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) Sales Alliance

2) Solution-specific Alliance

3) Geographic-specific Alliance

4) Investment Alliance

5) Joint Venture Alliance

Framework to determine the need for an Alliance

Step 1: Business & Marketing StrategyStep 2: Marketplace ScanStep 3: Product Portfolio Assessment vs.

Marketplace ScanStep 4: “Build Internally” vs. “Acquire Externally”Step 5: Organizational Readiness and Speed to

Market DemandStep 6: Proceed to “Build Internally” or “Acquire

Externally”

Internal & External Analysis

1) Porter’s Generic Value Chain (Internal)Primary

Supported by Secondary: firm infrastructure, HRM, R&D, Procurement etc.

2) External Analysis: PESTEL, O.T., Porter’s five forces, Competition Analysis (Marketplace Scan)

Inbound Logistics

Operations Outbound Logistics

Marketing&

Sales Service

Opportunities & Imperatives

• 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

The Rationale for Alliances

An extraordinary growth based on more than 500 companies, interviewing from tops executives.

Today’s CEO’s View Alliances

Perception of Alliances as Successful

• Globalization of Markets

• Search of Capabilities (Technology blur industry boundaries)

• Lack of Resources and intense marketing competition

The New Reality

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)

“If you think you can go it alone in today’s global economy, you’re highly mistaken”(Jack Welch)

Changing Markets

Changing Markets

Fewer Resources

Fewer Resources

Intense Competition

Necessary Skills New Knowledge &

Capability to strengthen core Competency

Necessary Skills New Knowledge &

Capability to strengthen core Competency

Rapid Technology

shifts

• 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

Oracle Systems

“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

Own Vocabulary for alliance

activity

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.

Growth of Capabilities

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

VS.

Transactional alliancesTransactional 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 cross-

licensing

Strategic alliancesStrategic 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!