Globalization Strategy of a Capital Keiretsu
Slide 1The Globalization Strategy of a Capital Keiretsu Free Range has multiple options for expanding their operations globally. One of the best options would be the globalization strategy of a keiretsu. A keiretsu is a group of organizations, each of which owns shares in the others organizations in the group, and all of which work together to further the group’s interests (Jones, 2011, p. 330). A capital keiretsu is specifically used when inputs and outputs are being shared among the organizations. Pros and Cons of a Capital Keiretsu Each type of globalization strategy is not perfect. All have their pros and cons. One of the main benefits of a keiretsu is the bond makes all the organizations interdependent on one another. It ensures cooperation from all organizations involved in order to be successful. It is very rare that one organization to behave opportunistically at the expense of the other firms as a keiretsu promotes co-prosperity and trust (Ito & Rose, 2005, p. 74). Another benefit of this type of minority ownership is the controlled low transaction costs from suppliers and distributors since everyone is interdependent in a keiretsu. The sharing of knowledge is more free in this type of structure to help benefit all in the process. This sharing of knowledge can lead to a better quality of product and to new product developments.
There are some downsides to a keiretsu. First, gaining acceptance in a keiretsu is very difficult. A keiretsu is a more formal long-term relationship that is based off of trust and reputation in the market. Second, there is extreme pressure to use only the member organizations. This leads to a more rigid, captive structure for organizations that want to work with other companies. This forces organization to choose a source that is acceptable, but not best, which results in the suboptimal use of corporate resources (Ito & Rose, 2005, P. 75). Lastly, the implementation of the keiretsu’s overall strategy may become cumbersome because one organization will want to implement strategies that will greatly benefit their organization and not the group.Slide 2The Globalization Strategy of Merger and Takeover Another global strategy Free Range should consider is that of merger and takeover. This occurs when one organization joins forces with another organization or they simply purchase the other company. Pros and Cons of Merger and Takeover Merger and takeover is most effective when managing symbiotic and competitive resource interdependencies. Symbiotic resource interdependencies meaning outputs of one organization are inputs for another (Jones, 2011, p. 327). Competitive resource interdependencies exist among organizations that compete for scarce inputs and outputs (Jones, 2011, p. 327). The symbiotic resource interdependencies are now exchanged and managed internally within the organization. The organization has now eliminated the fluctuations in prices from suppliers or distributors depending on which organization it has acquired. It has therefore controlled the cost of the symbiotic resource. When an organization successfully takeover a competitor they have immediately improved their domain in the current market. Resources that were typically scarce now become more available to do the elimination of a competing organization.