Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-1 Strategic Alliances: Teaming and Allying for Advantage.

Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-1

Strategic Alliances: Teaming and Allying for Advantage

by Robert Pitts & David Lei

Slides prepared byJohn P. Orr

Cameron University

Chapter 9


What you will learn…

• The characteristics of a strategic alliance

• Why companies around the world are forming strategic alliances

• The different broad types of strategic alliances, including:– Licensing– Joint ventures– Multipartner consortia

Slide 1 of 2


What you will learn…

• The benefits and costs of entering into strategic alliances

• How to balance the need for cooperation with competition

Slide 2 of 2


IBM’s Global AlliancesSlide 1 of 2

• Early Alliances: Responding to Japan

• IBM’s Initiatives During the 1990s: Rebuilding Competitiveness– Motorola– Apple Computer– Perkins-Elmer, Silicon Valley Group, and Elite

Systems– Toshiba– Siemens– Phillips


IBM’s Global AlliancesSlide 2 of 2

• Current Strategic Alliance Initiatives– Electronic commerce– Telecommunications– Smart technologies– Health care– Ongoing relationships


Ex. 9-1. IBM’s Alliance Strategy(Selected Categories)

Personal Computers• Matsushita (low-end

PCs)• Ricoh (hand-held PCs)

Telecommunications• NTT (value-added

networks)• Motorola (mobile data

pets)

Factory Automation• Texas Instruments• Sumitomo Metal• Nippon Kokan• Nissan Motor

Health Care• Pfizer• Microsoft


The Global Airline Industry

• Airline industry consolidation of 1990s

• From code sharing to combined operations

• Network versus network– Northwest – KLM– American Airlines – British Airways– Lufthansa – United Airlines– Delta “Sky Team” alliance– “Oneworld” alliance


Ex. 9-2: Global Airline AlliancesSlide 1 of 4

Trans-Atlantic Linkages/Relationships

Airlines Type of Alliance

• Northwest Airlines

• KLM Royal Dutch

Full partnership (antitrust immunity)

Wings alliance

• United Airlines• Lufthansa


Part of Star Alliance

• Delta Air Lines• Swissair• Sabena• Austrian Airlines


Relationship unwound in 1998-1999



Trans-Atlantic Linkages/Relationships

Airlines Type of Alliance• Continental Airlines• Alitalia

Code sharing, joint marketing (antitrust issues pending)

• American Airlines• British Airways

Code sharing, joint marketing (antitrust request withdrawn)

• Delta Airlines• Air France• CSA Czech Airlines• Alitalia•Aero Mexico


Sky Team alliance



Globe-Spanning Linkages/Relationships

Airlines Type of Alliance

• United Airlines• Lufthansa• Scandinavian Airline

System (SAS)• Thai International• Varig Brazilian

Star Alliance: Code sharing, joint marketing; includes up to 17 partners in 2002



Globe-Spanning Linkages/RelationshipsAirlines Type of Alliance• American Airlines• British Airways• Cathay Pacific• Qantas Airways• Aer Lingus• Lan Chile• Finn Air• Iberia

Code sharing, joint marketing, arrangement for global flights. New alliance known as ONEworld.

• Northwest Airlines• Continental Airlines• Japan Air System

Code sharing for Trans-Pacific flights


Factors Promoting Alliances

• New market entry

• Shaping of industry evolution

• Learning and applying new technologies

• Rounding out a product line


Types of Strategic Alliances

• Licensing ArrangementsThe least sophisticated and easiest-to-

manage type of alliance

• Joint VenturesThe creation of a third entity representing

the interests and capital of the partners

• Consortia and NetworksHighly complex linkages

among groups of companies


Licensing Arrangements

Primary reasons for entry• A need for help in commercializing a

new technology

• Global expansion of a brand franchise or marketing image


Ex. 9-6. Sun Microsystems’ Licensing Strategy in the Early 1990s

Slide 1 of 2

Sun Microsystems

Sun Microsystems

BipolarIntegrated

Technology

BipolarIntegrated

Technology

LSILogic

LSILogic

PhilipsN.V.

PhilipsN.V.

CypressSemi-

conductor

CypressSemi-

conductor

TexasInstruments

TexasInstruments

FujitsuFujitsu


Ex. 9-6. Sun Microsystems’ Licensing Strategy in the Early 1990s

Slide 2 of 2

Company Benefit of Linkage

Philips N.V. Gives Sun access to European market.Phillips will specialize in RISC chips for consumer and telecommunications products.

Texas Instruments

Gives domestic credibility to new product design

Fujitsu Gives access to low-cost production

LSI Logic, other small firms

Provides for cross-licensing and exchange of ideas


Joint Ventures

Primary reasons for entry• Vertical integration

• Learning a partner’s skills

• Upgrading and improving skills

• Shaping industry evolution


Consortia and Networks

• Multipartner ConsortiaMultipartner alliances designed to share an

underlying technology

• Cross-Holding ConsortiaFormal groups of companies that own large

cross-holdings and equity stakes in each other

• Industry-Spanning Alliance NetworksFirms sharing knowledge, costs, and risks


Risks and Costs of Alliances

• Rising incompatibility

• Risk of knowledge or skill leakage

• Risk of dependence

• Strategic control costs


Automotive Joint Venture Fades

FordFord VolkswagenVolkswagen

Autolatina

• Impasse on strategy to face General Motors

• Reluctance to share design, marketing ideas


Ex. 9-7. Deepening Dependence on Alliance Partner

Sourcing forcomponents

Sourcing forcomponents

Low pricedeters futureinvestment

Low pricedeters futureinvestment

Sourcingextends tojoint venture

Sourcingextends tojoint venture

Venture includesshared technologydevelopmentaround core

Venture includesshared technologydevelopmentaround core

Sustainedlosses induceresignation, exit

Sustainedlosses induceresignation, exit

Domestic firm feels pricepressure inevery marketbasedon coretechnology

Domestic firm feels pricepressure inevery marketbasedon coretechnology

Alliance partner becoming stronger,attacks firm’s othermarkets

Alliance partner becoming stronger,attacks firm’s othermarkets

Domestic firm loses its core competencebase

Domestic firm loses its core competencebase


Balancing Cooperation and Competition

• Understand the firm’s knowledge and skill base

• Choose complementary partners

• Keep alliance personnel long-term


Alliances and Ethics

• Balancing collaboration and competition within the alliance

• The issue of loyalty among personnel assigned to the alliance

Two Critical Issues

Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-1 Strategic Alliances: Teaming and Allying for Advantage.

Documents

competition slide

division of thomson

global airline alliances

ibms global alliances

early alliances

japan ibms initiatives

operations network

silicon valley group