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Strategic Alliance

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Strategic Alliance

  1. 1. Strategic Alliance WALID SAAFAN PROF. DR. ADEL ZAYED AUG 2015 8/12/2015 STRATEGICALLIANCE 1
  2. 2. Topics 1. Overview 2. Strategic alliance formation 3. Strategic alliance analysis 4. Benefits of strategic alliance 5. Case studies 8/12/2015 STRATEGICALLIANCE 2
  3. 3. Overview 8/12/2015 STRATEGICALLIANCE 3
  4. 4. Collaborative business spectrum 8/12/2015 STRATEGICALLIANCE 4
  5. 5. Strategic Spectrum 8/12/2015 STRATEGICALLIANCE 5
  6. 6. Strategic alliance An agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. This form of cooperation lies between mergers and acquisitions . Strategic alliances occurs when two or more organizations join together to pursue mutual benefits. 8/12/2015 STRATEGICALLIANCE 6
  7. 7. Strategic alliance, cont. Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specialization 8/12/2015 STRATEGICALLIANCE 7
  8. 8. Acquisition One company takes over another and clearly established itself as the new owner, From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. 8/12/2015 STRATEGICALLIANCE 8 Merger Two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place.
  9. 9. "Businesses once grew by one of two ways: grass roots up, or by acquisition. In both cases, the manager had control. Today businesses grow through alliances, all kinds of dangerous liaisons and joint ventures, which, by the way, very few people understand" 8/12/2015 STRATEGICALLIANCE 9 Peter Drucker
  10. 10. 51% of CEOs will enter into new alliances in the coming 12 months. 8/12/2015 STRATEGICALLIANCE 10 PwC CEO Study January 2015
  11. 11. Types of Alliance (according to purpose) 1- Technology development alliance : engineering agreement , Technology commercialization agreement 2- Operation and logistic alliance : taking advantage of an exiciting investment in an country by local firm 3- Marketing , sales , Service alliance : company make use of another company infrastructure in a foreign market for its products to help penetration of the foreign market 4- Multiple activity alliance : two or more types of alliance while marketing alliance are single country alliance , as international firm take on different allies in each country , technology , development and operation alliance are usually multi country , can be done over several countries Micheal porter and Mark fuller 8/12/2015 STRATEGICALLIANCE 11
  12. 12. Key Drivers Booz-Allen & Hamilton 1999 Survey of Top 2000 US & European firms 8/12/2015 STRATEGICALLIANCE 12
  13. 13. Formation 8/12/2015 STRATEGICALLIANCE 13
  14. 14. Process model David C. Mowery, Joanne E. Oxley, Brian S. Silverman, Strategic Alliances and Inter firm Knowledge Transfer (1996) shared expenses and shared risk. 8/12/2015 STRATEGICALLIANCE 14
  15. 15. Lifecycle PwC 8/12/2015 STRATEGICALLIANCE 15
  16. 16. Strategic alliance analysis 8/12/2015 STRATEGICALLIANCE 16
  17. 17. Advantages One of the best approaches to grow globally, reaching out to larger number of clients for products and services. To develop new product offering through complementary products / services. Access to local markets through partnering with local companies, which provides better understanding of the market and culture. 8/12/2015 STRATEGICALLIANCE 17
  18. 18. Advantages, cont. Shared responsibility over the developed product / service. Enable participating companies to focus on its own competitive advantage. Reduced cost of accessing and operating in new markets. Benefits to clients includes access to more convenient and wider range of services. Competitors may go into alliance for a common goal. 8/12/2015 STRATEGICALLIANCE 18
  19. 19. Disadvantages Can become ineffective if one partner is not performing as expected. May result in limiting the flexibility of one partner in taking certain decisions in his own benefit. May require large human and financial investments to join / comply with the standards of the alliance. 8/12/2015 STRATEGICALLIANCE 19
  20. 20. Considerations before joining an alliance Is the alliance relevant to the mission and vision of the company, and its scope of business. Will the alliance help the company in accessing new markets. Will the alliance help the company in improving its know-how. Will the alliance help in increasing the company's revenues. 8/12/2015 STRATEGICALLIANCE 20
  21. 21. Benefits of strategic alliance 8/12/2015 STRATEGICALLIANCE 21
  22. 22. Alliances as Percentage of Revenue Columbia University, European Trade Commission, Studies by BA&H, AC.1983-1987, 1988-1993, 1994-1996, 1999 EIU Global Executive Survey Andersen Consulting, Warren Comp. 8/12/2015 STRATEGICALLIANCE 22
  23. 23. Alliance ROI Outperforms Industry 1989-1993 BA&H survey of 2,500 U.S. alliances and 1994-1996 BA&H alliance study of 200 non-U.S. alliances 8/12/2015 STRATEGICALLIANCE 23
  24. 24. Case study #1 STAR ALLIANCE 8/12/2015 STRATEGICALLIANCE 24
  25. 25. Mission “Executing leadership in managing a portfolio of alliance products and services using an agreed process.” Established in 1997 28 members, airline companies from different countries 8/12/2015 STRATEGICALLIANCE 25
  26. 26. Main objective To make the travel experience for any passenger easy and smooth, through: ◦ Closer locations at airports ◦ Common airport facilities (lounges….). ◦ Coordinated travel schedules ◦ Faster transfer ◦ One frequent flyer system 8/12/2015 STRATEGICALLIANCE 26
  27. 27. Main statistics 192 countries served. More than 4600 aircrafts. 18,500 daily flights. 640 million passengers annually. 180 billion USD sales annually . 8/12/2015 STRATEGICALLIANCE 27
  28. 28. Case study #2 STRATEGIC ALLIANCE AND THE INTELLECTUAL CAPITAL OF FIRMS 8/12/2015 STRATEGICALLIANCE 28
  29. 29. Introduction The survival of companies depends on their capacity for innovation derived from their organizational intelligence, and knowledge that seen as a major differential and that the companies management of these intangible assets are determinants for their growth and sustainability. 8/12/2015 STRATEGICALLIANCE 29
  30. 30. Research Questions 1- Do strategic alliances positively influence the intellectual capital of the companies that enter into alliances ? 2- Whether the distinct types of proposed strategic alliance influence the intellectual capital of the companies researched with differing intensity. H0 : Strategic alliances provide an increase in the intellectual capital of the organizations partnered. 8/12/2015 STRATEGICALLIANCE 30
  31. 31. Corporate Intellectual Capital (IC) Human Capital HC Relation ship Capital RC Innovation Capital InC Process Capital PC 8/12/2015 STRATEGICALLIANCE 31
  32. 32. Alliance Type For the purpose of the Study An original classification consolidated into three broad groups is proposed for the purposes of this study. 1- Production alliance: An alliance that focuses on the integration of processes with limited interaction between productive activities. 2- Marketing alliance : An alliance that generally involves non- competing organizations with common interests, or associated activities that exploit different market niches to increase their distribution power and market response time. 3- Innovation alliance : An alliance for the purpose of exchange and sharing knowledge for the co-development of products, technologies or services. 8/12/2015 STRATEGICALLIANCE 32
  33. 33. Research Method Brazilian industrial firms were selected according to the three : 1- Firms had to have entered into alliances in the last ten years. 2- Firms had to have entered into alliances in the last ten years. 3- Of these 269 companies, only those with sales over $60 million were selected. 143 potential collaborates were located and contacted. 8/12/2015 STRATEGICALLIANCE 33
  34. 34. Research Method, cont. The collaboration of the principal executives of these 143 companies was sought as they were considered to be professionals capable of answering a questionnaire whose responses required a global vision. Received from 33 companies The questionnaire featured five questions. 1- The first is what types of strategic alliance were formed by the firm with other companies . 2- The next four questions (2,3,4 and5) sought to identify the influence of the alliances formed on the four groups of intangible assets : processes, relationship capacity, innovation capacity and human capital, using Likert scale varying from “much worse” to “much better” Scoring from (-2) to (+2) 8/12/2015 STRATEGICALLIANCE 34
  35. 35. Research Method, cont. The responses to question 1 led to the formation of seven different combinations of strategic alliance, derived from the three types Production, Marketing, Innovation (production and marketing); (production and innovation); (marketing and innovation); (production, marketing and innovation) The responses to questions 2,3,4 and 5 were converted into values and consolidated in a matrix. A cluster test was conducted that result in groupings with good homogeneity between the objects within each groups and good heterogeneity between the groups. 8/12/2015 STRATEGICALLIANCE 35
  36. 36. Findings Strategic alliances of different types have a positive impact on the intellectual capital of the organizations involved in them. The innovation alliance provide the greatest increase in intellectual capital, and it has the most influence on the creation of intangibles. When innovation alliances are associated with another type of alliance their contribution to intellectual capital are reduced. An even greater reduction in the ratio occurs when the innovation alliances are associated with the two other types of alliance 8/12/2015 STRATEGICALLIANCE 36
  37. 37. Video 8/12/2015 STRATEGICALLIANCE 37
  38. 38. References David C. Mowery, Joanne E. Oxley, Brian S. Silverman, Strategic Alliances and Inter firm Knowledge Transfer (1996) shared expenses and shared risk. Journal or Intellectual capital , Vol 10 Iss 4 p. 539 – 558 Paper Title: (Strategic alliances and the intellectual capital of firms) Author : Luiz Antonio Joia Rodrigo Malheiros Published in : 2009 8/12/2015 STRATEGICALLIANCE 38
  39. 39. Thank you. 8/12/2015 STRATEGICALLIANCE 39

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