4-1 1 17 Some Definitions Reasons for Alliances Types of Alliances Bus. Level Alliances Corp. Level Alliances International Cooperation Risks with Cooperation.
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For example: Marketing agreements between Various Airlines
Bus. Level 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
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
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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
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
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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
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
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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
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
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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
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
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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
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.
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Some Definitions
Reasons for Alliances
Types of Alliances
Bus. Level Alliances
Risks with Cooperation
Managing Cooperation
Risks with Cooperation
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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
Competitive Risks
Inadequate contracts
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Holding alliance partner’s specific investments hostage
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Risk & Asset Management Approaches
Detailed contracts and monitoring
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Misrepresentation of competencies
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Partner fails to use complementary resources
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Developing trusting relationships
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Outcome
Value Creation
Detailed contracts & monitoring
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Developing trusting relationships
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Managing Cooperative Strategic Risks
Holding alliance partner’s specific investments hostage