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Selecting the Partner

Selecting the Partner

• Alliances are often compared to marriages

• In alliance as in marriages, there is no recovery from choosing the wrong spouse

The Alliance Framework Process

6 Steps of the Alliance Framework process:

1.Appointing the Planning and Negotiating Team2. Achieving Internal Consensus3. Approaching Potential Partners: Strategic FIT Assessment4. Conducting Resource FIT Assessment5. Selecting the Partner6. Negotiating an Agreement

Step 5: Selecting the Partner

The partner selection process: 3 issues

1. Which potential partner presents the least trouble and disagreements in Strategic Assessment Elements(SAEs)?

2. Which potential partner provide the best match of required resources?

3. Which potential partner has self-selected itself into the deal?

Selecting the Partner

In ideal world, the partner selection is obvious after step 3 and 4 in the alliance framework.

In the real world, narrowing down the list to one partner or a select few can be difficult.

Therefore, this chapter will discuss how to use the alliance framework to make the best possible choice of potential partners and then move to negotiating an agreement in step 6.

Looping Back to Step 2, Achieving Internal Consensus

• The strategic fit and resource fit assessments provide great information about each partner.

• The information can identify that what strategy both firms have in common or different.

• With this information, the planning and negotiating team can understand the quality and quantity of each partner’s resources.

• The team can loop back to step 2 and resolve the SAEs conflicts.

The Strategic Fit Reconciliation Map

3 Possibilities in dealing with SAE disagreements.

1. Agree with the partner’s position

2. Convince the partner to agree with your position

3. Develop a compromise between the two positions

The Strategic Fit Reconciliation Map

• It can provide a visual summary of the strategic fit between each partner.

• It guides the team’s thinking on resolving SAE conflicts.

• It acts as a communication tool for top corporate management by allowing them to assess to strategic fit between the firms “At a Glance”.

The Strategic Fit Reconciliation Map

Symbol Meaning

• OK : the partner accepts our position on the sale

• ? : have disagreement and are unsure of the resolution

• : have disagreement but partner accept our position

• : have disagreement but partner’s position is

acceptable to us

• = : compromise can be negotiate to meet both firms’ strategic

need

• X : deal killer, have disagreement and cannot accept

Case Study

• Large pet food company alliance with biological firm to add the new nutritional ingredients into the company’s existing product lines.

• The goal of the alliance project is to jointly develop a series of new product with a biotechnology firm.

• The pet food company will distribute the improved products through its distribution network.

Case Study (Con’t)

• The pet food company lists down the two potential partners which Company A and B.

• They both have SAE conflicts with the pet food company

Case Study (Con’t)

The Pet Food Company

Objectives: Establishes and maintains its reputation for innovation through sole branding of any jointly developed product.

Market Model: Only the pet food company brand is named on the product.

Case Study (Con’t)

Conflicts :

Company A – Market Model “Any jointly developed product will be Cobranded”

Company A plan to sell nonfood products to pet owners not completing with the pet food company. Company A want to introduce its brand to pet owners in a powerful way.

Company B – Exclusivity “ Company B will give the pet food company a one-year exclusive right to use the nutrient, after which Company B will be free to provide licenses to others”

The pet food company want to have sole right to use the partner’s novel nutrients in pet food, on the other hand, Company B want to maximize the value of its ingredients by providing them to all pet food company.

Case Study (Con’t)

Strategic Fit Reconciliation Map for Pet Food Alliance

SAE Pet Food Company Position

Company A Company B

Our Objectives

Sole brand ? (Cobranded) OK

Market Model Sole brand ? (Cobranded) OK

Strategic Exclusivity

Exclusive rights

OK ? (one-year head start)

Note:OK The partner accepts our position on the SAE.? We have a disagreement and are unsure of the

resolution.

Case Study (Con’t)

Resolving the Disagreements

The pet food company reconsider:

Company A: “Is sole branding necessary?” “Can the pet food company label the products as jointly developed with

Company A and still achieve its marketplace objective?”

Company B:“Will a one-year head start allow the pet food company to establish a

strong enough foothold in the marketplace to fend off the competitors?”

Case Study (Con’t)

ConclusionThe pet food company could accept Company A’s co-branding position.

However, Company’s B position on Strategic Exclusivity was not acceptable.

SAE Pet Food Company Position

Company A Company B

Our Objectives Sole brand • OK

Market Model Sole brand • OK

Strategic Exclusivity

Exclusive rights

OK X

Note:OK The partner accepts our position on the SAE.• We have a disagreement, but the partner’s position is acceptable to us? We have a disagreement and are unsure of the resolution

Strategic Fit Reconciliation Map for Pet Food Alliance

The Resource Fit Reconciliation Map

Key Resource Company A Company B

Ability to contribute to joint development of products based on pre existing nutrients

OK OK+

Ability to provide technical support for jointly developed products

OK OK

Ability to develop future nutrients

OK+ OK+

Notes:OK+ The partner’s resources are outstanding and complementary to oursOK The partner’s resources are satisfactory and complementary to ours

• Though biotechnology Company B’s resources were slightly better, their exclusivity position was a deal-killer. • Based on the updated Alliance Framework, the pet food firm selected Company A for step 6 negotiations.

Self-Selection: The Intangible Factor in Partner Selection

Strategic fit and resource fit are only part of story

Vital motivation behind a successful alliance comes from the hearts and minds of key people

When a firm’s people have self-selected themselves into a deal, the energy that comes from self-motivation is tangible and translates into positive alliance results

The Multiple Partners Option

Sometimes the strategic fit, resource fit, and commitment level assessments show that 2 or more candidates are highly qualified

In this case, to move forward to step 6 negotiations with multiple firms, final partner selection is dependent on the results of other Alliance Framework elements such as Financial Pie-Split

Example

Battelle’s MicroCATS alliance, The resource fit assessments show that an alliance with several partners could best meet Battelle’s needs.

Before starting step 6 negotiations you will need to review the strategy fit and resource fit assessment carefully.

In that review, you must evaluate the linklihood that all of the companies involved will agree to compatible positions on all Alliance Framework element in step 6.

Tips for Completing Step 5 of the Alliance Framework

Use the Strategic Fit Reconciliation Map and Resource Fit Reconciliation Map to compare the results of step 3 and 4 among potential partners.

Include a motivation assessment as a partner selection criterion.

Loop back to step 2 with internal stakeholders to reassess your positions in light of new information.

Select the best partner or partners for moving ahead to step 6.

Look back at strategic fit and resource fit assessments for possible interpartner conflicts before attempting a multiparty alliance in step 6.