Question

alliances, joint ventures, and mergers with foreign comapanies are widely used as a means of entering foreign markets. such arrangements have many purposes, including learning about unfamilar environments, and the opportunity to access the complementary sources and capabilities of a foreign partner. Illustration Capsule 7.1 provides an example of how Walgreens used a strategy of entering foreign markets via alliance, followed by a merger with the same entity. What was the entry strategy designed to achieve? Why would this make sense for a company like Walgreens?

Answer 1

In the case provided here Walgreens had entered into a partnership with Alliance Boots. This partnership was entered into with the dual purpose of allowing Walgreens to enter a foreign market as quickly as possible and to take advantage and leverage the expertise and complementary assets of Alliance Boots. The partnership enabled Walgreens to expand its presence beyond USA and hence develop a new revenue stream. The entry strategy was designed to achieve the purpose of strengthening the existing business of Walgreens and enabling it to strengthen its position in the market. Its partner i.e. Alliance Boots had a robust distribution network in Europe, especially for wholesale drugs. This allowed Walgreens to enter the European market at a scale which was much larger and bigger than the scale had it entered the market on a standalone basis.

The above makes sense for a company like Walgreens as it allowed such a company (which was primarily reliant on its US operations) to seek opportunities in new markets and hence de-risk their business model. This will ensure that their business will grow in the future on a sustainable basis.