1. MANAGING STRATEGIC ALLIANCES AND CHANNEL PARTNERS ANDREWS ADUGUDAA AKOLAA February 2012

2. PRESENTATION OVERVIEW WHAT ARE STRATEGIC ALLIANCES ANDPARTNERSHIPS WHY ALLIANCES HAVE BECOME THENORM TYPES OF ALLAINCES WHAT BENEFITS DOES ALLIANCESOFFER? SELECTING THE RIGHT ALLIANCEPARNERS MANAGING ALLIANCES FOR SUCCESS STRATEGIC ALLIANCES, THE STARBUCKS 3. WHAT ARE STRATEGICALLIANCES? Strategic alliances are voluntary independent relationships, collaborations and partnerships of firms to develop and enhance business operations for competitive advantage (Gulati 1998) According to (Enrst 2004), By the turn of this century, most large companies had 20% of their assets and 30% of their research funds tied in alliances of one form or the other. 4. What are Alliances? Another research conducted by Partner Alliances indicate that most CEOs(80%) of fortune 1000 companies believe that by 2008, 26% of their business revenues will come from strategic alliances. 5. So why are alliances becoming thenorm? Source of competiveness and firmgrowth paths strategy Efficiency in management Innovation driver Knowledge pool for industry Valuable resource availability Market entry and penetrationmechanism 6. TYPE OF ALLIANCES THERE ARE TWO BASIC FORMS OF ALLIANCES1.HORIZONTAL INDUSTRY LEVELALLIANCES 2. VERTICAL FIRM LEVEL INDUSTRYALLIANCES 7. HORIZONTAL INDUSTRYALLIANCES This refers to the collaborations andnetwork alliances between competitivefirms within a specific industry tomaximize the use of resources forefficiency and to cooperate forcompetitive advantage. Examples are the alliances in the airlineindustry. Skyteam Alliance, The Staralliance and one world that enable themto operate globally in a coordinatedmanner. 8. Vertical Firm Level Alliances The vertical firm level alliances arepartnerships, agreements,collaborations signed with other valuesystem partners to deliver a service orproduct competitively. They could be upstream, down streamor horizontal alliances of strategic valueto the firm.(Rothaermel & Deeds 2006) They include;Distribution agency, franchising, licensing, 9. WHAT BENEFITS DOES INDUSTRYLEVEL ALLIANCES OFFER Collectivism in action Increasing economic and market power Increased balance of power to negotiate Operational resource sharing Reduced operational cost Organizational learning and knowledgesharing Access to critical resources andcapability 10. WHAT BENEFITS DOES FIRMLEVEL ALLIANCES OFFER Opportunity to enter new markets fasterand cheaper. Shared risk in business development Loyalty in operations Representation at low cost Provide timely relevant industryinformation requirements for decisions. Provide key services that competitorsmay not have access. 11. MANAGING ALLIANCES FORSUCCESS Many alliances have fail to meetexpectations and disintegrated withinshorts spans. According to research,30%-70% ofalliances do not deliver the benefits thatthey purport to offer. Alliance termination rates exceed 50%. However empirical evidence indicatethat well managed alliances be it firmlevel or industry level has createdcompetitive advantage for players 12. Managing Alliances for successShah & Swaminathan (2008) indicates 3 KEY success factors1. Partner complementarity2. Partner commitment3. Partner compatibility or fit 13. Managing Alliances for successThe successful management of Alliances must begin with the process leading to the formation.Schreiner, Kale & Corsten (2009) identify 3 phasesThe formation, the design and post formation phases1. The selection of alliance partners must be based on a robust criteria that matches both parties.2. There must be outcome commonality of 14. Managing Alliances for success3. The agreement and statement of articles that establishes the alliance must be clear, concise and spell out the responsibilities of each partner.4. Each firm must build its capacity to manage alliances.5. Each partner must view the alliance with a positive sense of importance 15. SELECTING THE RIGHT ALLIANCEPARTNERS INDUSTRY LEVEL ALLIANCES Size Facilities Resources Status Local identity Capabilities and competence 16. Selecting Alliance PartnersVERTICAL FIRM LEVEL ALLIANCES Distribution network Size Financial resources Sales force strength Image Logistics 17. Key success factors in Alliances Partner complementarity Formation Partner commitment phase Partner compatibility and fit Contractual Design &agreementsgovernance Relationship governance structures Use and type of coordinationPost mechanism formation Development of trust and relational capital Conflict resolution mechanism 18. The Starbucks coffee experience These were firm level strategic alliancesdeveloped to explore new products andchannel space for competitiveadvantage across industry and markets. They worked successfully for Starbucks 19. STARBUCK EXPERIENCE-Background Company founded in 1971, Seatle USA Designed an innovative way to sellcanned roasted coffee beans in aspecialty store. Company was taken over by HawardSchultz in 1987 and introduced theItalian style coffee bars espresso coffeeand currently operate over 9000 storesin over 28 countries. 20. Starbuck experience-Thesuccess! Starbuck net earnings was 391.7 million in 2004 with a turnover of about 5.3billion. compared to 181.2 million net earnings in 2001 21. Graph of net earningsStarbucks Net Earnings 1992-2004 391.7400350300268.3 251250 $M200181.2150101.6 94.510057.4 68.6 42.15026.14.5 8.310.2 0year 22. International expansion September 1995 First Starbucks retailstore opened within an existing and newlyopened state-of-the-art Star Markets. October 1995 Signed an agreement withSAZABY Inc., a Japanese retailer andrestaurateur, to form a joint-venturepartnership to develop Starbucks retailstores in Japan. The joint venture wascalledStarbucks Coffee Japan, Ltd. The first storeopened in Tokyo in the summer of 1996and marked Starbucks first retail 23. The star buck experience October 1995 A long-term joint venture with Dreyers Grand Ice Cream was formed to market a premium line of coffee ice creams. Nationwide distribution to leading grocery stores occurred in the spring of 1996. November 1995 Formed a strategic alliance with United Airlines to become the exclusive coffee supplier on every United flight. 24. The starbuck experience January 1996 The North American Coffee Partnership was formed between Pepsi-Cola and Starbucks New Venture Company, a wholly-owned subsidiary of Starbucks. The partnership announced its plan to market a bottled version of Starbucks Frappuccino beverage. 25. The starbucks experience February 1996 Formed an agreementwith Aramark Corp. to put licensedoperations at various locations markedby Aramark. The first licensed locationopened in the end of 1996. September 1996 Introduced DoubleBlack Stout a new dark roasted maltbeer with the aromatic and flavorfuladdition of coffee with the Redhook AleBrewery. 26. The starbucks experience October 1996 Formed an agreement with U.S. Office Products Company, a nationwide office products supplier to corporate, commercial, and industrial customers. The alliance will allow Starbucks to distribute its fresh-roasted coffee and related products to the workplace through U.S. Office Products extensive North American channels. 27. The star buck experience 1998 Formed a joint venture with IntelCorporation. The venture will help pushStarbucks into the market of cybercafes. 1998 Formed an alliance with eightcompanies to enable the gift of over320,000 new books for children throughthe All Books for Children Holiday BookBuy. 28. The star buck experience 1998 Formed a joint venture with MackJohnsons Johnson DevelopmentCorporation to develop Starbuckslocations in underserved, inner-cityurban neighborhoods. 1998 Formed long-term licensingagreement with Kraft Foods toaccelerate growth of the Starbucksbrand into the grocery channel acrossthe United States. 29. The star buck experience 1999 Acquired Portland, Oregons Tazo Tea company and Hear Music. Formed alliance with Conservation International for environmental friendly coffee-growing procedures. 30. The Starbucks experience 2001 Introduced Starbucks card. 2004 Introduced in-store CD burning, formed licensing agreement to distribute Tazo Tea in U.S. grocery 31. The future of Starbucks To open 800 stores across the globe2012 To open 1500 Starbuck shops inmainland China by 2015 32. Conclusion Although failure rates are said to be highbetween 30%-70%, Alliances can be keystrategic tools if;1. They are well cut out and engineered with the right focus2. If the step approach is adopted to ensure clarity3. If partners are committed to the outcomes4. If the governance structure is spelt out 33. Conclusion If the partners benefits mutually form thealliance If resource and organizationalknowledge is spread across the partners If there Equity and fairness in theprocesses involved in setting up thealliance. 34. References Ernst, D. (2004). Envisioning collaboration. In J. Bamford,B. Gomes-Casseres, & M.Robinson (Eds.), Mastering alliance strategies. San Francisco: Jossey-Bass. Gulati, R. (1998). Alliances and networks. Strategic Management Journal, 19(4), 293317. Schreiner, M., Kale, P., & Corsten, D. (2009). What really is alliance management capabilityand how does it impact alliance outcomes and success? Strategic Management Journal. Rothaermela, F.T, Deeds D.L.(2006). Journal of Business journal vol. 21 Shah, R., & Swaminathan, V. (2008). Factors influencing partner selection in strategicalliances: The moderating role of alliance context. Strategic Management Journal,29(5), 471494.