Strategic alliances
Long-term contracts (non-equity) reduce costs / share resources and risk of activities least formal type of alliance, can be written, casual etc. no ties linking organisations apart from agreement
Networks (non-equity)
cluster of different organisations whose actions arecoordinated through contracts / agreemt
members work closely to support / complement eachother s activities
Minority ownership (equity strategic alliance) forges strong cooperative bonds, e.g. keiretsu in JP
Joint Venture (equity strategic alliance) jointly established business w/ shared ownership legal agreement spells out rights and responsibilities of partners reduces problems of managing complex organisational relationships experienced e.g. in contract-relationships
Important considerations of interorganisational strategy Manage competitive risk with coop. strategies:
Cost minimisation : use detailed contracts / monitoring Opportunity maximisation by developing trust relationships = most efcient way to inuence & control partners
Purpose of Alliance should be identied upon entering --> indication of future problems helps deciding on formal vs. informal alliance! --> chose informal rather than formal alliance whenever possible Transaction cost theory to identify benets vs. costs of alliances
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12 - Global Strategies and the Multinational Corporation
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,*" increased intensity of competition Higher industry rivalry : higher seller concentration/ diversity of competitors ----> reduction of industry protability Higher bargaining power of buyers : worldwide market
Marius Scholinz TUM BWL - SS2011 !
! 11
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8/6/2019 TUM-BWL SS2011 - Organisation Zusammenfassung
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Motivation for global expansion Economies of scale through large-volume prodcution -> low per-unit cost Economies of scope through wider access to markets, adapt products to local needs Cheaper production factors Exploiting national resources Competing strategically : e.g. Unicredit 2010 -> German operations prot make up for loss in main activities Learning benets : integrating knowledge from multiple locations
Comparative advantage Results from availability of national resources Refers to relative efciency of producing products If exchange rates stable, then comparative adv. = competitive advantage---> historical change of focus: from natural resources / labor supply / capital stock to knowledge and commercialisation potentials
Determinants of geographical location for production1. National resource availability (determine resource needs, then nd lowest cost location)2. Firm-specic competitive advantage (to what extent is comp. adv. based on rm-specic resources? transferable?)3. Tradability (economic transportation cost? trade restrictions?)
Recent development = fragmented value chain to best t resource availability cost according to requirements at each vertical stage! --> HOWEVER: subject to exchange rate risks
Entering New Markets
Benets of joint ventures Combining resources / different capabilities -> synergies Knowledge / technology transfer Reducing time-to-market for innovations Risk sharing Proting from local partners expertise w/ mkt. environment
Drawbacks: Management differences --> conict Distribution of benets
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