sm module5 strategic alliance & collaberative partnership
TRANSCRIPT
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Strategic Alliances and Collaborative
Partnerships
Companies sometimes use
strategic alliances or collaborative
partnerships to complement their
own strategic initiatives andstrengthen their competitiveness.
Such cooperative strategies go
beyond normal company-to-
company dealings but fall short of
merger or full joint venture
partnership.
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Alliances Can Enhance a
Firms Competitiveness
Alliances and partnerships can help companiescope with two demanding competitive
challenges
to build a market presence in manydifferent national markets
Collaborative arrangements can help a company
lowerits costs and/or gain access to needed
expertise and capabilities
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Why Are Strategic
Alliances Formed?
To collaborate on technology development or newproduct development
To fill gaps in technical or manufacturing expertise
To acquire new competencies To improve supply chain efficiency
To gain economies of scale inproduction and/or marketing
To acquire or improve market access via joint marketingagreements
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Why Alliances Fail
Ability of an alliance to endure depends on How well partners work together
Success of partners in respondingand adapting to changing conditions
Willingness of partners torenegotiate the bargain
Reasons for alliance failure Diverging objectives and priorities of partners
Inability of partners to work well together
Emergence of more attractive technological paths
Marketplace rivalry between one or more allies
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Merger and Acquisition Strategies
Merger Combination and pooling of equals, withnewly created firm often taking on a new name
Acquisition One firm, the acquirer, purchases andabsorbs operations of another, the acquired
Merger-acquisition
Much-used strategic option
Especially suited for situations wherealliances do not provide a firm with needed
capabilities or cost-reducing opportunities Ownership allows for tightly integrated operations,
creating more control and autonomy than alliances
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Objectives of Mergers
and Acquisitions
To pave way for acquiring firm to gain more
market share and create a more efficient
operation
To expand a firms geographic coverage
To extend a firms business into new product
categories or international markets
To gain quick access to new technologies
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Pitfalls of Mergers
and Acquisitions
Combining operations may result in
Resistance from rank-and-file employees
Hard-to-resolve conflicts in management styles and
corporate cultures Tough problems of integration
Greater-than-anticipated difficulties in
Achieving expected cost-savings
Sharing of expertise
Achieving enhanced competitive capabilities
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Vertical Integration Strategies
Extenda firms competitive scope within
same industry
Backwardinto sources of supply
Forwardtoward end-users of final product
Can aim at eitherfullorpartial integration
InternallyPerformedActivities,Costs, &Margins
Activities,Costs, &
Margins ofSuppliers
Buyer/UserValue
Chains
Activities, Costs,& Margins of
Forward ChannelAllies &
Strategic Partners
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Strategic Advantages
of Forward Integration
To gain better access to end usersand better market visibility
To compensate for undependable distribution
channels which undermine steady operations To bypass regular distribution channels in favor
of direct sales and Internet retailing which may
Lower distribution costs
Produce a relative cost advantage over rivals
Enable lower selling prices to end users
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Outsourcing Strategies
Outsourcing involves withdrawing from certain value
chain activities and relying on outsiders
to supply needed products, support
services, or functional activities
Concept
InternallyPerformedActivities
Suppliers
SupportServices
Functional
Activities
Distributorsor Retailers
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Pitfalls of Outsourcing
Farming out too manyor the wrong activities,
thus
Hollowing outcapabilities
Losing touch with activities and expertise that
determine overall long-term success
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Offensive and Defensive Strategies
Used to build newor
stronger market position
and/or create competitiveadvantage
Used toprotect competitive
advantage (rarely used to
create advantage)
Offensive Strategies Defensive Strategies
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Objectives
Attacking Competitor Strengths
Challenging strong competitors with a lower price isfoolhardy unless the aggressor has acost advantage
or advantage ofgreater financial strength!
Gain market share by out-matching
strengths of weaker rivals
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Options for Attacking
a Competitors Strengths
Offer equally good productat a lower price
Develop low-cost edge, then use it to under-price rivals
Leapfrog into next-generation technologies
Add appealing new features
Run comparison ads
Construct new plant capacityin rivals market strongholds
Offer a wider product line
Develop better customer service capabilities
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Attacking Competitor Weaknesses
Utilize company strengths to exploit a
rivals weaknesses
Weaknesses to Attack Customers that a rival is least equipped to serve
Rivals providingsub-par customer service
Rivals with weaker marketing skills
Geographic regions where rival is weak
Market segments a rival isneglecting
Objective
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Preemptive Strikes
Involves movingfirstto secure an
advantageous position that rivals are foreclosed
or discouraged from duplicating!
Approach
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Preemptive Strike Options
Secure exclusive/dominant access to best distributors
Secure best geographic locations
Tie up best or most sources of essential raw materials
Obtain business of prestigious customers
Expand capacity ahead of demand in hopesof discouraging rivals from following suit
Build an image in buyers minds thatis unique or hard to copy
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FIRST MOVER ADVANTAGE
Its the benefits derived from being the first
firm to offer a new or modified product or
services.
Advantages:
Opportunity to exploit a virgin market
Can establish brand loyalty
Be able to grab sales volume
Be able to accumulate valuable knowledge.
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DISADVANTAGES
Pioneering cost is high for a leader
Primitive products
Fast moving technology.