To Achieve These Motivation(s), Were There Any Alternative Ways Other Than Forming a Jv and Why Do You Think a Jv Was Chosen over These Alternatives?
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To achieve these motivation(s), were there any alternative ways other than forming a JV and why do you think a JV was chosen over these alternatives?
Licensing
Licensing could be an alternative for both company. As mentioned the essential motivation for the joint venture is to combine Sonys consumer products expertise with Ericssons extended knowledge in mobile technology to compete with the market dominant Nokia. Under a licensing, Sony can acquire the mobile technology of Ericsson, also allow Sony to exploit its multimedia technology into handset industry in order to build and strengthen Sonys image beyond traditional multimeida boundary(Silgurdon J 2004). Thus achieve its intention of transforming into a global multimedia, communication company. However there is drawback of a licensing. Firstly, companies face difficulties with transferring the tacit knowledge, for example negotiation of tranfer price , monitoring transfer outcome(Jusuf Z, Biljana A,2011). Sony benefit from acquiring some knowledge from Ericsson. It however would be difficult to internalize Ericssons tacit knowledge given the rapid developing nature of the mobile industry. On the other hand, the excellent handset technology of Ericsson is a source of its competitive advantage. Ericsson might not willing to engage in a licensing agreement in order to prevent Sony acting opportunism of learning.
Licensing also can be an alternative for Ericsson as it gets the benefit with less investment on research and development and strengthen the ability of product development. Hence allow Ericsson to ensure its product stay up with the fashion. Its major competitor Nokia has been able to dominate the handset industry as it succeed in keep up with the changing fashion of technology.(Sony Ericsson-History of Ericsson n.d) However, this was not an appropriate strategy to adopt. The issue is licensing does not given the control to Ericsson on production. Also as mentioned, Ericsson might find face difficulty to internalize the tacit knowledge of Sony. Learning would be slow. Despite, there is a risk of leakage on technology know-how. Thus licensing was not adopted to achieve the motivation.
Franchising
Given one motive of joint venture for Sony to get access to foreign market in order to increase global market share in mobile industry. In case of licensing, Sony could have been able to acquire some of Ericssons handset technology. While it does not either give Sony with the operation know how or enter to the European market. Franchising is similar to licensing, the difference fransising gain independent operation on product. In this way Sony can enter the European market with lower investment and lower risks. As well as get the information regarding the local culture, market and customers. However, the problem is Sony by the time only have 1.5% share of the global market and hardly any presence in the US(Sigurdson J,2004) Sony might not be able too compete with the competitor such as Nokia given the fact that “Sony had failed twice on earlier attempt to enter the global market and was under pressure to find a new hopefully successful approach”(Sigurdson J,2004)
In addition, Sony could have achieved the objective by using OEM contract as it can either benefit from the technology transfer of Ericsson, learn the knowledge and also can presence on the foreign market. While one of the drawback is Sony loss of product control which might weaken your ability to maximize the product potential.(Trinity A,2010) In addition, there is a risk of opportunism. The manufacturer might imitate the know-how and develop own production hence threaten the business market share. .
WOSFurthermore, another alternative is Wholly Owned Subsidiaries which is characterized by full control over local operation and high level of resource commitment.(Lin C, Fuming J 2009) This option is an option for Ericsson as given telecommunication technology know-how is one important competence and competitive advantage. By adopting WOS, Ericsson can fully control on the operation, reduce the risk of business secret leakage. Thus maintain its competitive advantage. Even WOS provide full control for Ericsson. This method however include high level of risk and resource commitment. Ericsson would need to set up local subsidiary in Japanese market. Not only there is culture