Types of
Strategic
Alliances
Chapter 2
1. Strategic Alliances for Marketing
Cross-Promotional Alliance
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Cross promotion Alliances are one of the more
common types of alliances
Companies promoting each other with the use
of discounts, coupons, specials, shared
advertising space or in-store promotions
Exceptionally efficient in reducing costs of
advertising
Ex: Business Class flights offering a free AOL disk
with peanuts
2. Strategic Alliances for CoBranding
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Co-branding strategy involves two companies
putting their name on a common product
At the very least, co-branding offers twice the
exposure and market impact opposed to
traditional single brand advertising
Ex: Mattel and McDonalds offering toys that
produce McDonalds hamburgers and Fries
3. Strategic Alliances to Serve
National Customers
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Serving National customers is often too costly or too
difficult for a firm to handle by themselves
To create an alliance to serve national customers,
companies share information, sales accounts and
materials with the other members. This also allows for a
more consistent customer satisfaction that otherwise
wouldn’t be available
Trust is a very important factor for an alliance to succeed,
especially when the scope of the alliance is
national/global
Ex: Awnet: Canvas Awnings drawing together with
several other fabricators to meet the needs of clients all
over the U.S. by dividing the country into 5 regions, which
allows them to service the national need for awnings
4. Industry-specific Geographical
Strategic Alliances
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Focuses on a specific industry in a certain
geographical area.
These businesses are general within very close
proximity to one another and can satisfy all the
needs of their customers in one phone call or
visit.
Ex: The Minnesota Connection: Services the
Direct Marketing Industry, alliance involving
Telemarketing, Plastic, Printing, Envelope,
Lettershop, and Listing Services.
5. Community-based Alliances
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Involves working together with other companies to
create some community benefit that essentially
differentiates your organization from your competitors in
the eyes of your customers.
Community-Based Alliances are typically a form of
advertising, although they allow different companies to
come together for the benefit of the community, and
the resulting networking and friendships are a priceless
benefit for the companies involved.
Ex: Investors Advantage Corporation holding an
Economic Forum in Westlake Village, California. By
providing high-profile speakers and representatives from
many companies, the forum benefits the citizens and
customers and also provides the companies involved
with exceptional advertising and name recognition as
well as the ability to attract new customers in
attendance.
6. Alliances with Your Competition
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Competition is NOT bad. Competition breeds success.
This concept is exactly as it sounds, you work with your
competitors in search of mutual benefits.
This approach is beneficial in economic/industry
downturns or when costs of machinery or resources are
extremely high.
It is possible to reduce costs by sharing space, advertising
or commercial space with competition.
Ex: American, Delta and United Airlines sharing a storefront ticket office to reduce rental fees and attract more
customers.
7. Alliances with Competitors to
Open New Markets
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Often time’s foreign or new markets have some characteristic
that makes them unserviceable for an organization. Examples
are markets that are too large, too far away, too different,
undeveloped, and so on.
Forming alliances with competitors is a viable solution is many
cases when these issues are at large.
By working together with the competition, organizations are
able to increase output, lower costs of distribution and provide
advertising and marketing that make the penetration of the
market much easier that it would be if they were to go at it
alone.
Ex: La Tapatia Tortilleria and El Aguillea Tortillas formed a
strategic alliance to open the new market of California to fresh
tortillas. Neither of the companies had the production ability to
service the market alone, but together they were able to
capture a huge market and become very successful.
8. Strategic Alliances for Buying
Parity
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Such as buying cooperatives or buying
groups
Buying as a group can make similarity of
prices
Ex. In American Dental Cooperative (ADC), the
ADC members came together in an alliance
for buying parity to as they called “level the
playing field”. As buying in group, they can
get prices similar to that of the two giants in
their industries.
A list of Buying Group Benefits from
office Dealer Magazine:
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Lower product costs
Lower operating costs
Industry information
Education and training
Networking
Pricing guidelines
Competitive information
Advertising support
Catalogs
Credit information
Reduced-price services
9. Alliances with Competitors to
Build an Industry
The form of cooperative alliance to raise the awareness
and increase sales of particular business in the area
Ex. In Southern Ontario, Canada, a group of craft breweries
formed a cooperative alliance to raise the awareness of
craft brewing in the area. All competitors get together to
create the Ale Trail, the idea to bring visitors to the area.
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10. Strategic Alliances to Beat
competitor
The alliance that the two companies combine their
strength to make
new products
Ex. Coca-Cola developed an alliance with Nestle to make
cannd and bottled coffees and teas for a worldwide
market in order to compete with Pepsi.
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11. Alliances to Block New
Competitors
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The two main competitors make an agreement alliance
to stop another main competitor from its new strategy or
entering into the industry.
Ex. GTE and Pacific Bell, the two California telephone
companies, entered into an alliance agreement, and
they successfully blocked Metropolitan Fiber Systems
(MFS) from developing a fiber optics dual communication
system for the University because it will undercut price to
local phone companies.
12. Strategic Alliances for Product
Development
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When some products or ideas have to be
developed using more advance technology
and hard to do by own.
Ex. Chrysler and Westinghouse collaborated to
develop an advanced electric motor and
power controller that would boost
acceleration and operating rage between
charges in Chrysler electric vehicles.
13. Strategic Alliances for Research
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Often times, the contemporary understanding of
concepts is either outdated or flawed, and in worse
cases, completely mistaken
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Often times the research and development for newer or
more appropriate concepts is costly and difficult
Ex. GM and the federal government of the U.S.A are
combining forces to complete extensive research on
electric car technology
14. Strategic Alliances for
Manufacturing and Construction
Partnering – Having all the key people involved on a
project attend a workshop
 Four Basic Components of Construction Project
- Owner
- General Contractor
- Architectural and engineering
- Sub-contractors
 Advantages of Partnering
- Save time and money
Ex. Arizona Department of Transportation ( 19.45% time
saved and total project saving of $2,329,026
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15. Strategic Alliances Between Private
Business and State-Owned Foreign
Business
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Risky but can be profitable
Ex. Honeywell and Sinopec
Honeywell can double the sales to Sinopec’s 38
enterprises.
Honeywell anticipates a minimum of $75 million in new
sales over the five years
16. Strategic Alliances for
Distribution
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Coca Cola and Nestle
- Both parties get benefits, Coke has good distribution
channel, and Nestle has products that do not directly
compete with existing products.
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Non-Exclusive Agreement
- Ex. Steelcase, the world’s largest manufacturer of the office
furniture and office environments, distributes its products
through a dealer network. Dealers can sell other products of
other manufacturers to complete their own product line and
serve their customers better.
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Exclusive Agreement
- Ex. State Farm Insurance Companies alliance with their
agents is called the Marketing Partnership. It gives its agents
everything they need to conduct business, and it also sell
them other items to make improvements.
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17. Strategic Alliances with Your
Customers
It can be very rewarding
Vendor Managed Inventory (VMI)
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Electronic Data Interchange (EDI)
Just-In-Time (JIT)
Integrated Supply (I/S)
Benefits for Participants
- Improved inventory control
- Reduced vendor base
- Increased product and supply turns
- Reduced inventory investment
- Reduction of transaction cost
- Improved service levels
- Increased sales
- Reduction in out-of-stocks
- Improved profit margins
- Reduction of purchasing staff
18. Strategic Alliances with Your
Suppliers
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American companies shrink the number of
suppliers, they are putting more energy into
the remaining relationships, and are even
willing to pay a premium on the theory that
getting things right initially is cheaper in the
long run.
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Examples
Techniques to build a strong
alliance with your suppliers
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Look for partners who wanted to partner with you
-- Spend your time building those relationship
with your
suppliers that will help you to serve
your market and
improve your bottom
line
Ask your supplier “What can I do for you?”
-- We can help to come up with strategies for
the endusers to buy better from the
manufacturers in a way that
served the
manufacturers
The Fuji Factor
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It is a model that more manufacturers should embrace and
more purchasers should demand of their suppliers
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The key elements to Fuji’s success are as follows:
- A limited number of dealers offering their products to
their market
- Manufactured products of the highest quality with zero
defects as the norm
- Build tight relationships with a limited dealer network
- Seek constructive feedback from dealers and act upon
the ideas shared
- Consistency of leadership
- Accessibility
- Trust
19. Alliance on Internet
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A perfect example of an internet strategic alliance is
Lifelines
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The site is an alliance between the company and
several health and employee productivity related
companies
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The site lets corporate decision makers know what is
available for them in the area of employee
effectiveness and productivity
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The information on the site helps people to improve their
effectiveness through improved health and optimal
wellness
20. Mastermind Alliances
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Known as strategic alliances for individual development
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“ Palm Springs Breakfast Club”
- alliance with other California cities to draw tourists
to the state
- mastermind alliance with consisted of general
managers from seven other deluxe hotels, the
convention center director, and the owner of the
aerial tram
- they discuss issues uniquely important to the
hospitality business in downtown Palm Springs