11/22/22

Strategic Alliances Strategic Alliances

The Strategic Management Process Strategic Alliances Defined

External
Analysis

Strategic Alliance:
Strategic Strategy Competitive
Mission Objectives Choice Implementation Advantage

Which Businesses Any cooperative effort between two or more

Internal
Analysis
to Enter? independent organizations to develop,
Corporate Level • Vertical Integration manufacture, or sell products or services.
Strategy • Diversification

• Strategic Alliances
• Mode of Entry

Strategic Management & Competitive Advantage – Barney & Hesterly 13-1

1 Strategic Management & Competitive Advantage – Barney & Hesterly 13-2
2

1 2

Strategic Alliances Strategic Alliances

Strategic Alliances Motivation for Alliances

Create economic value by:
• Strategic alliance is a co-operative and collaborative approach to achieve
larger goals • accessing complementary resources and capabilities
• leveraging existing resources and capabilities

An alliance is an organizational form of exchange

BUY
Arm’s length
Short Long Term
Contracts
Joint
Ventures
Parent MAKE
Activities
that:
market Term • Licensing Equity Subsidiary performed
Contracts Relationship
transactions • Franchising Alliances in-house • should produce a gain from trade due to
some comparative or absolute advantage

Implication: Choose partners that are better at

something than you are (complementary resources).
Strategic Management & Competitive Advantage – Barney & Hesterly 13-3
3 Strategic Management & Competitive Advantage – Barney & Hesterly 13-4
4

3 4

1
 11/22/22

Strategic Alliances Strategic Alliances

Advantages Disadvantages
• Strengthen competitive position • Can result in loss of control
• Enter new markets – Hard to establish good management control of operations
• Hedge against uncertainty – Control of IP
– Governance issues
• Access critical complementary assets
– Reducing costs in the value chain
• Can distract participating company’s management and key
• Learn new capabilities
players
– Developing and diffusing new technology
– Cannibalization of manpower

Strategic Management & Competitive Advantage – Barney & Hesterly 13-5

5 Strategic Management & Competitive Advantage – Barney & Hesterly 13-6
6

5 6

Strategic Alliances Strategic Alliances

Three Types How Strategic Alliances Create Value

of
Alliances Improve Current Operations

Nonequity Joint
Alliance Venture
Contracts Joint Equity Value
Equity Shaping the Competitive Environment
• licensing Alliance Holdings Creation
• supply and • independent
distribution Cross Equity firm is
agreements Holdings created
• partners own
Facilitating Entry and Exit
stakes in
eachother
Strategic Management & Competitive Advantage – Barney & Hesterly 13-7
7 Strategic Management & Competitive Advantage – Barney & Hesterly 13-8
8

7 8

2
 11/22/22

Strategic Alliances Strategic Alliances

How Strategic Alliances Create Value How Strategic Alliances Create Value

Improving Current Operations Shaping the Competitive Environment

Exploiting economies of scale Facilitating technology standards
• A partner brings increased market share
• Partners may agree on a standard and avoid
and/or manufacturing capacity.
a market battle for the standard.
Learning from partners
• A partner brings technology and/or Facilitating tacit collusion
market knowledge. • Partners may communicate within an alliance
in subtle, legal ways whereas the same
Risk and cost sharing communication between competitors outside
• A partner bears a portion of the risk and/or an alliance would be illegal.
cost of the alliance.
Strategic Management & Competitive Advantage – Barney & Hesterly 13-9
9 Strategic Management & Competitive Advantage – Barney & Hesterly 13-10
10

9 10

Strategic Alliances Strategic Alliances

How Strategic Alliances Create Value Sustained Competitive Advantage

Are strategic alliances substitutable?
Facilitating Entry and Exit
Low-cost entry into new industries Internal Mergers &
• A partner provides instant access and legitimacy. Development Acquisitions
If: If:
Low-cost exit from industries Substitutes for • there are no
• A partner is an informed buyer. • no partner
Strategic Alliances anti-trust issues
is available
Managing uncertainty • low uncertainty about
• transaction-specific the investment
• Alliances may serve as “real options”.
investment is high • firms can be
Low-cost entry into new geographic markets integrated easily
• low uncertainty about
• Partners provide local market knowledge, access, the investment • value of combined firms is
and legitimacy with governments and customers. not tied to independence
Strategic Management & Competitive Advantage – Barney & Hesterly 13-11
11 Strategic Management & Competitive Advantage – Barney & Hesterly 13-12
12

11 12

3
 11/22/22

Strategic Alliances

Summary
Successful alliance managers will:

• create alliances that will produce gains

from trade—complementary resources
• identify the sources of value creation
• assess the likelihood of challenges to value
creation and allocation
• adopt appropriate governance responses to
the challenges to value creation and allocation

Strategic Management & Competitive Advantage – Barney & Hesterly 13-13

13

13