FOREIGN COLLABORATION

Foreign collaboration is an alliance incorporated to carry on

the agreed task collectively with the participation (role) of
resident and non-resident entities.
In other words, it is an alliance between domestic (native) and
abroad (non-native) entities. It could include individuals, firms,
companies, governments etc.
ING Vysya bank is a financial foreign collaboration between
ING group from Netherland and Vysya bank from India.
 NEED FOR FOREIGN
COLLABORATION
• Provides access to more potential customers
• To broaden service offerings and increase customer’s
satisfaction
• Gain foothold in international market
• Establish a unique position in market
• Provide added values to customer
 NEED FOR FOREIGN
COLLABORATION
• Access knowledge and expertise beyond company borders
• Increase sales and profitability
• Speed entry into particular market
• Eliminates competition
• Thus in general, financial growth, market share, and
employment generation of the domestic entity is favored
while the foreign entity enjoys reduced operating cost and
access to resources available in the domestic country.
MAJOR TYPES OF COLLABORATION
FINANCIAL COLLABORATION
• Financial collaboration refers to collaboration where only
equity is involved. This allows inflow of foreign investment
into domestic company in addition to the investment of the
domestic entity.
• Financial collaboration aids the developing countries to get
financial assistance from developed countries
 FINANCIAL COLLABORATION
Foreign entity could lend finance by:
a) Purchasing ownership shares - the foreign entity purchases the
ownership shares of the domestic company and in return gets
interest dividend for these shares.
b) Giving long-term loans - the foreign entity gives long-term loans
to domestic entity and in return gets interest from these loans.
c) Giving credit facility – the foreign entity gives credit facility to
the domestic entity which could be used to purchase raw-
materials, plant, machinery etc.
 TECHNICAL COLLABORATION
• Technical collaboration refers to collaboration with inflow of
foreign technology into domestic country. This allows
integration of foreign technology into domestic technology.
• Technology includes professional services, know-how,
expertise, equipment etc.
• Technical collaboration helps in bridging technological gap
between developing nation and developed nation. Thus, the
government of developing nations encourage such
collaboration.
 MARKETING COLLABORATION
• Marketing collaboration refers to collaboration with inflow of
foreign goods and services into domestic companies. This
allows integration of foreign and domestic market.
• Marketing collaboration allows the foreign entity to sell the
goods produced by domestic entities in its own market or
International market. Thus the foreign entity acts as a
distributor network for the products produced by domestic
entity.
• This is beneficial for developing nations in terms of exports
of goods and services
 MANAGEMENT CONSULTANCY
COLLABORATION
• Management consultancy collaboration refers to
collaboration with inflow of consultancy services into
domestic country.
• Consultancy services include advices on management,
accountancy, human resources, market, finance etc.
• The management consultancy collaboration aids foreign
company to provide management skills and expertise to
domestic company. Thus bridging the information gap
between both the nations.
 OTHER TYPES OF COLLABORATION
• Joint ventures
oJoint venture is a legal entity formed between two or more parties
to undertake an economic activity with shared capital, technology,
human resources, risks and rewards in a formation of a new entity
under shared control. It is a temporary partnership between the
entities which is terminated on achieving the common set goals.
• Mergers
oMerger is a combination of two companies into one company
where one company loses its identity. It is an arrangement whereby
the assets of two companies become vested under the control of
one company.
 OTHER TYPES OF COLLABORATION
• Amalgamation
oAmalgamation means bringing of two or more business into single
entity. In other words, amalgamation means blending together two
or more undertakings into one undertaking to form a new company.
In amalgamation, companies lose their individual identity.
• Strategic alliances
oStrategic alliance is an agreement between two or more parties to
pursue a set of agreed objective while remaining independent
organizations.
 OTHER TYPES OF COLLABORATION
• Acquisition or Takeover
oAcquisition is a growth strategy in which a strong company
acquires all the assets and liabilities of another company. When one
company takes over another company and clearly established itself
as the new owner, the purchase is called an acquisition.
oTakeover is a form of acquisition. There are two types of
acquisitions; Friendly acquisitions and Hostile acquisitions.
oIn a friendly acquisition the target company is formally informed
about the acquisition and there is an agreement on corporate
management and finance control.
oIn a hostile acquisition, the owner loses their ownership and control
of the company against their wishes.
 PROBLEMS TO BE DEALT
• Low commitment
• Poor operational planning
• Rigidity/poor adaptability
• Hidden agenda leading to distrust
• Overdependence
• Legal problem