Ch9-1

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Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
Michael A. Hitt
R. Duane Ireland
Robert E. Hoskisson
2000 South-Western College Publishing 2000 South-Western College Publishing
Ch9-2
Competitiveness Competitiveness
Chapter 3 Chapter 3
Internal Internal
Environment Environment
Chapter 2 Chapter 2
External External
Environment Environment
%he Strategic %he Strategic
Management Management
Process Process
%he Strategic %he Strategic
Management Management
Process Process
Strategic Intent Strategic Intent
$trategic Mission $trategic Mission
Strategic Strategic
Competitiveness Competitiveness
Above Average Above Average
Returns Returns
Feedback
Strategy Formulation Strategy Formulation
Chapter 4 Chapter 4
Business-Level Business-Level
Strategy Strategy
Chapter 5 Chapter 5
Competitive Competitive
Dynamics Dynamics
Chapter Chapter
Corporate-Level Corporate-Level
Strategy Strategy
Chapter 8 Chapter 8
International International
Strategy Strategy
Chapter 9 Chapter 9
Cooperative Cooperative
Strategies Strategies
Chapter 7 Chapter 7
Acquisitions & Acquisitions &
Restructuring Restructuring
Strategy Implementation Strategy Implementation
Chapter 1 Chapter 1
Corporate Corporate
Governance Governance
Chapter 11 Chapter 11
Structure Structure
& Control & Control
Chapter 12 Chapter 12
Strategic Strategic
Leadership Leadership
Chapter 13 Chapter 13
Entrepreneurship
& Innovation
Entrepreneurship
& Innovation
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Ch9-3
Partnerships between firms Partnerships between firms
are combined to pursue are combined to pursue
mutual interests to mutual interests to
are combined to pursue are combined to pursue
mutual interests to mutual interests to
Develop Develop Develop Develop
Manufacture Manufacture Manufacture Manufacture
Distribute Distribute Distribute Distribute
Goods Goods Goods Goods
Services Services Services Services
Firm A Firm A
Firm B Firm B
where their where their where their where their
Core
Competencies
Core
Competencies
Capabilities Capabilities
Resources Resources
Strategic Alliances Strategic Alliances Strategic Alliances Strategic Alliances
Ch9-4
ample: ample: Dow Corning from Dow Chemical and Corning Inc. Dow Corning from Dow Chemical and Corning Inc.
ample: ample: Chrvsler and Mitsubishi Automotive Chrvsler and Mitsubishi Automotive
ample: ample: Chrvsler's supplier network Chrvsler's supplier network
%ypes of Strategic Alliances %ypes of Strategic Alliances %ypes of Strategic Alliances %ypes of Strategic Alliances
Independent firm is created by the joining assets from two Independent firm is created by the joining assets from two
other firms where each contributes 50 of the total other firms where each contributes 50 of the total
1oint Venture 1oint Venture
Partnership where the two partners do not own equal shares Partnership where the two partners do not own equal shares
Equity Strategic Alliance Equity Strategic Alliance
Contract is given to supply. produce or distribute a firm`s Contract is given to supply. produce or distribute a firm`s
goods or services (without equity sharing) goods or services (without equity sharing)
Non Non- -Equity Strategic Alliance Equity Strategic Alliance Non Non- -Equity Strategic Alliance Equity Strategic Alliance
Ch9-5
Reasons for Alliances by Market %ype Reasons for Alliances by Market %ype
Slow Slow
Cycle Cycle
Market Market
Gain access to a restricted market Gain access to a restricted market
Establish Iranchise in a new market Establish Iranchise in a new market
Maintain market stability Maintain market stability
Standard Standard
Cycle Cycle
Market Market
Gain market power Gain market power
Gain access to complementary resources Gain access to complementary resources
Overcome trade barriers Overcome trade barriers
Meet competitive challenge Meet competitive challenge
Pool resources Ior large proiects Pool resources Ior large proiects
Learn new business techniques Learn new business techniques
Fast Fast
Cycle Cycle
Market Market
Fast Fast
Cycle Cycle
Market Market
Maintain market leadership Maintain market leadership Maintain market leadership Maintain market leadership
Form an industry technology standard Form an industry technology standard Form an industry technology standard Form an industry technology standard
Share risky R&D expenses Share risky R&D expenses Share risky R&D expenses Share risky R&D expenses
Overcome uncertainty Overcome uncertainty Overcome uncertainty Overcome uncertainty
Increase speed oI product, service or market entry Increase speed oI product, service or market entry Increase speed oI product, service or market entry Increase speed oI product, service or market entry
Ch9-6
Corporate Corporate- -
Level Level
Corporate Corporate- -
Level Level
Diversification Alliances Diversification Alliances Diversification Alliances Diversification Alliances
Synergistic Alliances Synergistic Alliances Synergistic Alliances Synergistic Alliances
Franchising Franchising Franchising Franchising
%ypes of Strategic Alliances %ypes of Strategic Alliances
Business Business- -
Level Level
Business Business- -
Level Level
Complementary Alliances Complementary Alliances Complementary Alliances Complementary Alliances
Competition Reduction Alliances Competition Reduction Alliances Competition Reduction Alliances Competition Reduction Alliances
Competition Response Alliances Competition Response Alliances Competition Response Alliances Competition Response Alliances
Uncertainty Reduction Alliances Uncertainty Reduction Alliances Uncertainty Reduction Alliances Uncertainty Reduction Alliances
Ch9-7
Partnerships that build on the complementarities Partnerships that build on the complementarities
among Iirms that make each more competitive among Iirms that make each more competitive
Complementary Strategic Alliances Complementary Strategic Alliances
Supplier Value Chain Supplier Value Chain
Buyer Value Chain Buyer Value Chain
Include distribution, supplier or Include distribution, supplier or
outsourcing alliances where outsourcing alliances where
Iirms rely on upstream or Iirms rely on upstream or
downstream partners to build downstream partners to build
competitive advantage competitive advantage
%ypes of Business %ypes of Business- -Level Strategic Alliances Level Strategic Alliances
Vertical Vertical
Alliance Alliance
ample: ample: 1apanese manufacturers 1apanese manufacturers
relv on close relationships among relv on close relationships among
suppliers to implement 1ust suppliers to implement 1ust- -In In- -1ime 1ime
inventorv svstems inventorv svstems
ample: ample: 1apanese manufacturers 1apanese manufacturers
relv on close relationships among relv on close relationships among
suppliers to implement 1ust suppliers to implement 1ust- -In In- -1ime 1ime
inventorv svstems inventorv svstems
Ch9-8
Used to increase the strategic competitiveness of the partners Used to increase the strategic competitiveness of the partners
ample: ample: Product development agreements between Microsoft Product development agreements between Microsoft
and Dreamworks SKG and Dreamworks SKG
ample: ample: Product development agreements between Microsoft Product development agreements between Microsoft
and Dreamworks SKG and Dreamworks SKG
Supplier Value Chain Supplier Value Chain Buyer Value Chain Buyer Value Chain
Complementary Strategic Alliances Complementary Strategic Alliances
%ypes of Business %ypes of Business- -Level Strategic Alliances Level Strategic Alliances
Horizontal Horizontal
Alliance Alliance
or or
1oint ventures between BMG Entertainment and 1oint ventures between BMG Entertainment and
Universal Music Universal Music
or or
1oint ventures between BMG Entertainment and 1oint ventures between BMG Entertainment and
Universal Music Universal Music
Ch9-9
ample: ample: OPC petroleum cartel OPC petroleum cartel
ample: ample: Direc1J has agreement with 1ime Direc1J has agreement with 1ime
Warner for eclusive programming Warner for eclusive programming
ample: ample: A11 acquires 1eleport, a provider of A11 acquires 1eleport, a provider of
telecommunications services to business customers telecommunications services to business customers
%ypes of Business %ypes of Business- -Level Strategic Alliances Level Strategic Alliances
voiding competition by using tacit collusion such as price Iixing voiding competition by using tacit collusion such as price Iixing
Competition Reduction Strategies Competition Reduction Strategies
Firms ioin Iorces to respond to a strategic action oI Firms ioin Iorces to respond to a strategic action oI
another competitor another competitor
Competition Response Strategies Competition Response Strategies
lliances can be used to hedge against risk and uncertainty lliances can be used to hedge against risk and uncertainty
Uncertainty Reduction Strategies Uncertainty Reduction Strategies Uncertainty Reduction Strategies Uncertainty Reduction Strategies
Ch9-10
%ypes of Corporate %ypes of Corporate- -Level Strategic Alliances Level Strategic Alliances
ample: ample: $amsung Croup joins with Aissan $amsung Croup joins with Aissan
to build new autos to build new autos
ample: ample: McDonald's or Centurv 21 McDonald's or Centurv 21
ample: ample: $onv shares development with manv small firms $onv shares development with manv small firms
llows a Iirm to expand into a new product or market area llows a Iirm to expand into a new product or market area
with an acquisition with an acquisition
Diversifying Alliances Diversifying Alliances
Create economies oI scope between two or more Iirms, Create economies oI scope between two or more Iirms,
creating synergy across multiple businesses between Iirms creating synergy across multiple businesses between Iirms
Synergistic Strategic Alliances Synergistic Strategic Alliances
llows Iirms to grow and relatively strong centralized control llows Iirms to grow and relatively strong centralized control
without signiIicant capital investments without signiIicant capital investments
Franchising Franchising Franchising Franchising
Ch9-11
However.... However....
International Cooperative Strategies International Cooperative Strategies
llows risk sharing by reducing Iinancial investment llows risk sharing by reducing Iinancial investment
Host partner knows local market and customs Host partner knows local market and customs
International alliances can be diIIicult to manage due International alliances can be diIIicult to manage due
to diIIerences in management styles, cultures or to diIIerences in management styles, cultures or
regulatory constraints regulatory constraints
Must gauge partner`s strategic intent so they do not gain Must gauge partner`s strategic intent so they do not gain
access to important technology and become a competitor access to important technology and become a competitor
Must gauge partner`s strategic intent so they do not gain Must gauge partner`s strategic intent so they do not gain
access to important technology and become a competitor access to important technology and become a competitor
Ch9-12
Dynamic Networks Dynamic Networks
Internal Networks Internal Networks
Network strategies involve a group oI interrelated Iirms Network strategies involve a group oI interrelated Iirms
that work Ior the common good oI all that work Ior the common good oI all
ample: ample: 1apanese keiretsus or U.$. R&D consortia 1apanese keiretsus or U.$. R&D consortia
Stable Networks Stable Networks
Network Strategies Network Strategies Network Strategies Network Strategies
%he three types %he three types
of networks: of networks:
%he three types %he three types
of networks: of networks:
Ch9-13
ample: ample: AIK's relationships with suppliers and distributors AIK's relationships with suppliers and distributors
ample: ample: Asea Brown Boveri's network Asea Brown Boveri's network
ample: ample: Apple computer and $harp electronics Apple computer and $harp electronics
Network Strategies Network Strategies Network Strategies Network Strategies
Long term relationships that oIten appear in mature Long term relationships that oIten appear in mature
industries with largely predictable market cycles industries with largely predictable market cycles
Stable network Stable network
rrangements that evolve in industries with rapid rrangements that evolve in industries with rapid
technological change leading to short product liIe cycles technological change leading to short product liIe cycles
Dynamic network Dynamic network
Management system used to coordinate a global web oI Management system used to coordinate a global web oI
suppliers and customers suppliers and customers
Internal network Internal network Internal network Internal network
Ch9-14
Competitive Risks with Cooperative Strategies Competitive Risks with Cooperative Strategies Competitive Risks with Cooperative Strategies Competitive Risks with Cooperative Strategies
While cooperative systems can oIIer many advantages, While cooperative systems can oIIer many advantages,
there are also signiIicant risks associated with them there are also signiIicant risks associated with them
Poor contract development Poor contract development
Misrepresentation oI partners` competencies Misrepresentation oI partners` competencies
Failure oI partners to make complementary resources Failure oI partners to make complementary resources
available available
Being held hostage through speciIic investments made Being held hostage through speciIic investments made
with partner with partner
Misunderstanding a partner`s strategic intent Misunderstanding a partner`s strategic intent Misunderstanding a partner`s strategic intent Misunderstanding a partner`s strategic intent
Ch9-15
Competitive Risks Competitive Risks Competitive Risks Competitive Risks
Risk and sset Risk and sset
Management Management
pproaches pproaches
Risk and sset Risk and sset
Management Management
pproaches pproaches
Outcome Outcome Outcome Outcome
Value Value
Creation Creation
Value Value
Creation Creation
Managing Risks in Cooperative Strategies Managing Risks in Cooperative Strategies Managing Risks in Cooperative Strategies Managing Risks in Cooperative Strategies
Inadequate Inadequate
contracts contracts
Inadequate Inadequate
contracts contracts
Misrepresentation Misrepresentation
of competencies of competencies
Misrepresentation Misrepresentation
of competencies of competencies
Partner fails to use Partner fails to use
complementary complementary
resources resources
Partner fails to use Partner fails to use
complementary complementary
resources resources
Holding alliance Holding alliance
partner`s specific partner`s specific
investments investments
hostage hostage
Holding alliance Holding alliance
partner`s specific partner`s specific
investments investments
hostage hostage
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Detailed Detailed
contracts and contracts and
monitoring monitoring
Detailed Detailed
contracts and contracts and
monitoring monitoring
Developing Developing
trusting trusting
relationships relationships
Developing Developing
trusting trusting
relationships relationships
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