Due to the rapid strides made by globalisation, no conglomerate today wishes to be left out of the race to diversify. Traditional product lines have witnessed path-breaking innovations to include extensions that were previously considered unfeasible for business. Bio-fuel is one such area, which has seen disruptive changes being introduced by players. Two major companies, Cosan and Shell, operating in traditional sectors(energy production-distribution and global fuel major, respectively) in Brazil came together to create Raizen, a ethanol production and energy distribution major in the nation.
Through this research article, students will get a bird’s eye view of what factors are responsible in making combinations of related businesses successful. Although the alliance has been only 6 years old, the constituents are both incumbent market leaders in their respective segments, which ideally should make matters more difficult. The authors have tested the performance of the joint venture using certain theories like the Transaction Cost Economics (TCE), Agency Theory, Resource Based View and Dynamic Capability Theory.
Students of Strategic Management, and anybody in general with an interest in Strategic Alliances and Synergy will find the article of great use.