The emerging roles of strategic alliances

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The emerging roles of strategic alliances

  1. 1. PRESENTATION ONTHE EMERGING ROLES OF STRATEGIC ALLIANCES By Parvez Ahmed Email: parvez.melange@gmail.com
  2. 2. ONCE OF THE STRONGEST LONG TERM RELATIONSHIP TO BE ASSESSED ISSTRATEGIC ALLIANCEAS DESCRIBED BY STOUT & JULIE (2005) IS“STRATEGIC ALLIANCE IS ALIGNED WITH THE OVERALL STRATEGIC DIRECTION OF YOUR BUSINESS”STRATEGIC ALLIANCE IS A SYMBOLIC RELATIONSHIP, AS WELL – AN INTERDEPENDENT, MUTUALLY BENEFICIALCHANNEL RELATIONSHIP BETWEEN TWO OR MORE PARTIES.
  3. 3. STRATEGIC ALLIANCE HAS RESEMBLANCE IN THE WAYS MENTIONED BELOW:STRENGTH-TO-WEIGHT-RATIOPARTNERS ARE MORE TEAM ORIENTED RATHER THAN BEING INDIVIDUALISTS. THUS ORGANIZATIONS ARE CAPABLE OF DIPPINGTHE DOUBLING OF RESOURCES AND EFFORTSLOAD DISTRIBUTIONCHANNEL MEMBERS PERFORM SIMILAR FUNCTIONS TO DISTRIBUTE RESPONSIBILITIES AND BEAR THE WEIGHT OF MARKETFORCES HAVING AN IMPACT ON THE OVERALL CHANNEL PERFORMANCEIT REDUCES UNCERTAINTY AND RISK IN THE CHANNELECONOMY AND EFFICIENCY“DOING MORE WITH LESS CAPACITY” IS THE CONCEPT.
  4. 4. IMPORTANT COMPONENTS OF STRATEGIC ALLIANCECO ALIGNMENTTHIS BASICALLY MEANS THAT CHANNEL MEMBERS HAVING DIFFERENT TIMELINES FOR ACHIEVING GOALS WOULD STILL LINKTHEIR ORGANIZATIONS WITH OTHER CHANNEL MEMBERS IN PURSUIT OF A COMMON OBJECTIVE AS WELL AS A SENSE OFSHARED PURPOSEEXCHANGING TECHNOLOGIES, PRODUCTS, SKILLS AND KNOWLEDGESTRATEGIC ALLIANCE NOWADAYS HAS NOT KEPT THAT TRADITIONAL DEFINITION OF PARTNERSHIP BETWEEN TWO MEMBERS.IT INVOLVES THE SHARING OF POOL RESOURCES AND EXPLOITATION OF MARKET OPPORTUNITIES.COMPETITIVE EDGETO GAIN THESE COMPETITIVE ADVANTAGES, EACH CHANNEL MEMBER MUST CONTRIBUTE SOME VALUE TO THE STRATEGICALLIANCE.”
  5. 5. ACCORDING TO LEI, SLOCUM & JOHN,STRATEGIC ALLIANCES TAKE DIFFERENT SHAPES SIZES AND FORMS SOME WHICH ARE: Collaborative advertising For television advertising and other promotional activities Cooperative bidding Cooperated together in winning advanced tactical fighter contract Cross-licensing HL & Glaxo agreed for HL to sell Zantac, an anti-ulcer drug in the US Cross-manufacturing Design and build similar cars on same manufacturing/assembly line Internal spin-offs Cummins Engine & Toshiba Corp. created new company to develop and market silicon nitride products. Lease service agreements Arrangement to provide financing services R&D partnership To develop next generation products Resource venturing Natural resource venture Shared distribution Distribution of each other’s brands/products Technology Transfer Arrangement of developing next generation of operating software systems
  6. 6. THE NATURE AND SCOPE OF STRATEGIC ALLIANCES
  7. 7. IMPACT OF STRATEGIC ALLIANCESSTRATEGIC ALLIANCES AMONG ORGANIZATIONS HAVE GROWN DRAMATICALLY DURING THE PAST TWO DECADESPUBLIC ALLIANCE ANNOUNCEMENTS IN THE US GREW FROM 100 IN 1984 TO MORE THAN 3,000 IN 1994PRIOR STUDIES HAVE FOUND STRONG CORRELATIONS BETWEEN THE AMOUNT OF ALLIANCE ACTIVITY AND FIRM PERFORMANCEMEASURES, SUCH AS INNOVATIONTHE CORRELATION BETWEEN ORGANIZATIONAL PERFORMANCE AND STRATEGIC ALLIANCE ?THE RESULT IS MAINLY POSITIVEYET, THIS OBSERVATION BRINGS INTO QUESTION THE ABSENCE OF NEAR UNDISPUTED PARTICIPATION IN STRATEGIC ALLIANCESAMONG FIRMS.
  8. 8. FOUNDATION FOR STRATEGIC ALLIANCE FORMATIONTHE PRIMARY CONTRIBUTING FACTOR TO STRATEGIC ALLIANCE IS THE COMPETITIVE MARKETPLACETHERE ARE ADVANTAGES TO STRATEGIC ALLIANCE ALL OF WHOSE FIRST LETTERS COMBINE TO FORM THE WORD MERGETHEY ARE:MARKET ENTRY – ALLIANCES MAKE WAY FOR NEW MARKETS TO CHANNEL. TO SUCCESSFULLY PENETRATE THE MARKET, ONE NEEDSSUFFICIENT RESOURCES, EXPERIENCE AND EXPERTISE. THIS IS WHAT STRATEGIC ALLIANCE DOES; MINIMIZES LIMITATIONSECONOMY – FACILITATION IN REDUCTION OF WASTEFUL REDUNDANT ACTIVITIES AND POOLING LIMITED RESOURCES ARE THE PLUSPOINTS FOR ALLIANCES LEADING TO ECONOMIES OF SCALE AND CORRECT ALLOCATION OF RESOURCES.RISK REDUCTION – REDUCTION OF RISKS IN THE MARKET AND PRODUCT DEVELOPMENT IS ASSURED FOLLOWED BY ACCELERATION OFTHE TIME-TO- MARKET FOR NEW PRODUCTS GUARANTEEING TECHNOLOGICAL ADVANTAGES.GAIN MARKET SHARE – INDIVIDUALLY, MANY COMPETITORS FAIL TO ANTICIPATE FORTHCOMING COMPETITIVE THREATS AND HIGHMARKET SHARE DOES NOT COME WITH A GUARANTEE OF EQUALLY STRONG POSITION, WHICH IS PROVIDED BY ALLIANCES.EXPANSION – ADVANCEMENT OF EXPANSION TO RELATED AND UNRELATED INDUSTRIES IS A PROMISE WHEN IT COMES TO TYINGALLIANCE WITH CHANNEL PARTNERS
  9. 9. STRATEGIC ALLIANCE SHOULD NOT BE CONFUSED WITH MERGER OR ACQUISITION
  10. 10. PELTON, STRUTTON & LUMPKIN (1997) ARGUE THAT“THE ALLIANCE’S EXCHANGE VALUE MAY NOT ALWAYS RESULT IN AN EQUAL PAY OFF, BUT A WIN-WIN SITUATION MUST BE POSSIBLE FOR EACH ALLIANCE PARTNER”.
  11. 11. TYPES OF STRATEGIC ALLIANCESLICENSING AGREEMENTS :IT IS A CONTRACTUAL AGREEMENT IN WHICH ONE ALLIANCE PARENT MAKE INTANGIBLE ASSETS SUCH AS TECHNOLOGY,KNOWLEDGE AND SKILLS AVAILABLE TO ANOTHER PARTNER IN EXCHANGE FOR REMUNERATIONS SUCH AS ROYALTIES.MANUFACTURING AGREEMENTS:AGREEING TO HELP EACH OTHER CAPITALIZE ON ITS TECHNOLOGICAL ADVANTAGE TO COLLECTIVELY ESTABLISH GLOBALSTANDARDS TO PREEMPT COMPETITIVE THREATS.SERVICE AGREEMENTS:BEING THE MOST COMMON FORM OF INTERNATIONAL LICENSING, IT IS ALSO KNOWN AS FRANCHISING.JOINT VENTURES :A JOINT VENTURE IS AN AGREEMENT BY TWO OR MORE PARTIES TO FORM A SINGLE ENTITY TO UNDERTAKE A CERTAINPROJECTCONSORTIA :A GROUP MADE UP OF TWO OR MORE INDIVIDUALS, COMPANIES OR GOVERNMENTS THAT WORK TOGETHER TOWARDACHIEVING A CHOSEN OBJECTIVE.
  12. 12. DEVELOPING STRATEGIC ALLIANCESTHERE IS A 4 STEP PROCESS TO BRING ABOUT SUCCESSFUL STRATEGIC ALLIANCEACHIEVING STRATEGIC HARMONY :THE QUARTERBACK: THEY ARE GOOD AT TRANSFERRING THEIR OWN SKILLS BUT LACK THE ABILITY TO RECEIVE SKILLS.THE WIDE RECEIVER: THEY ARE SIMPLY OPPOSITE TO THE QUARTERBACKS HAVING THE ABILITY TO RECEIVE SKILLS BUT NOTTRANSFER THEIR OWN SKILLS.THE SPECTATOR: THESE ARE GOOD AT NOTHING. NEITHER RECEIVING, NOR DELIVERING VALUE. THIS DOES NOT INVITESTRATEGIC HARMONY IN ANY WAYTHE UTILITY PLAYER: THESE ARE THE PARTNERS WHO CAN OPERATE BOTH WAYS. FLEXIBILITY IS THEIR KEY FEATURE HAVINGOPEN MANAGEMENT CULTURES.
  13. 13. DEVELOPING STRATEGIC ALLIANCESSELECTING ALLIANCE PARTNERS :THE RACER: THIS WOULD BE AN ALLIANCE BETWEEN TWO OR MORE STRONG COMPETITORS RULING THE MARKET ANDSTRIVING FOR THEIR OWN MARKET SHARE.THE UNINSURED: THIS IS WHEN TWO WEAK PARTIES COME TOGETHER TO FORM AN ALLIANCE WITH THE HOPE THAT THEYMIGHT OVERCOME THEIR LACKING AND TOGETHER FORM A STRONG BOND AND GRADUALLY EXCEL.THE ROAD HOG: THIS TERM IS GENERALLY USED FOR ROUGH DRIVERS. THEY HAVE VERY LITTLE CONCERN FOR THE OTHERSAROUND. THIS ALLIANCE REPRESENTS A BOND BETWEEN THE STRONG AND THE WEAK WHERE THE STRONGER PARTY SEEMS TOTAKE ALL THE BENEFITS, GRABBING MAXIMUM MARKET SHARE AND A DEGREE OF AUTONOMY IS GIVEN RISE TO HENCEACQUIRING THE WEAKER FIRM. BACK-SEAT DRIVER: THIS IS A VERY INTERESTING ALLIANCE WHERE THE TIE IS AGAIN FORMED BETWEEN A STRONG AND AWEAK BUT THE SCENARIO IS A LITTLE DIFFERENT. HERE THE WEAKER PARTNER TAKES A BACK-SEAT AND ENJOYS THE STRENGTHTHAT IT IS RECEIVING FROM THE STRONGER PARTNER.
  14. 14. DEVELOPING STRATEGIC ALLIANCESDEVELOPING ACTION PLANS :ALLIANCE TEAMS ARE FORMED WHEN TO PARTIES AGREE TO FORM A BOND CONSISTING OF MANAGERIAL EMPLOYEES FROMEACH FIRM ENGAGED IN STRATEGIC ALLIANCE.ASSESSING ALLIANCE PERFORMANCE :MONITORING AND PERIODIC ASSESSMENT OF ALLIANCE PERFORMANCE IS VITAL. IT HAS TO BE MADE SURE THAT THE ALLIANCEIS MAINTAINING THE COURSE THAT WAS ORIGINALLY CHARTED.
  15. 15. THE DOWNSIDE OF STRATEGIC ALLIANCESTHEN AGAIN STRATEGIC ALLIANCES ALSO FAIL DUE TO THE LACK OF STRATEGY DEVELOPMENT. MORE TIME NEEDS TO BE GIVENBY MANAGERS TO FORM THE PERFECT STRATEGY TO SUCCEED.THE FEW MORE REASONS WHY ALLIANCES FAIL ARE :THE BURDEN CARRIED BY THE PARTNERS OF UNREALISTIC EXPECTATIONSTHE CLASH OF CORPORATE CULTURESINSUFFICIENT INTEREST IN THE ALLIANCE.THE METHODS OF SOLVING THIS DILEMMA WOULD BE TO CHOSE THE RIGHT PARTNER, CHOSE THOSE WHO PRODUCECOMPLEMENTARY PRODUCTS OR OPERATE IN SIMILAR MARKETS.

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