Chapter 9
Exit from alliances
- Exit strategies should be a part of any alliance agreement - Lacking an exit strategy is viewed as a common mistake that partners have when starting an alliance. - Exit strategies should meet the test of fairness while protecting key resources of joint-venture partners
Outcome of trust in alliances
- Limits transaction costs - Facilitates long-term relationships - Stimulates collaboration - Simplifies knowledge transfer - Long-term competitive advantage
Failure factor of alliances
- conflict interest - lack of clearly defined objectives and responsibilities - ill evaluation of the achievements - under-resourcing - cultural issues - perceived underperformance
Benefits of strategic alliances
- ease of market entry - shared risk - shared knowledge and expertise - synergy and competitive advantage
Advantages achieved through alliances
- entry into new markets - increased market power and economies of scale and scope - the acquisition and exchange of skills - risk and investment sharing - reductions in liabilities of foreignness - Strategic renewal
Three main types of alliances
- joint venture - equity strategic alliance - non-equity strategic alliance
Success factor of alliance
- specific goals, life span, tasks, responsibilities and achievement measures - use pilot ideas - ongoing management, coordination, transparency and communication - commitment - value chain alignment - active team work and staff training
The role of strategic centre in managing a web of partners
- strategic outsourcing - capability - technology - competition
Key Success Factors relevant at each stage of alliance evolution
- the phase of formation - the phase of design - the post formation phase
How to collaborate and win
1. Collaboration is competition in a different form 2. Harmony is not the most important measure of success 3. Cooperation has limits 4. Learning from partners is paramount
Strategic alliance
A long-term partnership between two or more companies established to help each company build competitive market advantages.
Cooperation has a limits
A strategic alliance is a constantly evolving bargain whose real terms go beyond the legal agreement or the aims of top management. Successful companies inform employees at all levels that skills and technologies are off-limits to the partner, and monitor what the partner request and receives
Technology
Borrow ideas that are developed and explained as a means of creating and mastering new technologies
The phase of formation
Companies select of partner/ partners
Successful alliances must accomplish two goals
Coordination of the optimal combination of productive resources across parties and Mitigation of the risk of opportunistic behaviour
Capability
Develop the core skills and competencies of partners to make them more effective and competitive. Force members of the network to share their expertise with others in the network, and with the central firm
Competition
Explain to partners that the principle dimension of competition is between value chains and networks. The network is only as strong as its weakest link. Encourage rivalry between companiesinside the network, in a positive manner.
Harmony is not the most important measure of success
Indeed, occasional conflict may be the best evidence of mutually beneficial collaboration. Few alliances remain a win-win undertaking forever. A partner may be content even as it unknowingly surrenders core skills
Strategic outsourcing
Outsource and share with more partners than the normal broker and traditional firm. Expect them to be problem solvers and initiators
Non equity alliances
Refer to agreements under which companies collaborate in order to supply, produce, market or distribute products of the joint-venture partner over an extended period of time without substantial ownership investment in the alliance
Collaboration is competition in a different form
Successful companies never forget that their new partners may be out to disarm them. They enter alliances with clear objectives, and also understand how their partners' objectives will affect their success
learning from partners is paramount
Successful companies view each alliance as a window on their partners' broad capabilities. They use the alliance to build skills in areas outside the formal agreement and systematically diffuse new knowledge throughout their organisation
The phase of design
The alliance governance mechanism is being established
The post formation phase
The company manages the alliance on an ongoing basis and creates value
Equity alliance
an alliance in which one or more partners assume a greater ownership interest in either the alliance or another partner
Joint venture
refers to a strategic alliance in which two or more cooperating companies (the 'parents') create a legally independent company in which they invest and from which they share any profits created.
Organisations enter into an alliance
to get access to complementary resources or capabilities that would enable each of the partners to increase economies of scale and gain greater market power.