4b corp strat alliances

8/2/2019 4b Corp Strat Alliances

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July 2, 1999 Ian Lee, Ph.D, Carleton University 1

Ian Lee, Ph.DIan Lee, Ph.D

Carleton UniversityCarleton University

Ottawa, CANADAOttawa, CANADA


Peter Drucker

xThe greatest change in corporate structure

& the way business is being conducted

x is the growth of relationships not based on

ownership but on partnerships


Intro

xalliances have long history

xoriginated in shipping industry, then oil,

mining, gas and autos

xretailing alliances - Coke in 1930s


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Strategy for 1990s

x1990s massive organization change

xold giants must act like small firms

xGiants Must Learn to Dance like a ballerina


3 Options for Growth

1. expand internally (grow it)

2. acquisitions (buy it)

3. alliances (share it)


Cooperation as Competitive

AdvantagexNew management methods

xOpportunities and dangers

xSuccesses very lucrative

xFailure levels high


3/12


Today

xpharmaceuticals buy minority interest in

bio-tech start-ups

xairlines with competitors

xtelecoms team for cell-phone licenses


Ceiba-Gigy

xToday >80% of sales from 100% owned

plants

xIn 10 years >50% of sales will come from

alliances, J/Vs, licensing

Reasons for Alliances:

Do you want to dance?


4/12


Reasons for Alliances

1. synergies

2. risk sharing

3. transfer of technology


Reasons for Alliances

4. leverage resources

5. tie up competitors

6. make money


Strategic AlliancesStrategic Alliances

Partnerships between firmsPartnerships between firms

Firm AFirm A

Firm BFirm B


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where theirwhere theirwhere their

Firm AFirm A

Firm BFirm B

Core

Competencies

Core

Competencies

CapabilitiesCapabilities

ResourcesResources




where theirwhere theirwhere their

Firm AFirm A

Firm BFirm B

Core

Competencies

Core

Competencies

CapabilitiesCapabilities

ResourcesResources

are combined to pursue

mutual interests to

are combined to pursueare combined to pursue

mutual interests tomutual interests to

DevelopDevelopDevelop

ManufactureManufactureManufacture

DistributeDistributeDistribute

GoodsGoodsGoods

ServicesServicesServices


Advantages vs M&A

xquicker to form

xmore flexible

xless risky


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Advantages vs M & A

xpositioning to block competition

xcreate permanent distribution channel

without total outlay


Disadvantages vs M&A

xneeds new control methods

xneeds unique mgmt skills

xneeds resource commitment

Understanding Alliances:

Who do you want to dance with?


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Strategic Spectrum

Alliances by Hierarchical Level

Alliances in the Value Chain


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Alliances in Value Chain

1. keiretsu - vertical integrated

2. franchise alliances - dealers (forward)

3. supplier alliances (backward)


Keiretsu

xformal, legal alliances in Japan in complex

products e.g. autos

xinformal shudan in trading, industry,

finance e.g. Mitsubishi with cross

ownership of shares and shared directors


Franchise Alliances

xMcDonalds with dealer franchisees

xPepsi & Coke with bottling dealers

xBMW, Ford


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Supplier Alliances

xWalMart increased from $5 B to $85 in 10

years

xthro tight alliances with suppliers

Alliances by Ownership Form


Forms of Alliances

xstrategic alliances

xequity partnerships

xfranchise alliances

xjoint ventures


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Strategic Alliances

xmost simple - no legal contract

xlong term strategic focus

xlinkages - cross-training, share info

xcollaborative mgmt - not control


Equity Partnerships

xmore complex than basic alliance

xstrategic alliance + equity

xusually minority equity 5% - 25%

xincludes informal J/V


Franchise Alliances

xsystem of multiple alliances

xinterlocking license agreements

xright to distribute in exclusive area

xcross-obligation buy goods in return


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Joint Ventures

xformalized alliances

xcreation of legal, 3rd entity

xstaffed by separate mgmt team

xrights/duties in s/h agreements

Alliances by Function


Alliances by Function

xmarketing alliances

xproduct alliances

xR & D alliances


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Marketing Alliances

xuses distribution system of 1 firm to

increase sales of partner

xe.g. small dairy develops alliance withsupermarket chain

xforeign mfg wants to enter Romanian mktthrough Romanian firms channels


Product Alliance

xlinks purchasers with suppliers to achieve

JIT deliveries

xjoint mfg facility between mfgs to develop

common products

4b corp strat alliances

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