Building alliances
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Building Alliances. Firm A. Firm B. Key Functional Areas R&D Marketing Production Logistics Service. Cooperative Modes Joint Coordinated Complementary Independent. Structure and Control Org. Structure Centralization Formalization. Complementary Alliances.

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Building Alliances

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Building alliances

Building Alliances

Firm A

Firm B

  • Key Functional Areas

  • R&D

  • Marketing

  • Production

  • Logistics

  • Service

  • Cooperative Modes

  • Joint

  • Coordinated

  • Complementary

  • Independent

  • Structure and Control

  • Org. Structure

  • Centralization

  • Formalization


Building alliances

Complementary Alliances

Competition Reduction Alliances

Business-Level

Competition Response Alliances

Uncertainty Reduction Alliances

Types of Strategic Alliances


Building alliances

Complementary Alliances

Competition Reduction Alliances

Business-Level

Competition Response Alliances

Uncertainty Reduction Alliances

Types of Strategic Alliances

Complementary Alliances

Competition Reduction Alliances

Business-Level

Competition Response Alliances

Uncertainty Reduction Alliances

Diversification Alliances

Corporate-Level

Synergistic Alliances

Franchising


Building alliances

Business-Level Strategic Alliances

Complementary Strategic Alliances

Supplier Value Chain

Partnerships that build on the complementarities among firms that make each more competitive

Vertical Alliance

Buyer Value Chain


Building alliances

Business-Level Strategic Alliances

Complementary Strategic Alliances

Firm A’s Value Chain

Complementary Alliance

Firm B’s Value Chain

FedEx and Laura Ashley:

“outsourcing” outbound

logistics


Building alliances

Business-Level Strategic Alliances

Complementary Strategic Alliances

Used to increase the strategic competitiveness of the partners

Other Firm’s Value Chain

Horizontal Alliance

Your Firm’s Value Chain


Building alliances

Business-Level Strategic Alliances

Pooling Strategic Alliances

Used to increase the strategic competitiveness of the partners

Horizontal Alliance

Your Firm’s Value Chain

Other Firm’s Value Chain

Marketing agreements between Delta and SwissAir


Building alliances

Business-Level Strategic Alliances

Competition Reduction Strategies

Avoiding competition by using tacit collusion such as price fixing

OPEC


Building alliances

Business-Level Strategic Alliances

Competition Reduction Strategies

Avoiding competition by using tacit collusion such as price fixing

OPEC petroleum cartel

Competition Response Strategies

Firms join forces to respond to a strategic action of another competitor

DirecTV & Time Warner for exclusive programming

PowerPC: IBM, Apple, & Motorola


Building alliances

Business-Level Strategic Alliances

Competition Reduction Strategies

Avoiding competition by using tacit collusion such as price fixing

OPEC petroleum cartel

Competition Response Strategies

Firms join forces to respond to a strategic action of another competitor

DirecTV has agreement with Time Warner for exclusive programming

Uncertainty Reduction Strategies

Alliances can be used to hedge against risk and uncertainty

Biotechnology--pharmaceutical partnerships


Equity and non equity alliance options

From Options Theory

In high-tech industries, innovation is uncertain.

Alliance partners want a “way out” if alliance is not profitable

After a specified time period, equity or contractual alliance is formed (or, partners walk away).

Equity and Non-equity Alliance Options


Building alliances

Corporate-Level Strategic Alliances

Diversifying Alliances

Allows a firm to expand into a new product or market area without an acquisition

Samsung Group joins with Nissan to build new autos


Building alliances

Corporate-Level Strategic Alliances

Diversifying Alliances

Allows a firm to expand into a new product or market area with an acquisition

Samsung Group joins with Nissan to build new autos

Synergistic Strategic Alliances

Create economies of scope between two or more firms, creating synergy across multiple businesses between firms

Sony shares development with many small firms


Building alliances

Corporate-Level Strategic Alliances

Diversifying Alliances

Allows a firm to expand into a new product or market area with an acquisition

Samsung Group joins with Nissan to build new autos

Synergistic Strategic Alliances

Create economies of scope between two or more firms, creating synergy across multiple businesses between firms

Sony shares development with many small firms

Franchising

Allows firms to grow and relatively strong centralized control without significant capital investments

McDonald’s or Century 21


Building alliances

Types of Strategic Alliances

Joint Venture

Independent firm is created by the joining assets from two other firms where each firm contributes at least 20-25 %

NUMMI


Building alliances

Types of Strategic Alliances

Joint Venture

Independent firm is created by the joining assets from two other firms where each firm contributes at least 15-20 %

Equity Strategic Alliance

Partnership where one partner owns less than 15-20%

Ford and Mazda Automotive


Building alliances

Types of Strategic Alliances

Joint Venture

Independent firm is created by the joining assets from two other firms where each contributes 50% of the total

Dow Corning from Dow Chemical and Corning Inc.

Equity Strategic Alliance

Partnership where the two partners do not own equal shares

Chrysler and Mitsubishi Automotive

Non-Equity Strategic Alliance

Contract is given to supply, produce or distribute a firm’s goods or services (without equity sharing)

Chrysler’s supplier network


Developing alliances

Purpose

Motivations

Goals

Value Chain activities involved

Contributions of Partners

Cash

Technology

Brand name

Other Assets

Developing Alliances


Developing alliances1

Structure

Contributions %

Organizational structure

Leadership

Strategic direction

Partner Roles and Responsibilities

Value chain activities

Integration of activities

Termination

Dissolution vs. Acquisition vs. Spin-off?

Developing Alliances


Managing cooperative ventures

Managing the Boundary

Managing Knowledge Flows

Strategic Direction

Managing Cooperative Ventures

Co-Managed

by Parents

Independent

Legal Org.

Firm A

Firm B

Alliance

Firm A

Firm B

Alliance


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