Professional Documents
Culture Documents
Understanding Alliances and Cooperative Strategies
Understanding Alliances and Cooperative Strategies
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AN ALLIANCE THAT FITS LIKE A GLOVE
Expand into
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THE WHITE WAVE-DEAN ALLIANCE
$15 million
35% ownership
White Dean
Wave Foods
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BENEFITS OF STRATEGIC ALLIANCES
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ALLIANCES ARE NOT STRATEGIES IN THEMSELVES
Arenas
Differentiators
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THE USE OF ALLIANCES AS STRATEGIC VEHICLE HAS BALLOONED
16%
As of 2007,
large MNCs have over 20%
of their total assets tied
up in alliances
2%
1980 1995
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ALLIANCES OFFER BENEFITS, CONTRACTS CANNOT
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ALLIANCES MAY BUILD COMPETITIVE ADVANTAGE
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MOTIVATION FOR ALLIANCES HAS CHANGED OVER TIME
Product performance Learning and
focus Position focus capabilities focus
1970s 1980s Post 2000
Sell product stressing Gain economies of scale Optimize total cost by pro-
performance and scope duct/customer segment
Wal-Mart Cifra
Knowledge of the
market in Mexico
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ALLIANCES CAN TAKE MANY FORMS
Examples of cooperative arrangements in the continuum of organizational forms
Keiretsu in Japan or Caltrex, which was
Chaebols in South jointly owned by
Korea Chevron and
Permanent Texaco prior to their
merger.
Outsourcing Many technology Examples include Anheuser-Busch’s Stand-alone joint
standards consortia technology collaborations cross ownership with ventures like Dow-
Long-term like the PowerPC chip Kirin in Japan and Corning.
between Motorola, IBM, Modelo in Mexico
and Apple
Purchase agreements Agreements to Cross-licensing like that
that are renewable distribute products between Disney and Pixar
annually or every or services or R&D partnerships like
several years Millennium Pharma-
ceuticals and some of its
Transactional smaller partners
Simple purchase order Short-term agreements on functions like
for commodities, some- advertising or manufacturing to achieve
times called a spot efficiencies – for example, contract brewing of
transaction Miller Beer by Anheuser Busch
No Linkages Beyond Information Asset, Resource, and Cross-Equity Shared Equity
Level of Transaction Sharing Capability Sharing (partners take
Commitment ownership in one
party or each other)
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WHO MIGHT BECOME AN ALLIANCE PARTNER?
Rivals
Complementors New
entrants
Any other
organization could
Firms become an alliance
partner
Substitutes Suppliers
Customers
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2 TYPES OF BUSINESS STRATEGY ALLIANCES
Examples
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EXAMPLES OF NETWORKS OF BUSINESS ALLIANCES
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RISKS ARISING FROM ALLIANCES
Redhook Ale
?
Was Redhook Ale held captive by
its alliance with Anheuser Busch?
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FIVE LEVERS FOR INCREASING THE PROBABILITY OF ALLIANCE SUCCESS
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BENEFITS OF TRUST
Interfirm
Trust
’
• TRUST is one party’s confidence that the other party in the exchange relationship will fulfill its promises and
commitments and will not exploit its vulnerabilities
• Trust and alliances are a conundrum from a classical economics perspective – assumption of opportunism means
firms must choose market or hierarchy, make or buy, not an alliance
BUT
Trust lowers transaction costs • Increases knowledge sharing
• Search costs • Increases investments in dedicated
• Contracting costs AND assets
• Monitoring costs
• Enforcement costs
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FOUR KEY FACTORS AFFECT TRUST
Initial
conditions
Negotiation
process
Trust
Reciprocal
experiences
Outside
behavior
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COMPONENTS OF A DEDICATED ALLIANCE FUNCTION
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WHEN DO PARTNERS FIT?
Why?
• Strategic fit?
• Resource fit?
• Cultural fit
• Structural fit?
• Other questions?
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