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!