ICMI 355 Business Alliances
What is an alliance?
By
Pailin Pornkittiparl (5180106)
Maylin Oonhateparuck (5180096)
Danielle Haveman (5380953)
Presentation Overview
• Introduction
• Part 1: “Building, Leading and Managing
Strategic Alliances”, Kuglin and Hook
• Part 2: “Smart Alliances”, Harbison, Pekar
• Questions & Answers
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.
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
Part 1: “Building, Leading and Managing Strategic
Alliances”, Kuglin and Hook
Types of Alliances:
1)
2)
3)
4)
5)
Sales Alliance
Solution-specific Alliance
Geographic-specific Alliance
Investment Alliance
Joint Venture Alliance
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”
Internal & External Analysis
1) Porter’s Generic Value Chain (Internal)
Primary
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
&
Sales
Service
Supported by Secondary: firm infrastructure, HRM, R&D, Procurement
etc.
2) External Analysis: PESTEL, O.T., Porter’s five
forces, Competition Analysis (Marketplace Scan)
Opportunities & Imperatives
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
Today’s CEO’s View Alliances
Perception of Alliances as Successful
An extraordinary growth based on more than 500 companies,
interviewing from tops executives.
The New Reality
• Globalization of Markets
• Search of Capabilities (Technology blur
industry boundaries)
• Lack of Resources and intense marketing
competition
Scan
Environment
Assess own
resources &
capabilities
Discover a gap when
confront with reality of
competitive changes
(like to achieve .VS. able to
achieve)
“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
Rapid
Technology
shifts
Intense
Competition
Fewer
Resources
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:
1. Industry Solution Initiatives (one exclusive partner)
2. Cooperative Application Initiatives (any company that
want to design a connection to its software programs)
3. Technology Partners
“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
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.
VS.
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)
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
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 length
collaborative advertising, collaborative
marketing, shared distribution, and crosslicensing
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
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
Strategic Alliance Objectives
• Risk sharing
– You can no longer afford the high risk of
investment opportunities
• Kodak realized that 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)
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
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
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
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
Jupiter Programming, a Japanese cable tv
distribution company = offer a 24-hour business
news program on Japanese tv
Strategic Alliance Objectives (cont.)
• Handling of funding constraints
– You are confronting large and ever-increasing
development costs
• Skills leverage
– You need to access skills or 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
Questions & Answers
Thank you for your attention!