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Strategic Alliances A Practitioners Approach
 

Strategic Alliances A Practitioners Approach

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  • GOOD EVENING AND THANKS FOR INVITING ME TO YOUR CLASS MY MAIN PURPOSES TODAY ARE : [1] TO SHARE WITH YOU A POSSIBLE APPROACH TO THE ESTABLISHMENT OF STRATEGIC ALLIANCES; AND [2] TO ANSWER ANY QUESTIONS THAT YOU MAY HAVE ON THIS AND/OR RELATED TOPICS. -------------------------------------------------------------------------------------- IT SEEMS LIKE EVERYDAY …...EVERYBODY TALKS AND WRITES ABOUT STRATEGIC ALLIANCES . THESE TWO WORDS ARE PROBABLY AMONG THE TWO MOST MISUSED AND ABUSED…ALL UNDER THE BANNER OF “CREATING VALUE FOR THE SHAREHOLDERS” . BUT BEFORE WE GET INTO THE SPECIFICS I WOULD LIKE TO KNOW A LITTLE BIT ABOUT YOU : [1]Do you have any experience in establishing/managing alliances? [2]Do you have any experience in mergers and acquisitions [3]Have you lived or worked in a foreign country ..other than Miami ?
  • HOPEFULLY EVERYTHING WE DO IS DRIVEN BY A PROACTIVE STRATEGY…. I CANNOT EMPHASIZE ENOUGH THE IMPORTANCE OF “GOOD STRATEGIC THINKING PROCESS AND CULTURE” AS PART OF THE STRATEGIC PLANNING CYCLE. BUT EQUALLY IMPORTANT IS “ EXECUTION” . SO LET’S SPEND A FEW MINUTES REVIEWING SOME BASIC CONCEPTS . LET’S START WITH STRATEGY AND TACTICS .
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED WITH PASSION ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • BUSINESSES TODAY ARE CONFRONTED WITH A HIGHER DEGREE OF COMPLEXITY BROUGHT ABOUT BY GLOBALIZATION, NEW TECHNOLOGIES, RAPIDLY SHIFTING CONDITIONS IN THE MARKET PLACE, AND COMPETITION ARISING FROM UNEXPECTED SOURCES. FOCUS ON CORE CAPABILITIES IS NOT ENOUGH…CONTINUOUS IMPROVEMENT IS NOT ENOUGH….CREATIVITY IS WHAT MATTERS THE MOST STRENGTHEN THE CORE REINVENT THE CORE EXPAND BEYOND THE CORE
  • MOST OF THE THINGS THAT WE APPLY AS ADULTS ..ARE THINGS THAT WE LEARNED DURING OUR CHILDHOOD…AND THIS IS AN EXCELLENT EXAMPLE……. WHEN YOU DO NOT KNOW WHERE YOU ARE GOING ALL ROADS WILL TAKE YOU THERE….. YOU ONLY NEED TO WAIT LONG ENOUGH…. EFFECTIVE STRATEGY IS DYNAMIC….IT IS NOT CASTED IN CONCRETE…..YOU NEED TO ADJUST IT IN RESPONSE TO THE ENVIRONMENTS - INTERNALLY AND EXTERNALLY- BUT YOU NEED TO KNOW WHERE YOU ARE HEADING…AT LEAST DIRECTIONALLY….
  • IS STRATEGY AN ART OR SCIENCE ? IS TACTICS AN ART OR SCIENCE ? AND I WOULD ADD THAT IS NOT ONLY KNOWING WHAT TO DO…...BUT DOING IT WELL . EXECUTION IS THE NAME OF THE GAME .
  • IN ORDER TO SELECT THE PREFERRED ALTERNATIVE YOU NEED TO : [1] HAVE A CLEAR VISION AND A WELL ARTICULATED SET OF GOALS [2] UNDERSTAND THE STRUCTURE OF YOUR INDUSTRY AS WELL AS THE VALUE CHAIN SUPPLIERS COMPETITORS CUSTOMERS TECHNOLOGIES DYNAMICS- ENTRY AND EXIT BARRIERS [3] WHAT ARE THE CLEAR THREATS THAT YOU SEE THAT YOU IGNORE TO ACKNOWLEDGE ? [4] EXPANSION OPPORTUNITIES ? +MODE +DIRECTION
  • IN ORDER TO SELECT THE PREFERRED ALTERNATIVE YOU NEED TO : [1] HAVE A CLEAR VISION AND A WELL ARTICULATED SET OF GOALS [2] UNDERSTAND THE STRUCTURE OF YOUR INDUSTRY AS WELL AS THE VALUE CHAIN SUPPLIERS COMPETITORS CUSTOMERS TECHNOLOGIES DYNAMICS- ENTRY AND EXIT BARRIERS [3] WHAT ARE THE CLEAR THREATS THAT YOU SEE THAT YOU IGNORE TO ACKNOWLEDGE ? [4] EXPANSION OPPORTUNITIES ? +MODE +DIRECTION
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • HOPEFULLY EVERYTHING WE DO IS DRIVEN BY A PROACTIVE STRATEGY…. I CANNOT EMPHASIZE ENOUGH THE IMPORTANCE OF “GOOD STRATEGIC THINKING PROCESS AND CULTURE” AS PART OF THE STRATEGIC PLANNING CYCLE. BUT EQUALLY IMPORTANT IS “ EXECUTION” . SO LET’S SPEND A FEW MINUTES REVIEWING SOME BASIC CONCEPTS . LET’S START WITH STRATEGY AND TACTICS .
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • LET’S CONCENTRATE ON THE LAST BULLET… KEY IS TO SECURE COMPETITIVE ADVANTAGE.. AND BY THAT WE MEAN : [1]UNIQUE…NOT EASY TO BE COPIED [2]2 TO 3 YEARS GAP [3]ADOPTED PASSIONATEDLY ACROSS THE ORGANIZATION ------------------------------------------------------------------------------------- FORMULATION OF STRATEGY IS A CRITICAL COMPONENT OF YOUR PLANNING PROCESS……. WHY IS IT IMPORTANT ?
  • IN ORDER TO SELECT THE PREFERRED ALTERNATIVE YOU NEED TO : [1] HAVE A CLEAR VISION AND A WELL ARTICULATED SET OF GOALS [2] UNDERSTAND THE STRUCTURE OF YOUR INDUSTRY AS WELL AS THE VALUE CHAIN SUPPLIERS COMPETITORS CUSTOMERS TECHNOLOGIES DYNAMICS- ENTRY AND EXIT BARRIERS [3] WHAT ARE THE CLEAR THREATS THAT YOU SEE THAT YOU IGNORE TO ACKNOWLEDGE ? [4] EXPANSION OPPORTUNITIES ? +MODE +DIRECTION
  • TWO REASONS : [1] CONTROL/COMMITMENT INVESTMENT [2] RATE OF FAILURE STRATEGIC ALLIANCES ARE MORE COMPLEX TO NEGOTIATE….BUSINESS FIT AND IMPLEMENTATION ISSUES
  • TWO REASONS……CONTROL AND COMMITMENT…AND INVESTMENT STRATEGIC ALLIANCES ARE MORE DIFFICULT TO NEGOTIATE BECAUSE OF BUSINESS FIT AND IMPLEMENTATION ISSUES
  • TRANSACTIONAL ALLIANCES UNDER 5 YEARS MORE THAN 5 YEARS DOES NOT INVOLVE CONTROL..USUALLY CONTRACT DRIVEN LINKAGE BASED ON EQUITY AND SHARED CAPABILITIES PARTNERS DO NOT SHARE ATRATEGIC VISION RECIPROCAL VISION
  • MURPHY IS ALWAYS RIGHT…PLAN FOR THE UNEXPECTED! PLAN FOR THE REACTION OF CUSTOMERS,COMPETITORS,SUPPLIERS,INVESTMENT COMMUNITY ETC WHEN LOOKING AT COMPETITORS : + DOMINANT +TRADITIONAL +INNOVATORS USE AIRLINES EXAMPLE NEED TO FULLY ASSESS THE RISKS….
  • IN ESSENCE…ALL ALLIANCES ARE STRATEGIC BY DEFINITION
  • REMEMBER……OVER 50 % END UP FAILING
  • THIS TAKES US TO THE PLANNING AND EXECUTION PHASE
  • AS WE LOOK AT CULTURE THERE ARE AT LEAST SIX INTERACTING SPHERES…..AND THESE - INDIVIDUALLY AND COLLECTIVELLY HAVE A TREMENDOUS IMPACTON HOW WE COMPETE AND BEHAVE AS INDIVIDUALS AND ORGANIZATIONS
  • HOW COMPATIBLE ARE WE WITH OUR POTENTIAL PARTNERS? WHAT ARE THE REAL VERSUS THE PERCEIVED INCOMPATIBILITIES ? LET ME TAKE YOU THROUGH AN EXAMPLE.
  • ANY OF YOU HAVE EXPERIENCE DEALING IN ASIA ? NE ASIA? SE ASIA?
  • PRETTY GOOD LIST….. IF WE STOP HERE IT WILL PROBABLY MAKE LITTLE DIFFERENCE FROM THE CULTURAL POINT OF VIEW TO ESTABLISH AN ALLIANCE WITH A KOREAN OR AN INDONESIAN COMPANY…… BUT LET’S LOOK AT THE DIFFERENCES
  • A LOT OF WORK HAS BEEN DONE IN THE AREA OF CULTURE AND THE RESULTS ARE NOT COMPLETELY SURPRISING ELEMENTS THAT CUT ACROSS NATIONAL BOUNDARIES: GEOGRAPHICAL HISTORICAL LINGUISTICS RELIGION IF YOU LOOK CLOSER……SHARED LINGUISTICS AND COLONIAL HERITAGE
  • A LOT OF WORK HAS BEEN DONE IN THE AREA OF CULTURE AND THE RESULTS ARE NOT COMPLETELY SURPRISING ELEMENTS THAT CUT ACROSS NATIONAL BOUNDARIES: GEOGRAPHICAL HISTORICAL LINGUISTICS RELIGION IF YOU LOOK CLOSER……SHARED LINGUISTICS AND COLONIAL HERITAGE
  • GEERT HOFSTEDE IS AN EUROPEAN WHO HAS HELPED IDENTIFY IMPORTANT DIMENSIONS OF NATIONAL CHARACTER . FOUR DIMENSIONS OF NATIONAL CULTURE : POWER DISTANCE -the extent to which a society accepts that power in institutions and organizations is distributed unequally. UNCERTAINTY AVOIDANCE- the extent to which a society feels threatened by uncertain or ambiguous situations. INDIVIDUALISM-a loosely knit social framework in a society in which people are supposed to take care of themselves and of their immediate families only. COLLECTIVISM- the opposite occurs when the people distinguish between in-groups and out-groups ; they expect their in-group to look after them in exchange for absolute loyalty . MASCULINITY with its opposed pole FEMININITY . This dimension express “the extent to which the dominant values in society are assertiveness,money and material things, not caring for others,quality of life and people”. AGAIN,THE RESULTS SHOULD NOT COME AS A TOTAL SURPRISE
  • KEY DEFINITIONS : SYSTEM D : “WORKING AROUND THE SYSTEM “ CLOISONNE : “ HIGHLY COMPARTMENTALIZED..VERTICALLY AND HORIZONTALLY
  • NOW THAT WE HAVE A POTENTIAL PARTNER….WE NEED TO STRUCTURE AND NEGOTIATE A DEAL……
  • THIS IS ALSO AN INTERESTING AND CRITICAL PART OF THE PROCESS WHO IS GOING TO DO WHAT TO WHOM…WHEN…HOW… AND THIS BECOMES MORE CRITICAL IF THE ALLIANCE IS WITH AN EXISTING OR PROSPECTIVE COMPETITOR ,CUSTOMER OR SUPPLIER HOW ARE WE GOING TO DEFINE SUCCESS….SUCCESS MEANS DIFFERENT THINGS TO DIFFERENT PEOPLE WHAT ARE WE GOING TO MEASURE ? ……….BE AS SPECIFIC AS YOU CAN
  • MANY DEALS ARE PREDICATED ON ACHIEVING “ SIGNIFICANT SYNERGIES “…. MAKE SURE YOU HAVE A CLEAR UNDERSTANDING OF WHAT THOSE ARE….HOW ARE YOU GOING TO ACHIEVE ? WHO CONTRIBUTES WHAT ? BE CAREFUL….BECAUSE TENDENCY IS TO OVERESTIMATE ….AND CONSEQUENTLY OVERVALUE ------------------------------------------------------------------------------------------------------------------------------- YOU MUST ANTICIPATE YOUR CUSTOMERS AND COMPETITORS’ REACTION….AND THE FINANCIAL IMPACTS FROM THE MANY SCENARIOS ---------------------------------------------------------------------------------------------------------------------------- NEGOTIATIONS ARE TIME CONSUMING ….AND THIS FLUCTUATES FROM CULTURE TO CULTURE….BE READY AND UNDERSTAND YOUR COUNTERPART ------------------------------------------------------------------------------------------------------------------------------------------------ THERE IS MORE TO COME ON THE LAST TWO BULLETS …..DUE DILIGENCE AND PROTECTING RIGHTS
  • CONFLICT RESOLUTION SHOULD NOT BE TAKEN SUPERFICIALLY YOU CERTATINLY WANT TO MINIMIZE CONFLICT…..AND MAXIMIZE VALUE CREATION……
  • RECENT CORPORATE FIASCOS….
  • ASSIGN YOUR BEST PEOPLE DON’T ASSIGN YOUR DEAD WOOD SHOW PASSION AND COMMITMENT BE SPECIFIC LOOK FOR EARLY SUCCESSES
  • EXCELLENT –POOR …………………………PROBLEM IS IMPLEMENTATION BUT MANAGEMENT QUESTIONS THE STRATEGY SOME INNOVATION FRUSTRATED LEADERSHIP MEETS CUSTOMERS NEEDS LOSS OF VIABILITY POOR- EXCELLENT………………………………STRONG CORE BEST COST PRODUCER NOT ENOUGH INNOVATION LOSS OF VIABILITY POOR- POOR……………………………………QUICK FAILURE EXCELLENT-EXCELLENT………………….BEST IN CLASS INDUSTRY LEADERSHIP CUSTOMER LOYALTY CREATIVITY AND INNOVATION RED ZONE……………………………………….BET THE COMPANY STRATEGY
  • EXCELLENT –POOR …………………………PROBLEM IS IMPLEMENTATION BUT MANAGEMENT QUESTIONS THE STRATEGY SOME INNOVATION FRUSTRATED LEADERSHIP MEETS CUSTOMERS NEEDS LOSS OF VIABILITY POOR- EXCELLENT………………………………STRONG CORE BEST COST PRODUCER NOT ENOUGH INNOVATION LOSS OF VIABILITY POOR- POOR……………………………………QUICK FAILURE EXCELLENT-EXCELLENT………………….BEST IN CLASS..SUCCESS / BENEFITS ARE ACHIEVED INDUSTRY LEADERSHIP CUSTOMER LOYALTY CREATIVITY AND INNOVATION RED ZONE……………………………………….BET THE COMPANY STRATEGY
  • GOOD EVENING AND THANKS FOR INVITING ME TO YOUR CLASS MY MAIN PURPOSES TODAY ARE : [1] TO SHARE WITH YOU A POSSIBLE APPROACH TO THE ESTABLISHMENT OF STRATEGIC ALLIANCES; AND [2] TO ANSWER ANY QUESTIONS THAT YOU MAY HAVE ON THIS AND/OR RELATED TOPICS. -------------------------------------------------------------------------------------- IT SEEMS LIKE EVERYDAY …...EVERYBODY TALKS AND WRITES ABOUT STRATEGIC ALLIANCES . THESE TWO WORDS ARE PROBABLY AMONG THE TWO MOST MISUSED AND ABUSED…ALL UNDER THE BANNER OF “CREATING VALUE FOR THE SHAREHOLDERS” . BUT BEFORE WE GET INTO THE SPECIFICS I WOULD LIKE TO KNOW A LITTLE BIT ABOUT YOU : [1]Do you have any experience in establishing/managing alliances? [2]Do you have any experience in mergers and acquisitions [3]Have you lived or worked in a foreign country ..other than Miami ?

Strategic Alliances A Practitioners Approach Strategic Alliances A Practitioners Approach Presentation Transcript

    • Strategic Alliances
    • A Practitioner’s Approach
    University of Miami Graduate Program School of Business Administration
  • SELECT PREFERRED COURSE IDENTIFY AND SELECT PARTNER STRUCTURE AND NEGOTIATE DEAL PLAN IMPLEMEN- TATION EXECUTE STRATEGIC PLANNING ALLIANCE PLANNING AND EXECUTION 1 2 3 4 5 FRAMEWORK FOR NEGOTIATING, DEVELOPING AND MANAGING A STRATEGIC ALLIANCE The process consists of five phases:
  • WHAT IS STRATEGY ?
  • WHAT IS STRATEGY ?
    • Word is derived from the Greek word “strategus” : art of the general
    • Strategy is the pattern of major objectives and goals, and the essential policies and plans for achieving these goals
    • Strategy is the match between the organization and the environment
    • Strategy is an integrated set of actions aimed at securing competitive advantage
  • WHY IS STRATEGY IMPORTANT? STRATEGIC PLANNING
    • “ Would you tell me please, which way I ought to go from here?”
    • “ That depends good deal on where you want to go ’’ said the Cat
    • “ I do not much care”, said Alice
    • “ Then it does not matter which way you go”, said the Cat
    • “ … so long as I get somewhere”, Alice added as an explanation
    • “ Oh, you are sure to do that” said the Cat, “if you only walk long enough”
    • Lewis Carroll
    • Alice in Wonderland
    WHY IS STRATEGY IMPORTANT? STRATEGIC PLANNING
  • WHAT IS STRATEGY? WHAT IS TACTICS ?
  • WHAT IS STRATEGY? WHAT IS TACTICS ? Strategy is knowing what to do when there is nothing to do. Tactics is knowing what to do when there is something to do. Savielly Tarakover Polish Chess Grand Master
  • STRATEGIC PLANNING
    • Critical issues include:
    • Understanding of business goals
    SELECT THE PREFERRED COURSE
  • STRATEGIC PLANNING
    • Critical issues include:
    • Understanding of business goals
    • Assessing the competitive environment
    SELECT THE PREFERRED COURSE
  • Assessing the Competitive Environment Industry Structure – Porter’s Five Forces Potential Entrants Substitutes Customers Industry Competitors Suppliers
  • Assessing the Competitive Environment Industry Structure – Porter’s Five Forces Potential Entrants Substitutes Customers Industry Competitors Suppliers Globalization Trade Agreements Political Economy
  • Industry Structure – Porter’s Five Forces Potential Entrants Substitutes Customers Industry Competitors Suppliers Globalization Trade Agreements Political Economy
  • High VOLATILITY Low Low IMPACT ON BUSINESS High Industry Structure – Not All Forces are Equal Exit Globalization Suppliers Competition Example New Entrants Technology Product Substitution Customers Political Economy
  • Our Industry Clients’ served industries Our Suppliers’ Industries E Commerce Technology Must understand the structure of ALL industries that are your suppliers and/or your customers… now and future! Potential Competitors? Mostly outsiders looking in
  • Strategic Drivers Impact Volatility Timing 5 years Example High High
  • Strategic Drivers Impact Volatility Timing 5 years Customers Example High High
  • Strategic Drivers Impact Volatility Timing 5 years Suppliers Customers Example High High
  • STRATEGIC PLANNING
    • Critical issues include:
    • Understanding of business goals
    • Assessing the competitive environment
    • Identifying and evaluating expansion alternatives
      • Expansion Matrix: Mode and direction
    SELECT THE PREFERRED COURSE
  • CORPORATE EXPANSION MATRIX SAME BUSINESS NEW MARKETS IN NEW REGIONS VERTICAL INTEGRATION RELATED BUSINESS UNRELATED BUSINESS Mode Direction STRATEGIC PLANNING
  • CORPORATE EXPANSION MATRIX STRATEGIC PLANING SAME BUSINESS NEW MARKETS IN NEW REGIONS VERTICAL INTEGRATION RELATED BUSINESS UNRELATED BUSINESS CONSOLIDATION GLOBALIZATION COMPETITIVE STRATEGY SYNERGY CONGLOMERATE
  • INTERNAL DEVELOPMENT STRATEGIC ALLIANCES MERGERS AND ACQUISITION CORPORATE EXPANSION MATRIX STRATEGIC PLANNING SAME BUSINESS NEW MARKETS IN NEW REGIONS VERTICAL INTEGRATION RELATED BUSINESS UNRELATED BUSINESS CONSOLIDATION GLOBALIZATION COMPETITIVE STRATEGY SYNERGY CONGLOMERATE
  • SELECT THE PREFERRED COURSE STRATEGIC PLANNING Why is it important to select the right type of alternative?
  • SELECT THE PREFERRED COURSE STRATEGIC PLANNING
    • Why is it important to select the right type of alternative?
      • Wide spectrum of possible strategic options
      • High rate of failure
    Joint Venture Mergers & Acquisitions Relationship Investments, Licensing > 50% < 50% Decreasing Control / Commitment Increasing Investment
  • COMMITMENT No linkage Shared Resource Shared Funding Cross Equity Shared Equity Wholly Owned OWNERSHIP “ How do you successfully manage this new entity and maximize value creation for your shareholders?” STRATEGIC PLANNING SELECT THE PREFERRED COURSE Source: Booz Allen PERMANENT LONG TERM TRANSACTIONAL
  • STRATEGIC PLANNING
    • Critical issues include:
    • Understanding of business goals
    • Assessing the competitive environment
    • Identifying and evaluating expansion alternatives
    • Selecting the preferred growth course:
      • Acquisition
      • Internal Development
      • Strategic Alliances
    • Establishing contingency plan
    • Assessing the risks
    SELECT THE PREFERRED COURSE
  • WHAT IS A STRATEGIC ALLIANCE? STRATEGIC PLANNING
    • “ In a strategic alliance, firms cooperate out of mutual need and share the risks to reach a common objective. ”
    • Jordan D. Lewis
    • Partnerships for Profit
    • Free Press, 1990
    • “ A cooperative arrangement between two or more companies where:
    • - A common strategy is developed in unison and a win-win attitude
    • is adopted by all parties.
    • - The relationship is reciprocal with each partner prepared to share
    • specific strengths with each other, thus lending power to the
    • enterprise.
    • - A pooling of resources, investments and risks occurs for mutual
    • (rather than individual) gain.”
    • Booz-Allen & Hamilton
    WHAT IS A STRATEGIC ALLIANCE? STRATEGIC PLANNING
  • STRATEGIC PLANNING What are the advantages in forming strategic alliances? SELECT THE PREFERRED COURSE
  • STRATEGIC PLANNING ADVANTAGES IN FORMING STRATEGIC ALLIANCE 1. Offers multinational access to resources (e.g. products, technologies, personnel, market access) 2. Permits economies of scale through sharing or concentration of resources or facilities (e.g. manufacturing) across all alliance partners 3. Shares risk, such as in joint R&D programs that reduce the expenditure required by each firm individually 4. Blocks or co-opts competition (e.g. through defensive or offensive alliances) 5. Overcomes trade barriers (e.g. in developing countries or nationally protected industries)
  • STRATEGIC PLANNING What are the risks in forming strategic alliances? SELECT THE PREFERRED COURSE
  • 1. Creates a competitor, by transferring knowledge or market access to the partner 2. Inhibits integration of local operations into the global strategy, and limits internal development of key resources for global operations 3. Raises organizational and commercial risks (e.g. differences in culture may prove to be disruptive and costly; alliance may be detrimental for industry structure and profitability) 4. Reduces autonomy and strategic / competitive flexibility 5. Consumes significant proportion of management time and attention RISKS IN FORMING STRATEGIC ALLIANCES STRATEGIC PLANNING
  • STRATEGIC PLANNING How do you minimize the risk of failure? SELECT THE PREFERRED COURSE
  • STRATEGIC PLANNING How do you minimize the risk of failure? By addressing the two most frequent types of failure: 1. LOGIC … “It looked like a good idea, but it was not.” 2. PROCESS … “It was a good idea, but it did not work.” SELECT THE PREFERRED COURSE
  • SELECT PREFERRED COURSE IDENTIFY AND SELECT PARTNER STRUCTURE AND NEGOTIATE DEAL PLAN IMPLEMEN- TATION EXECUTE STRATEGIC PLANNING ALLIANCE PLANNING AND EXECUTION 1 2 3 4 5 FRAMEWORK FOR NEGOTIATING, DEVELOPING AND MANAGING A STRATEGIC ALLIANCE The process consists of five phases:
  • What would you look for in your partners? IDENTIFY & SELECT PARTNER
  • 1. COMPATIBILITY ...in strategic objectives,technology,values, management philosophies and beliefs 2. COMMITMENT ...to high safety, industrial hygiene, environmental and ethical standards. And, a long-term commitment to the relationship 3. TRUST ...in every aspect of the relationship. Trust must be balanced with self-interest. Know each other’s goals and be sure both can succeed 4. COMMUNICATION ...frequent, open and informal to avoid potential conflicts 5. ACTION ORIENTED ... nature of relationship requires prompt and decisive actions 6. STRONG REPUTATION ... solid corporate image, record, financial resources and strength IDENTIFY & SELECT PARTNER SIX GOLDEN RULES
  • Complementary Unrelated or Similar Resources, Technologies and staff Similar Different Cultures/Values Failure Success Failure Failure Based on our experience, strategic and cultural compatibility are critical for success IDENTIFY & SELECT PARTNER
  • WHAT IS CULTURE ? IDENTIFY & SELECT PARTNER
  • WHAT IS CULTURE ?
    • The sum total of known written and unwritten dynamic
    • beliefs, rituals, rules, regulations, policies,
    • procedures, institutions and artifacts that characterize
    • human populations.
    • In essence,
      • Culture is learned, it is not innate.
      • Various aspects of culture are interrelated.
      • Culture is shared.
      • Culture defines the boundaries of different groups.
    IDENTIFY & SELECT PARTNER
  • National Professional Functional Company Industry Regional Geography, history, political and economic forces, climate, region, language Resources, technology, product market, regulation, competitive advantage Education, training, selection, socialization External environment, nature of task, time horizon Founder, leader, administrative heritage, nature of product/industry stage of development INTERACTING CULTURAL SPHERES Source: Adapted from J. Santos IDENTIFY & SELECT PARTNER
  • CULTURAL COMPATIBILITY - “ PERCEPTION VS. REALITY” IDENTIFY & SELECT PARTNER
  • CULTURAL COMPATIBILITY - “ PERCEPTION VS. REALITY”
    • What are the shared values between N.E. Asia and S.E. Asia?
    • What are the cultural differences?
    IDENTIFY & SELECT PARTNER
  • SELECTION OF PA RTNER “ SHARED VALUES” : NE ASIA AND SE ASIA
    • Age, deference to seniority, authority
    • Education
    • Upward mobility
    • “ Face”; self steem
    • “ Harmony”, conflict avoidance
    • Manners, proper behavior, personal demeanor
    • Personal trust and relationship
    • Reciprocity and mutual obligation
    • Pragmatism versus idealism
    • ETHNICITY HOMOGENEOUS DIVERSE
    • RELIGION CONFUCIAN ISLAM - BUDHISM
    • CHRISTIANITY
    • COLONIAL JAPAN NETHERLANDS-UK
    • FRANCE-USA
    • SPAIN
    • FAMILY PATRILINEAL BILATERAL
    • GROUP VERTICAL HORIZONTAL
    • EXCLUSIVE INCLUSIVE
    • WOMEN SUBORDINATE EQUAL
    • FOREIGNERS OPPOSED WELCOMED
    • TRADE INWARD LOOKING OUTWARD ORIENTED
    • WEALTH ACCUMULATION DISTRIBUTION
    NE ASIA SE ASIA SELECTION OF PARTNER CULTURE CULTURAL DIVERSITY MAKES A DIFFERENCE
  • SELECTION OF PARTNER Country Clusters Source: S. Ronen and O. Shenkar (1965) “Clustering Countries on Attitudinal Dimensions”, Academy of Management Review, 10(3) Near Eastern Turkey Iran Greece Nordic Finland Norway Denmark Sweden Germanic Austria Germany Switzerland Anglo United States Australia Canada New Zealand Ireland United Kingdom South Africa Latin European France Belgium Italy Spain Portugal Latin American Chile Peru Argentina Venezuela Mexico Colombia Far Eastern Malaysia Hong Kong South Vietnam Singapore Philippines Indonesia Taiwan Thailand Arab Bahrain Abu Dhabi United Arab Emirates Kuwait Oman Saudi Arabia Independent Brazil Japan India Israel
  • SELECTION OF PARTNER Country Clusters Source: S. Ronen and O. Shenkar (1965) “Clustering Countries on Attitudinal Dimensions”, Academy of Management Review, 10(3)
    • Elements that cross across national boundaries
    • Geography
    • History
    • Linguistics
    • Religion
    Near Eastern Turkey Iran Greece Nordic Finland Norway Denmark Sweden Germanic Austria Germany Switzerland Anglo United States Australia Canada New Zealand Ireland United Kingdom South Africa Latin European France Belgium Italy Spain Portugal Latin American Chile Peru Argentina Venezuela Mexico Colombia Far Eastern Malaysia Hong Kong South Vietnam Singapore Philippines Indonesia Taiwan Thailand Arab Bahrain Abu Dhabi United Arab Emirates Kuwait Oman Saudi Arabia Independent Brazil Japan India Israel
    • POWER DISTANCE - the extent to which a society accepts that power in
    • institutions and organizations is distributed unequally.
    • UNCERTAINTY AVOIDANCE - the extent to which a society feels
    • threatened by uncertain or ambiguous situations.
    • INDIVIDUALISM - a loosely knit social framework in a society in which
    • people are supposed to take care of themselves and of their immediate
    • families only.
    • COLLECTIVISM - the opposite occurs when the people distinguish
    • between in-groups and out-groups ; they expect their in-group to look
    • after them in exchange for absolute loyalty .
    FOUR DIMENSIONS OF NATIONAL CULTURE
  • POWER DISTANCE - the extent to which a society accepts that power in institutions and organizations is distributed unequally. UNCERTAINTY AVOIDANCE - the extent to which a society feels threatened by uncertain or ambiguous situations. INDIVIDUALISM - a loosely knit social framework in a society in which people are supposed to take care of themselves and of their immediate families only. COLLECTIVISM - the opposite occurs when the people distinguish between in-groups and out-groups ; they expect their in-group to look after them in exchange for absolute loyalty . MASCULINITY with its opposed pole FEMININITY . This dimension express “the extent to which the dominant values in society are assertiveness, money and material things, not caring for others, quality of life and people ”. AND A FIFTH DIMENSION OF NATIONAL CULTURE
  • Source: G. Hofstede (1991) Cultures and Organizations Hofstede’s Maps SELECTION OF PARTNER
  • Low Formalization High Low Hierarchy High SELECTION OF PARTNER PREDOMINANT CULTURAL PROFILES Uncertainty Avoidance Power Distance Village Market (Anglo Nordic) Family or Tribe (Asian) Well-Oiled Machine (Germanic) Traditional Bureaucracy “ pyramid of people” (Latin)
  • Low Formalization High Low Hierarchy High SELECTION OF PARTNER PREDOMINANT CULTURAL PROFILES Uncertainty Avoidance Power Distance Decentralized Generalist People as free agents Flexibility More delegation Coordination thru Informal communication Output Control Decentralized decision making Narrow span of control Specialist/technical competence Discretion limited by expertise Strong role of “staff experts” Top management team Organized by functions Compartmentalized Coordination thru rules Structural solutions Throughput control/Efficiency Centralized Paternalistic Loyalty Generalist Strong social versus task roles Personal relationships Social control Centralized decision making Coordination at the top Less delegation “ Cloisonné” highly specialized Strong role of staff Analytical ability Pyramid of people Informal relationships “ Systeme D” Elitist( power and authority) Input control
  • SELECT PREFERRED COURSE IDENTIFY AND SELECT PARTNER STRUCTURE AND NEGOTIATE DEAL PLAN IMPLEMEN- TATION EXECUTE STRATEGIC PLANNING ALLIANCE PLANNING AND EXECUTION 1 2 3 4 5 FRAMEWORK FOR NEGOTIATING, DEVELOPING AND MANAGING A STRATEGIC ALLIANCE The process consists of five phases:
  • STRUCTURE & NEGOTIATE DEAL
    • Critical issues include:
    • Defining the scope of alliance
      • By territory, product, geography, technology
      • Flexibility for other alliances
      • Liability limitations
    • Clarifying roles
      • Clear expectations, requirements of business strategy
    • Defining what success will look like
      • Must be “win-win” to both parties
      • Alliance objectives
      • Specific performance criteria and milestones
    • Critical issues include: Cont’d.
    • Understanding & verifying synergies
    • Anticipating likely competitor and customer response
    • Evaluating the potential financial impacts
    • Developing the business case
    • Planning and completing negotiations
    • Completing the due diligence
    • Protecting majority and minority rights
    STRUCTURE & NEGOTIATE DEAL
    • Protecting majority and minority rights
    • Memorandum of understanding
    • Material Adverse Clause (MAC)
    • Shareholders agreement
    • By-Laws
    • Management responsibility
    • Dividend policy
    • Technology and administrative fees
    • Access to core technologies, people, trade secrets
    • Conflict resolution methodology
    STRUCTURE & NEGOTIATE DEAL
  • High Conflict Potential Low Low Extent of Organizational Interaction High STRUCTURE & NEGOTIATE DEAL TYPOLOGY OF AN ALIANCE
  • High Conflict Potential Low Low Extent of Organizational Interaction High Pre Competitive Competitive Non Competitive Pro Competitive STRUCTURE & NEGOTIATE DEAL TYPOLOGY OF AN ALIANCE
  • PROTECTING MAJORITY AND MINORITY RIGHTS High Relative Fear Low Low Relative Expectations High Source: Mustafi, Mahajan & Dutla - Handbook of Business Strategy STRUCTURE & NEGOTIATE DEAL FEAR - EXPECTATION MATRIX
  • PROTECTING MAJORITY AND MINORITY RIGHTS High Relative Fear Low Low Relative Expectations High Preparing for divorce Courtship Honeymoon Maturity Source: Mustafi, Mahajan & Dutla - Handbook of Business Strategy STRUCTURE & NEGOTIATE DEAL FEAR - EXPECTATION MATRIX
  • What you can see What you can’t see STRUCTURE & NEGOTIATE DEAL
    • COMPLETING THE DUE DILIGENCE
    • Establishing an alliance is like buying an iceberg
  • What you can see
    • Plants
    • Industry Conditions
    • Brands
    • Financial Status
    • Technology
    • Competitors
    • Distribution
    • Advert ising
    What you can’t see STRUCTURE & NEGOTIATE DEAL
    • COMPLETING THE DUE DILIGENCE
    • Establishing an alliance is like buying an iceberg
  • What you can see
    • Reward System
    • Accounting System
    • Decision-making process
    • Customer Relations
    • Suppliers relations
    • Management style
    • Labor relations
    • People
    • R&D Pipeline
    • Technology
    • Turnover
    • Culture
    • Morale
    What you can’t see STRUCTURE & NEGOTIATE DEAL
    • COMPLETING THE DUE DILIGENCE
    • Establishing an alliance is like buying an iceberg
  • SELECT PREFERRED COURSE IDENTIFY AND SELECT PARTNER STRUCTURE AND NEGOTIATE DEAL PLAN IMPLEMEN- TATION EXECUTE STRATEGIC PLANNING ALLIANCE PLANNING AND EXECUTION 1 2 3 4 5 FRAMEWORK FOR NEGOTIATING, DEVELOPING AND MANAGING A STRATEGIC ALLIANCE The process consists of five phases:
    • Critical issues include:
    • Selecting key management
      • Senior management must be committed
      • Appoint credible/successful managers
    • Agreeing on success factors
      • Apply adequate resources to ensure success
    • Identifying key milestones
    • Designing a practical operations plan
      • Select initial projects of significant value and high potential
    PLAN IMPLEMEN- TATION
  • MINORITY INVESTMENT JOINT VENTURE ACQUISITION NOT ALL TYPES OF ALLIANCES CAN BE MANAGED THE SAME CONTROL STRATEGIC VALUE TIMEFRAME KEY SUCCESS FACTORS PLAN IMPLEMEN- TATION
  • CONTROL STRATEGIC VALUE TIMEFRAME KEY SUCCESS FACTORS MINORITY INVESTMENT MARGINAL NEGOTIATED TRACK NEW TECHNOLOGIES SHORT TERM STRUCTURE OF AGREEMENT JOINT VENTURE CONTRACTUAL, POTENTIALLY CONTENTIOUS DEVELOP NEW OPTIONS MEDIUM TERM MANAGING SHARED RESOURCES ACQUISITION EXCLUSIVE CAPITALIZE ON OPTIONS LONGER TERM MINIMIZING INTEGRATION COSTS PLAN IMPLEMEN- TATION NOT ALL TYPES OF ALLIANCES CAN BE MANAGED THE SAME
  • Excellent Poor Strategic Formulation [ Thinking ] Execution Strategic Formulation and Execution Matrix Value Creation Poor Excellent Value Destruction Red Zone Value Stabilization/ Erosion Value Stabilization/ Erosion Strategic Planning
  • Excellent Poor Strategic Formulation [ Thinking ] Execution Strategic Formulation and Execution Matrix Value Creation Poor Excellent Value Destruction Red Zone Value Stabilization/ Erosion Value Stabilization/ Erosion Strategic Planning
  • SELECT PREFERRED COURSE IDENTIFY AND SELECT PARTNER STRUCTURE AND NEGOTIATE DEAL PLAN IMPLEMEN- TATION EXECUTE STRATEGIC PLANNING ALLIANCE PLANNING AND EXECUTION 1 2 3 4 5 FRAMEWORK FOR NEGOTIATING, DEVELOPING AND MANAGING A STRATEGIC ALLIANCE The process consists of five phases:
    • Critical issues include:
    • Announcement
    • Operations start-up
    • Assessment of milestone progress
    • Adjustment of business goals
    EXECUTE
  • BUILDING BLOCKS FOR SUCCESSFUL STRATEGIC ALLIANCES SUMMARY LEADERSHIP CULTURE PEOPLE PERFORMANCE CONTINUOUS IMPROVEMENT Corporate Values - Clear strategic focus: Vision Visible senior management involvement Common set of objectives Assign your best people … drive process with passion Definition of success Adjust key metrics Create reward incentives Be flexible and adaptable + Learn from successes and failures Willingness to share knowledge Willingness to use others’ knowledge Willingness to accept risk + + = Right Partner/ Improved Performance
    • Strategic Alliances
    • A Practitioner’s Approach
    University of Miami Graduate Program School of Business Administration
    • www.aloaris.com
    • [email_address]