Alliances and Network
first week of April
M. Tariq Yousafzai
S
Intro
Partnerships and alliances and
supply (chain) networks
Why
What
When
Where
In what form
Intro
The content
1. Background and
purpose
3.Alliances as networks
and supply chain
Trends and motives
Benefits of alliances
Types of networks
Network changes
Network effects
2.Alliances as dyads
4. Managing alliances as
dyads and networks
Type of alliances
Different perspectives
Dimensions
Changes of alliances
Performance
Positioning
Development
Handling effects
Part I
Some changes
influencing the need of alliances
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Internationalization and globalisation
International competition
Outsourcing and reduction in suppliers
R&D and shorter product life cycles
Time to market
Give me examples of alliances!
Susanne Hertz, SSE,2000
Global logic of alliances
• To compete on the global arena you have to
incur fixed costs
• With enough time, money and luck, you can
do everything yourself. But who has
enough?
• Having control does not necessarily mean
better management
K. Omae, HBR, March-April,1989
Part I
Basic motives of alliances
• Transaction costs - bargaining
• Enhance competitive positioning and
market power
• Quest for organisational knowledge and
learning
Gulati, 1998
Part I
Classification of alliances
1. Degree of commitment and integration
low, medium, high
2. Function based
i.e. product development, distribution, production, purchasing
3. Formal- informal
4.Symmetry-assymmetry ( including the power issue)
5. Type of actors involved (competitors,buyer-seller, distributors )
6. Geographical spread ( local, national, regional, global)
Hertz, 2000
Alliances
simplication
• Firm - Firm
• Net - Firm
• Net -Net
Alliances as dyads
Alliance definition
”A long term relationship where
participants cooperate and
willingly modify
their business practices
to improve joint performance”
Whipple and Frankel, JSCM, Summer 2000
Part II
What is an alliance/partnership?
Based how it is mostly used in literature
Strategic. Alliance
include. J/V and part-
alliance
ownership
Partnership
Transaction
Degree of commitment
Relationships
Part II
Relationships/ alliances
Degree of commitment
Economic exchange
Frequency of exchange
Type of interaction
Adaptation
Trust
Alliances from different
perspectives
• Supply Chain Management
• Industrial Marketing
• Purchasing
• Marketing
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Service marketing
Relationship marketing
Social networks
Organisational and management literature
Part II
Supply chain network
consisting of a a number of relationships
Single relationship
Focal firm
Upstream
Downstream
Part II
Interacting dimensions of
relationship
Social
Legal
Communication
/IT
Knowledge
Physical
Economic
Technical
Part II
How?
Relationship life cycle
dissolution
termination?
closer cooperation
expansion
Enlargement/
Commitment
stable stage
Institutionalization
Disintegration
dissatisfaction
Dissolution
Termination
Formation
Revival
Pre-relationship
or awareness stage
Formatio
Prerelationship
stage
Individual alliances will not
easily break- Why?
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Investments
Costs of breaking
Trust
Knowledge
• This creates inertia
Part II
Global logic of alliances
(K. Omae)
• Nine times out of ten you will want to stay
in the alliance if you can
• The way to wreck an alliance is to become a
check casher, a coupon clipper
Part II
When and why to switch
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Marketing forces
Internal conflicts
Acquisitions and mergers
New opportunities
Different roads to dissolution
• Who is breaking
• Direct or indirect
• Dissolution quality ( intracomp. exit,
aftermath)
• Task related, actor related or network
related
Part II
Gradual way - the most common way
Three different ways
• relationship of lower importance - less volumes
• break but stay in the supply chain
• break but stay in the firm network
• leave the network
Alliances as networks
Part III
Definition of a network
• A network is a set of connected
exchange relations between actors.
• Exchange relations are defined as
connected if exchange in one of
relation is contingent upon exchange in
other relations
Part III
Firm network
The firm
Relationships and supply chain network
simplified
C1
C1
Customers
C1
C1 C2
C1
C1
D
D
A
D
P
P
C2= org. customer
C2
C2
D
C1= consumer
A
D
D
B
A
Distributor
or agent
D=distributor
A= agent
P
Partners
P= partner
S1
S1
S1
S1
S3
S2
S2
S2
S2
S1
S3
S3
S2
S3
S1
Supplier 1 tier
S1=supplier 1tier
Supplier 2 tier
S2= supplier 2 tier
Other suppliers
S3= Other supplier
What could this alliance mean to downstream and upstream partners?
Part III
Supply chain network
change patterns
• Supply chain network formation/ joining
• Supply chain development include closer
cooperation and enlargement
• Supply chain closing up
• Supply chain splitting- leaving
• Supply chains drifting closer/away
Joining of networks
Closing up
Horizontal and vertical alliance
networks
Horizontal network
Transport firms representing each other in different countries
Vertical networks
include customers and suppliers
Alliance network development
a study from J. Ludvigsen, 2001 doctoral dissertation
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E1 a network formed of transport alliances
To meet European transport MNEs
In order to reach operational and strategic fit
Developing from smaller networks to a joint
network
• Development from close cooperation to closing up
• Solving crises together cause of higher integration
• Institutionalisation in EEIG common grouping
What?
Overlap or complementarity?
in alliances of supply chain networks
Type of products/services
Different
Same
Fully complementary
Overlap
/ complementary
Different
Geographical
coverage
Complementary/
overlap
Same
Full overlap
Part III
Network effects
• Externalisation effects (ex.telecom)
• Forrester or bullwhip effects amplication
of demand changes ( dynamic performance -info and physical systems small disurbance large effects
• Domino effects
Overlapping supply chains
and firm networks
Firms are part of several supply chains
Movement between supply chains in firm network
Once you are in, you have a bigger chance
Effects of overlap
Overlapping supply chain networks
a) Decrease
b) increase
Supply chain
network 1
a) Decrease
b) increase
Supply chain
network 2
a) increase
b) decrease
Domino effects
B1
C1
A
B2
C2
D2
E2
A radical break
often a result of strategic change
at network level
Exemple of strategic change
strategic alliances, mergers and acquisitions
Dynamics of alliances and market restructuring
Competitor alliance
processes
Customers
Network processes
Internal developm.
focal alliance
Relationship processes
Customer- focal firm
Hertz& Mattsson
SJM 2006
Processes
breaking/dissolving
relationships
Management of alliances as
dyads and networks
Part VI
Management of alliances
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Performance
Development
Positioning
Handling effects
Part IV
Performance
Problems to be handled
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Missions and domains
Job division
Expectations
Cultural differences
Power distribution
( Ludvigssen, 2001 ” The international networking between
European Logistics Operators” Doct dissertation, SSE
Performance
Cultural fit?
• Main stream culture
• Organisational culture
• Managerial style
• ( autocratic,democratic
• Individualistic-collectivistic
• Trust)
Part IV Performance
From management to leadership
Financing
Projects
Measurement
Science
Tools
Consulting
Communication
Commitment
Behaviors
Creativity
Overcoming resistance
Self leadership
etc
etc
Dissatisfied? Intra-alliance fit?
Inhibitors
• Disparate benefit of
alliances
• Lack of willingness to
accept unpopular
decisions
• Lack of propensity to
reach consensus
• Lack of willingness to
contribute to resources
and alliance missions
Stimulators
• Types of tasks performed
in concert
• Relational bonds and
functional co-dependency
• High level of mutual
control due to
standardisation
• Trust and commitment to
alliance welfare
Ludvigsen, 2001
Inter- alliance fit?
Before forming alliance?
• Degree of overlap or complementarity?
• Corporate cultural differences and management
practices?
• Power balance?
• Differences in strategic interests?
• Development - speed and direction?
• Access to network partners?
• Effects and costs of a change?
Part IV performance
Different types of strategies
dyads and / networks
• Dyad - establish, develop, break or switch
• Supply chain network - changing your position
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Increasing/ decreasing integration
Conflict/ cooperation- group work
Changing direct and indirect relationship
Leave/ enter
• Industry network
• Overlapping/ complementary
• Moving in or out or supply chains
Making use of relationship lifecycle pattern
Positioning ?
• Your firm´s position in the alliance- Related to
actors-resources and activities
• Your position in the network -horizontal or
vertical (supply chain network)
• Your network in comparison to others
Handling the effects?
• How to prepare for the domino effects?
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Where can we expect large acquisitions or mergers
How would such an alliances influence us? Directly -indirectly?
What can we do to prepare? Alternative solutions?
• How to make use of the externalisation
effects?
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Extension of the number of actors in the network
Interaction between actors
Category of alliances?
Prerequisites?
Part VI
Success factors expressed as
”8 i´s for successful alliances”
(Rosabeth Moss-Kanter” Collaborative advantage- The art of alliances HBR 2:4 July Aug 1994)
• Individual
excellence
• Importance
• Interdependence
• Investment
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Information
Integration
Institutionalisation
Integretity
What have you learnt?
When and why do you need alliances?
Alliances of different types?
How do partnerships or alliances change?
Network of relationships
- a supply chain network
Strategies for alliances
The industry networks and alliances dynamics
Management and implications
New
Knowledge?
The ASG- Danzas case
Questions
• What are the main objectives of the alliance
• What were the strengths and weaknesses
before when forming the alliance ?
• How have these strength and weaknesses
changed?
• How would you as a new CEO cope with
the situation? What different problems have
you solved with your suggested solutions?