4-1 1 17 some definitions reasons for alliances types of alliances bus. level alliances corp. level...
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4-1117
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Chapter Three:
The External Environment
Chapter Three:
The External Environment
© 2 0 0 9
Hitt, Ireland, Hoskission, Rowe & Sheppard
Strategic Management
N o
t e sChapter Ten:
Cooperative Strategy
Competitiveness & Globalization
4-2217
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
The Strategic Management Process
Chapter 5: Bus.-Level Strategy
Chapter 6:Competitive Dynamics
Chapter 7:Corp.-Level
Strategy
Chapter 8:Acquisition & Restructuring
Chapter 9:International
Strategy
Chapter 10:Cooperative
Strategy
Strategy Formulation
Chapter 11:Corporate
Governance
Ch. 12: Org. Structure & Controls
Chapter 13:Strategic
Leadership
Chapter 14:Org. Renewal & Innovation
Strategy Implementation
StrategicActions
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . &
Performance
Chapter 3:The External Environment
Chapter 4:The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 10:Cooperative
Strategy
4-3317
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Cooperative StrategyKnowledge Objectives:
1. Explain cooperative strategies & why they are used.
2. Define & discuss three types of strategic alliances.
3. Name the business-level and corporate-level cooperative strategies & describe their use.
4. Note the importance of cross border strategic alliances as an international cooperative strategy.
5. Describe the risks of cooperative strategies.
6. Depict methods to manage cooperative strategies.
4-4417
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Some Definitions
A strategy where firms work together to achieve a shared objective.
Develop
Manufacture
Distribute
Goods
Services
are combined to pursue mutual
interests to
where their
Core CompetenciesCapabilitiesResources
Strategic Alliances Partnerships between firms
A Cooperative Strategy
Some Definitions
4-5517
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Standard Cycle Market
* Gain market power.* Gain access to complementary resources.
* Overcome trade barriers.* Meet competitive challenge.* Pool resources for large projects.* Learn new business techniques.
Fast Cycle Market * Share risky R&D expenses.
* Overcome uncertainty.
* Maintain market leadership.* Form an industry technology standard.* Speed-up product, service or market entry.
* Gain access to a restricted market.* Establish franchise in a new market.* Maintain market stability.
Slow Cycle Market
Reasons for Alliances by Market Type
Reasons for Alliances
4-6617
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
OMERS & Apax Partners purchase of Nelson.
Blackberry services used on wireless devices worldwide.
Cuisine de France & Tim Horton’s Maidstone Bakeries.
Types of Strategic Alliances
Create an independent firm is created by equally joining assets from 2 other firms (50-50).
Joint Venture
Partnership where partners do not own equal shares. Equity Strategic Alliance
Contract is given to supply, produce or distribute a firm’s goods or services (without equity sharing).
Non-Equity Strategic Alliance
Types of Alliances
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Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Complementary Alliances
Diversification Alliances
Synergistic Alliances
Franchising
Competition Reduction Alliances
Competition Response Alliances
Uncertainty Reduction Alliances
Types of Strategic Alliances
Business-Level
Corporate-Level
Types of Alliances
4-8817
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Partnerships built on the complementary aspects of firms to make each more competitive.
Supplier Value Chain
Buyer Value Chain
Include dist., supplier or out-sourcing alliances where firms rely on upstream partners
Japanese manufacturers rely on close relationships with and among suppliers to implement Just-In-Time inventory systems
Vertical Alliance
Vertical Complementary Alliances
or downstream partnersto build competitive advantage.
Business Level Strategic Alliances
Bus. Level Alliances
4-9917
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Used to increase the strategic competitiveness of the partners
Horizontal Alliance
Buyer Value Chain Buyer Value Chain
Horizontal Complementary AlliancesBusiness Level Strategic Alliances
For example: Marketing agreements between Various Airlines
Bus. Level Alliances
4-101017
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Explicit Collusion: When firms directly negotiate production output & pricing agreements in order to reduce competition.
Often illegal types of cooperative strategy which are used to reduce competition.
Tacit Collusion: When several firms in an industry indirectly coordinate production and pricing decisions by observing each others competitive actions & responses.
e.g. the OPEC petroleum cartel
e.g. Gas Stations at an intersection
Competition Reduction Alliances
Business Level Strategic Alliances
Bus. Level Alliances
4-111117
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Firms join forces to respond to a strategic action of other competitors.
Competition Response Strategies
In mobile Internet, France Telecom & Microsoft’s WiFi alliance as a response BT Group’s use of Bluetooth.
Many insurance companies use this strategy for large policies.
Alliances can be used to hedge against risk & uncertainty.
Uncertainty Reduction Strategies
7 insurers covered the WTC for $4.7 Billion.
Business Level Strategic Alliances
Bus. Level Alliances
4-121217
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Create economies of scope between 2+ firms, creating synergy across multiple businesses between firms.
Synergistic Strategic Alliances
Allows firms to grow with relatively strong centralized control without significant capital investments.
Franchising
Name a fast food establishment.
The purchase of Telestat by a variety of investors.
Allows a firm to expand into a new product or market area without an acquisition.
Diversifying Alliances
OMERS moves into a range of infrastructure projects.
Corporate-level Strategic Alliances
Corporate Level Strategic Alliances
Corp. Level Alliances
Corp. Level Alliances
4-131317
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Host partner knows local market & customs.
However....
International Cooperative Strategies Allows risk sharing via lower investment.
International alliances can be difficult tomanage due to differences in management styles, cultures or regulatory constraints.
Must gauge partner’s strategic intent soThey do not gain access to important technology and become a competitor.
International CooperationInternational Cooperation
4-141417
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Network strategies involve a group of interrelated firms that work for the common good of all.
Dynamic Networks
Network Strategies
The types of networks are:
Stable Networks
Built for the exploitation of economies available between firms.
Used in industries characterised by frequent product innovations & short product life cycles.
Network StrategiesNetwork
Strategies
4-151517
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Competitive Risks with Cooperative Strategies
While cooperative systems offer advantages, there are also major risks associated with them:
Misunderstanding partner’s strategic intent.
Poor contract development.
Failure of partners to make complementaryresources available.
Being held hostage through specificinvestments made with partner.
Misrepresentation of partners’ competencies.
4-151517
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Risks with Cooperation
Managing Cooperation
Risks with Cooperation
4-161617
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
Competitive Risks
Inadequate contracts
*
Holding alliance partner’s specific investments hostage
*
Risk & Asset Management Approaches
Detailed contracts and monitoring
*
Misrepresentation of competencies
*
Partner fails to use complementary resources
*
Developing trusting relationships
*
Outcome
Value Creation
Detailed contracts & monitoring
*
Developing trusting relationships
*
Managing Cooperative Strategic Risks
Holding alliance partner’s specific investments hostage
*
Inadequate contracts
*
Misrepresentation of competencies
*
Partner fails to use complementary resources
*
Managing Cooperation
4-171717
Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Corp. Level Alliances
International Cooperation
Risks with Cooperation
Managing Cooperation
Network Strategies
The Strategic Management Process
Chapter 5: Bus.-Level Strategy
Chapter 6:Competitive Dynamics
Chapter 7:Corp.-Level Strategy
Chapter 8:Acquisition & Restructuring
Chapter 9:International Strategy
Chapter 10:Cooperative Strategy
Strategy Formulation
Chapter 11:Corporate Governance
Ch. 12: Org. Structure & Controls
Chapter 13:Strategic Leadership
Chapter 14:Org. Renewal & Innovation
Strategy Implementation
StrategicActions
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . & Performance
Chapter 3:The External Environment
Chapter 4:The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 10:Cooperative Strategy
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