ICMI 355 Business Alliances

1. ICMI 355 Business Alliances What is an alliance? By Pailin Pornkittiparl (5180106) Maylin Oonhateparuck (5180096) Danielle Haveman (5380953)

2. Presentation Overview • Introduction • Part 1: “Building, Leading and Managing Strategic Alliances”, Kuglin and Hook • Part 2: “Smart Alliances”, Harbison, Pekar • Questions & Answers

3. Part 1: “Building, Leading and Managing Strategic Alliances”, Kuglin and Hook • What is an Alliance? A formal relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining an independent organization.

4. Why to start an Alliance A way to... • Quick start sales through accessing new markets and solutions • Reduce costs through strategic relationships matching core competencies • Leverage fixed assets through shared services • Accelerate working capital turn through supply chain and financial alliances • Lower effective tax rates

5. Part 1: “Building, Leading and Managing Strategic Alliances”, Kuglin and Hook Types of Alliances: • Sales Alliance • Solution-specific Alliance • Geographic-specific Alliance • Investment Alliance • Joint Venture Alliance

6. Framework to determine the need for an Alliance Step 1: Business & Marketing Strategy Step 2: Marketplace Scan Step 3: Product Portfolio Assessment vs. Marketplace Scan Step 4: “Build Internally” vs. “Acquire Externally” Step 5: Organizational Readiness and Speed to Market Demand Step 6: Proceed to “Build Internally” or “Acquire Externally”

7. Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Internal & External Analysis 1) Porter’s Generic Value Chain (Internal) Primary Supported by Secondary: firm infrastructure, HRM, R&D, Procurement etc. 2) External Analysis: PESTEL, O.T., Porter’s five forces, Competition Analysis (Marketplace Scan)

8. Opportunities & Imperatives “Harbinson & Pekar”

9. The Rationale for Alliances • Since 70 yrs ago, there’s a record of corporate alliances between Westinghouse Electric and Mitsubishi • In 1990, there’s an acceleration growth of strategic alliances of its boundary and executive’s perception

10. Today’s CEO’s View Alliances Perception of Alliances as Successful An extraordinary growth based on more than 500 companies, interviewing from tops executives.

11. The New Reality Globalization of Markets Search of Capabilities (Technology blur industry boundaries) Lack of Resources and intense marketing competition

12. Assess own resources & capabilities Scan Environment Discover a gap when confront with reality of competitive changes (like to achieve .VS. able to achieve)

13. “If you think you can go it alone in today’s global economy, you’re highly mistaken”(Jack Welch) Changing Markets Necessary Skills New Knowledge & Capability to strengthen core Competency Fewer Resources Rapid Technology shifts Intense Competition

14. Oracle Systems • Database Software Leader • Thousands of alliance partners • Advantages: earlier access to technology and gain additional critical mass & resources Three categories of Oracle Alliances: • Industry Solution Initiatives (one exclusive partner) • Cooperative Application Initiatives (any company that want to design a connection to its software programs) • Technology Partners

15. “Coopetition”= adjust your culture to be partner and rival at the same time “Complementarity” Different competitors have its goals (no overlap of business scope) Own Vocabulary for alliance activity

16. Growth of Capabilities A company can select, build and deploy the critical capability to gain a competitive advantage, increase customer value, drive markets and fill critical capability gaps.

17. VS. Mazda provides • built compact car for Ford • cutting edge concept in design & manufacturing • center of learning for Ford Mazda gains • access to USA markets • survival path from intense competition in Japanese automakers • increase capital Ford provides • arrangement for Mazda to be built in Taiwan • 25% stake in Mazda Ford gains • new knowledge (which improve European operation, Aston Martin in the UK)

18. Transactional alliances They generally last less than 5 years The partners do not share critical capabilities The relationship does not involve control and is usually contract driven The partners do not share a common strategy or act in unison; they remain at arm’s lengthcollaborative advertising, collaborative marketing, shared distribution, and cross- licensing

20. Strategic alliances • A commitment of at least ten years • A linkage based on equity or on shared capabilities • A reciprocal relationship with a shared strategy in common • An increase in the companies’ value in the marketplace, placing pressure on competitors • A willingness to share and leverage core capabilities

21. Strategic Alliances (cont.) • Many alliances are now driven by industry agendas to cross national boundaries • Many of the most successful strategic alliances are among competitors • Some atrategic alliances involve companies in entirely unrelated industries • Taito, a Japanese sugar producer, and Pfizer, the U.S. pharmaceutical company ->> a pharmaceutical company in Japanese market • Microsoft and NBC ->> MSNBC, a cable television and Internet service

22. Strategic Alliance Objectives • Risk sharing • You can no longer afford the high risk of investment opportunities • Kodak realizedthat electronic media and imging posed long-term threats to its firm business • Joined with its rival, Fuji Photo Film, and 3 camera makers, Canon, Minolta, and Nikon • Invested billion of dollars created the Advanced Photo System (APS)

23. Strategic Alliance Objectives (cont.) • Economies of scale • Your industry has high fixed costs and you need greater scale to compete globally • British Airways and American Airlines + START and Amadeus (two of the world’s largest airline computer reservation systems • Develop new products, cut costs, and improve service

24. Strategic Alliance Objectives (cont.) • Market segment access • You lack a basic understanding of customers and applications and you lack the relationships and the infrastructure to distribute your product to customers • Wal-Mart in U.S. and Cifra in Mexico work as equal partners on various projects in Mexican market

25. Strategic Alliance Objectives (cont.) • Technology access • You face critical technology gaps, and you cannot afford the time or resources to develop the technology yourself • IBM, Motorola, Apple Computer = Power PC microprocessor

26. Strategic Alliance Objectives (cont.) • Geographic access • You are frustrated with the difficulty of penetrating a foreign market where the opportunity is attractive and for which you have a viable product • Asia Business News (a satellite broadcaster in Singapore), Kyodo news agency of Japan, and JupiterProgramming, a Japanese cable tv distribution company = offer a 24-hour business news program on Japanese tv

27. Strategic Alliance Objectives (cont.) • Handling of funding constraints • You are confronting large and ever-increasing development costs • Skills leverage • You need to access skillsor capabilities faster and at a lower cost than internal development permits • Value-added barriers to competition • You want to strengthen skills and raise the level of competitive intensity for your industry

28. Questions & Answers Thank you for your attention!