Strategic Management Report: Globalization, Alliances, and Strategies

This report delves into key concepts in strategic management, beginning with an analysis of globalization, regionalization, and localization, outlining their strategic differences. It differentiates between reactive and proactive business strategies, providing examples of each in the context of globalization. The report then presents a case study on Cathay Pacific, examining its strategies for international market entry and expansion through strategic alliances. Further, it discusses the benefits and pitfalls of strategic alliances, followed by an analysis of Sony's joint ventures with PlayStation in China. The report concludes by differentiating between equity and non-equity strategic alliance agreements, providing a comprehensive overview of strategic management principles.

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Answer 1
Globalization is the procedure of economic integration and interaction of the people,
businesses and governments of different countries. This is driven by international investments
and trade relations, supported by information technology. Globalization impacts political
systems, environment, culture, economic development, prosperity and human well being of the
nations (Beck, 2015). Regionalization refers to segmentation of a nation into smaller regions,
such as, states or provinces. The relation between the regions is also affected by the globalization
(Jones, 2017). Lastly, localization refers to the process of adaptation of a good or service for
meeting the needs of a specific region’s culture or economic condition (Mander, 2014). The
strategic difference among these three processes is that, globalization is a broad process
involving the regions of the entire world, and therefore, the impact is widespread. On the other
hand, regionalization covers only specific regions and their needs. Economic and cultural
activities are planned in a way to meet the requirements of particular regions. Localization is
more specific. The activities are more focused towards very specific requirements of that
particular locality.
Answer 2
Reactive business strategy or responses are those, which react to any unanticipated event
only after it happened, on the other hand, the proactive strategies are those, which are designed
to anticipate the possible challenges in the business (Dahlander & Piezunka, 2014). Two reactive
responses for firms to go for globalization are as follows. If there is a fall or saturation of
demand in the domestic market, and the firm has excess capacity for production, then it tries to

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expand its business in the international market. Moreover, when the cost of production increases
in the domestic market, then the firms are forced to find a cheaper place for production. This
way, manufacturing of many firms is outsourced to economically underdeveloped countries to
reduce the cost of production (Joseph & Gaba, 2015).
On the other hand, profit seeking and sales expansions are two proactive reasons that the
firms wish to involve in globalization. Firms try to enter an international market to make a global
brand image and it enters with a lower price, to gain a competitive edge. For sales expansion,
firms follow the fact that the customers are global, and the international markets have more
potential than the domestic market (whygointernational.weebly.com, 2014).
Answer 3
Cathay Pacific, the international airlines, headquartered in Hong Kong International
Airport, offers services to 180 destinations in 44 nations world wide. Cathay Dragon, a fully
owned subsidiary of Cathay Pacific, operates in 44 destinations in the Asia-Pacific Region. In
2016, the revenue earned by the airline was HK$92,751 million (Cathay Pacific, 2017). The
company started its business in the East Asia in 1946, when there was no other dominant
international airline in that Asia-Pacific region. Thus, it entered a new market, with fewer
competitors. A major strategy adopted by this airline is the strategic alliance, which helps in
opening up of new and emerging markets. This also helps in expansion in the international
market, along with co-sharing the flights with partners, which opens up new markets
(ToughNickel, 2015).

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Answer 4
Benefits and pitfalls of strategic alliance
Strategic alliance is the agreement among companies for doing business jointly in a way,
which goes beyond the normal company dealings, but less than a merger or complete partnership
(Hill, Jones & Schilling, 2014). The major benefit of strategic alliance is that, it enables a
business to gain competitive advantage through the access of the partner’s resources, which
include markets, capital, technologies, services and people. A joint business helps both the
partners to grow and expand more efficiently and rapidly through the access of a bigger pool of
resources. It also benefits the businesses by lowering the manufacturing costs. Strategic alliance
also helps the organizations to introduce the products or services speedily in the existing markets
and overcome the trade barriers and legal challenges rapidly (Rothaermel, 2015).
The major pitfalls of such alliance are the risks involved in the business and the potential
clash of the corporate cultures. When the partners are not financially equal, there are some
potential risks such as, loss of operational control, confidentiality of intellectual property and
technology. These are some costs involved in the business. Moreover, clash of the corporate
cultures can hamper the business operations, as there is loss of independence to some extent
(Badir & O'Connor, 2015).
Answer 5
In 2014, it was announced that Sony Corporation would make joint ventures with
PlayStation in China. Sony would launch two joint ventures in China. One of them would focus
on the hardware of PlayStation and the other would focus on the software. These ventures would
take place in the Shanghai’s free trade zone and would be set up by a subsidiary of the Shanghai

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Oriental Pearl and Sony’s China section. It is a challenging venture for the companies, as China
had banned the games console in 2000 citing their negative effect on mental health of the
children. After the ban was lifted, Microsoft was the first company to explore the opportunity of
this vast market of China. Sony’s move was announced after a month when Microsoft and its
joint venture partner, BesTV New Media Co Ltd announced the launch of Xbox One games
console in China in September. To capture the games console market of China, it’s a competitive
move by Sony to play a rival of Microsoft (Nytimes.com, 2014). Two ventures will be
undertaken to increase the efficiency and focus on product distribution, marketing and
construction of platforms more efficiently.
Answer 6
Equity strategic alliance agreements are supplemented by the equity investments, which
makes the partners shareholders and stakeholders in each other’s business. The investments are
made passive, so that each company can retain its decision making power completely. Cross
shareholding exists and creates a complex operation network with direct and indirect ownership.
Instinctively, when the firms share profits, their incentive to compete gets reduced and often
enhance control and takeovers get more difficult (Lin & Darnall, 2015).
Non-equity strategic alliances range from working relationships with suppliers,
outsourcing activities, R&D, licensing of technology, clusters of industry etc. These are
informal alliances without any formal or legal agreements. These are more of a personal
relationship than any contract (Gudergan, Devinney & Ellis, 2016).

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References
Badir, Y. F., & O'Connor, G. C. (2015). The formation of tie strength in a strategic alliance's first
new product development project: The influence of project and partners'
characteristics. Journal of Product Innovation Management, 32(1), 154-169.
Beck, U. (2015). What is globalization?. John Wiley & Sons.
Cathay Pacific. (2017). Introducing our new strategy - Cathay Pacific. Cathay Pacific. Retrieved
5 September 2017, from https://cathaypacific.com/cx/press/cxw/pdf/CXW249.pdf
Dahlander, L., & Piezunka, H. (2014). Open to suggestions: How organizations elicit suggestions
through proactive and reactive attention. Research Policy, 43(5), 812-827.
Gudergan, S. P., Devinney, T. M., & Ellis, R. S. (2016). Cooperation and compliance in non-
equity alliances. Journal of Business Research, 69(5), 1759-1764.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an
integrated approach. Cengage Learning.
Jones, A. (2017). Economic Regionalization.
Joseph, J., & Gaba, V. (2015). The fog of feedback: Ambiguity and firm responses to multiple
aspiration levels. Strategic Management Journal, 36(13), 1960-1978.
Lin, H., & Darnall, N. (2015). Strategic alliance formation and structural configuration. Journal
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Mander, J. (2014). The case against the global economy: and for a turn towards localization.
Routledge.

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Nytimes.com. (2014). Sony Forms Joint Ventures in China for PlayStation. Nytimes.com.
Retrieved 5 September 2017, from
https://www.nytimes.com/2014/05/27/business/international/sony-forms-joint-venture-in-
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Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
ToughNickel. (2015). Cathay Pacific's Competitive Advantage & Strategy. ToughNickel.
Retrieved 5 September 2017, from https://toughnickel.com/industries/Cathay-Pacific-
Competitive-Advantage-Strategy
whygointernational.weebly.com. (2014). The Motivations for Internationalization of a
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