the emerging roles of strategic alliances
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STRATEGIC ALLIANCEONCE OF THE STRONGEST LONG TERM RELATIONSHIP TO BE ASSESSED IS
“STRATEGIC ALLIANCE IS ALIGNED WITH THE OVERALL STRATEGIC DIRECTION OF YOUR BUSINESS”
STRATEGIC ALLIANCE IS A SYMBOLIC RELATIONSHIP, AS WELL – AN INTERDEPENDENT, MUTUALLY BENEFICIAL CHANNEL RELATIONSHIP BETWEEN TWO OR MORE PARTIES.
AS DESCRIBED BY STOUT & JULIE (2005) IS
STRENGTH-TO-WEIGHT-RATIO
PARTNERS ARE MORE TEAM ORIENTED RATHER THAN BEING INDIVIDUALISTS. THUS ORGANIZATIONS ARE CAPABLE OF DIPPING THE DOUBLING OF RESOURCES AND EFFORTS
LOAD DISTRIBUTION
CHANNEL MEMBERS PERFORM SIMILAR FUNCTIONS TO DISTRIBUTE RESPONSIBILITIES AND BEAR THE WEIGHT OF MARKET FORCES HAVING AN IMPACT ON THE OVERALL CHANNEL PERFORMANCE
IT REDUCES UNCERTAINTY AND RISK IN THE CHANNEL
ECONOMY AND EFFICIENCY
“DOING MORE WITH LESS CAPACITY” IS THE CONCEPT.
STRATEGIC ALLIANCE HAS RESEMBLANCE IN THE WAYS MENTIONED BELOW:
CO ALIGNMENT
THIS BASICALLY MEANS THAT CHANNEL MEMBERS HAVING DIFFERENT TIMELINES FOR ACHIEVING GOALS WOULD STILL LINK THEIR ORGANIZATIONS WITH OTHER CHANNEL MEMBERS IN PURSUIT OF A COMMON OBJECTIVE AS WELL AS A SENSE OF SHARED PURPOSE
EXCHANGING TECHNOLOGIES, PRODUCTS, SKILLS AND KNOWLEDGE
STRATEGIC ALLIANCE NOWADAYS HAS NOT KEPT THAT TRADITIONAL DEFINITION OF PARTNERSHIP BETWEEN TWO MEMBERS.
IT INVOLVES THE SHARING OF POOL RESOURCES AND EXPLOITATION OF MARKET OPPORTUNITIES.
COMPETITIVE EDGE
TO GAIN THESE COMPETITIVE ADVANTAGES, EACH CHANNEL MEMBER MUST CONTRIBUTE SOME VALUE TO THE STRATEGIC ALLIANCE.”
IMPORTANT COMPONENTS OF STRATEGIC ALLIANCE
ACCORDING TO LEI, SLOCUM & JOHN, STRATEGIC ALLIANCES TAKE DIFFERENT SHAPES SIZES AND FORMS SOME WHICH ARE:
Collaborative advertising For television advertising and other promotional activities
Cooperative bidding Cooperated together in winning advanced tactical fighter contract
Cross-licensing HL & Glaxo agreed for HL to sell Zantac, an anti-ulcer drug in the US
Cross-manufacturing Design and build similar cars on same manufacturing/assembly line
Internal spin-offs Cummins Engine & Toshiba Corp. created new company to develop and market silicon nitride products.
Lease service agreements Arrangement to provide financing services
R&D partnership To develop next generation products
Resource venturing Natural resource venture
Shared distribution Distribution of each other’s brands/products
Technology Transfer Arrangement of developing next generation of operating software systems
THE NATURE AND SCOPE OF STRATEGIC ALLIANCES
STRATEGIC ALLIANCES AMONG ORGANIZATIONS HAVE GROWN DRAMATICALLY DURING THE PAST TWO DECADES
PUBLIC ALLIANCE ANNOUNCEMENTS IN THE US GREW FROM 100 IN 1984 TO MORE THAN 3,000 IN 1994
PRIOR STUDIES HAVE FOUND STRONG CORRELATIONS BETWEEN THE AMOUNT OF ALLIANCE ACTIVITY AND FIRM PERFORMANCE MEASURES, SUCH AS INNOVATION
THE CORRELATION BETWEEN ORGANIZATIONAL PERFORMANCE AND STRATEGIC ALLIANCE ?
THE RESULT IS MAINLY POSITIVE
YET, THIS OBSERVATION BRINGS INTO QUESTION THE ABSENCE OF NEAR UNDISPUTED PARTICIPATION IN STRATEGIC ALLIANCES AMONG FIRMS.
IMPACT OF STRATEGIC ALLIANCES
THE PRIMARY CONTRIBUTING FACTOR TO STRATEGIC ALLIANCE IS THE COMPETITIVE MARKETPLACE
THERE ARE ADVANTAGES TO STRATEGIC ALLIANCE ALL OF WHOSE FIRST LETTERS COMBINE TO FORM THE WORD
MERGE
THEY ARE: MARKET ENTRY – ALLIANCES MAKE WAY FOR NEW MARKETS TO CHANNEL. TO SUCCESSFULLY PENETRATE THE MARKET, ONE NEEDS SUFFICIENT RESOURCES, EXPERIENCE AND EXPERTISE. THIS IS WHAT STRATEGIC ALLIANCE DOES; MINIMIZES LIMITATIONS
ECONOMY – FACILITATION IN REDUCTION OF WASTEFUL REDUNDANT ACTIVITIES AND POOLING LIMITED RESOURCES ARE THE PLUS POINTS FOR ALLIANCES LEADING TO ECONOMIES OF SCALE AND CORRECT ALLOCATION OF RESOURCES.
RISK REDUCTION – REDUCTION OF RISKS IN THE MARKET AND PRODUCT DEVELOPMENT IS ASSURED FOLLOWED BY ACCELERATION OF THE TIME-TO- MARKET FOR NEW PRODUCTS GUARANTEEING TECHNOLOGICAL ADVANTAGES.
GAIN MARKET SHARE – INDIVIDUALLY, MANY COMPETITORS FAIL TO ANTICIPATE FORTHCOMING COMPETITIVE THREATS AND HIGH MARKET SHARE DOES NOT COME WITH A GUARANTEE OF EQUALLY STRONG POSITION, WHICH IS PROVIDED BY ALLIANCES.
EXPANSION – ADVANCEMENT OF EXPANSION TO RELATED AND UNRELATED INDUSTRIES IS A PROMISE WHEN IT COMES TO TYING ALLIANCE WITH CHANNEL PARTNERS
FOUNDATION FOR STRATEGIC ALLIANCE FORMATION
STRATEGIC ALLIANCE SHOULD NOT BE CONFUSED WITH
MERGER OR ACQUISITION
PELTON, STRUTTON & LUMPKIN (1997) ARGUE THAT
“THE ALLIANCE’S EXCHANGE VALUE MAY NOT ALWAYS RESULT IN AN EQUAL PAY OFF, BUT A WIN-WIN SITUATION MUST BE POSSIBLE FOR EACH ALLIANCE PARTNER”.
LICENSING AGREEMENTS :
IT IS A CONTRACTUAL AGREEMENT IN WHICH ONE ALLIANCE PARENT MAKE INTANGIBLE ASSETS SUCH AS TECHNOLOGY, KNOWLEDGE AND SKILLS AVAILABLE TO ANOTHER PARTNER IN EXCHANGE FOR REMUNERATIONS SUCH AS ROYALTIES.
MANUFACTURING AGREEMENTS: AGREEING TO HELP EACH OTHER CAPITALIZE ON ITS TECHNOLOGICAL ADVANTAGE TO COLLECTIVELY ESTABLISH GLOBAL STANDARDS TO PREEMPT COMPETITIVE THREATS.
SERVICE AGREEMENTS: BEING THE MOST COMMON FORM OF INTERNATIONAL LICENSING, IT IS ALSO KNOWN AS FRANCHISING.
JOINT VENTURES : A JOINT VENTURE IS AN AGREEMENT BY TWO OR MORE PARTIES TO FORM A SINGLE ENTITY TO UNDERTAKE A CERTAIN PROJECT
CONSORTIA :
A GROUP MADE UP OF TWO OR MORE INDIVIDUALS, COMPANIES OR GOVERNMENTS THAT WORK TOGETHER TOWARD ACHIEVING A CHOSEN OBJECTIVE.
TYPES OF STRATEGIC ALLIANCES
THERE IS A 4 STEP PROCESS TO BRING ABOUT SUCCESSFUL STRATEGIC ALLIANCE
ACHIEVING STRATEGIC HARMONY :
THE QUARTERBACK: THEY ARE GOOD AT TRANSFERRING THEIR OWN SKILLS BUT LACK THE ABILITY TO RECEIVE SKILLS.
THE WIDE RECEIVER: THEY ARE SIMPLY OPPOSITE TO THE QUARTERBACKS HAVING THE ABILITY TO RECEIVE SKILLS BUT NOT TRANSFER THEIR OWN SKILLS.
THE SPECTATOR: THESE ARE GOOD AT NOTHING. NEITHER RECEIVING, NOR DELIVERING VALUE. THIS DOES NOT INVITE STRATEGIC HARMONY IN ANY WAY
THE UTILITY PLAYER: THESE ARE THE PARTNERS WHO CAN OPERATE BOTH WAYS. FLEXIBILITY IS THEIR KEY FEATURE HAVING OPEN MANAGEMENT CULTURES.
DEVELOPING STRATEGIC ALLIANCES
SELECTING ALLIANCE PARTNERS :
THE RACER: THIS WOULD BE AN ALLIANCE BETWEEN TWO OR MORE STRONG COMPETITORS RULING THE MARKET AND STRIVING FOR THEIR OWN MARKET SHARE.
THE UNINSURED: THIS IS WHEN TWO WEAK PARTIES COME TOGETHER TO FORM AN ALLIANCE WITH THE HOPE THAT THEY MIGHT OVERCOME THEIR LACKING AND TOGETHER FORM A STRONG BOND AND GRADUALLY EXCEL.
THE ROAD HOG: THIS TERM IS GENERALLY USED FOR ROUGH DRIVERS. THEY HAVE VERY LITTLE CONCERN FOR THE OTHERS AROUND. THIS ALLIANCE REPRESENTS A BOND BETWEEN THE STRONG AND THE WEAK WHERE THE STRONGER PARTY SEEMS TO TAKE ALL THE BENEFITS, GRABBING MAXIMUM MARKET SHARE AND A DEGREE OF AUTONOMY IS GIVEN RISE TO HENCE ACQUIRING THE WEAKER FIRM.
BACK-SEAT DRIVER: THIS IS A VERY INTERESTING ALLIANCE WHERE THE TIE IS AGAIN FORMED BETWEEN A STRONG AND A WEAK BUT THE SCENARIO IS A LITTLE DIFFERENT. HERE THE WEAKER PARTNER TAKES A BACK-SEAT AND ENJOYS THE STRENGTH THAT IT IS RECEIVING FROM THE STRONGER PARTNER.
DEVELOPING STRATEGIC ALLIANCES
DEVELOPING ACTION PLANS :
ALLIANCE TEAMS ARE FORMED WHEN TO PARTIES AGREE TO FORM A BOND CONSISTING OF MANAGERIAL EMPLOYEES FROM EACH FIRM ENGAGED IN STRATEGIC ALLIANCE.
ASSESSING ALLIANCE PERFORMANCE :
MONITORING AND PERIODIC ASSESSMENT OF ALLIANCE PERFORMANCE IS VITAL. IT HAS TO BE MADE SURE THAT THE ALLIANCE IS MAINTAINING THE COURSE THAT WAS ORIGINALLY CHARTED.
DEVELOPING STRATEGIC ALLIANCES
THEN AGAIN STRATEGIC ALLIANCES ALSO FAIL DUE TO THE LACK OF STRATEGY DEVELOPMENT. MORE TIME NEEDS TO BE GIVEN BY MANAGERS TO FORM THE PERFECT STRATEGY TO SUCCEED.
THE FEW MORE REASONS WHY ALLIANCES FAIL ARE :
THE BURDEN CARRIED BY THE PARTNERS OF UNREALISTIC EXPECTATIONS
THE CLASH OF CORPORATE CULTURES
INSUFFICIENT INTEREST IN THE ALLIANCE.
THE METHODS OF SOLVING THIS DILEMMA WOULD BE TO CHOSE THE RIGHT PARTNER, CHOSE THOSE WHO PRODUCE COMPLEMENTARY PRODUCTS OR OPERATE IN SIMILAR MARKETS.
THE DOWNSIDE OF STRATEGIC ALLIANCES