What is the financial value of a partnership, alliance or strategic collaboration? What network orchestration roles are there and how do these roles influence the value?
Firms frequently face difficult decisions about the scope of activities to perform inhouse, and whether to perform them alone as a solo venture or to perform them collaboratively with one or more partners. As mentioned in Chapter Two, a significant portion of innovation arises not from any single individual or organization, but instead from the collaborative efforts of multiple individuals or organizations. Collaboration can often enable firms to achieve more, at a faster rate, and with less cost or risk than they can achieve alone. However, collaboration also often entails relinquishing some degree of control over development and some share of the expected rewards of innovation, plus it can expose the firm to risk of malfeasance by its partner(s). In this chapter, we will first consider the reasons that a firm might choose to engage in collaborative development or might choose to avoid it. We will then review some of the most common types of collaborative arrangements and their specific advantages and disadvantages.
Firms frequently face difficult decisions about the scope of activities to perform inhouse, and whether to perform them alone as a solo venture or to perform them collaboratively with one or more partners. As mentioned in Chapter Two, a significant portion of innovation arises not from any single individual or organization, but instead from the collaborative efforts of multiple individuals or organizations. Collaboration can often enable firms to achieve more, at a faster rate, and with less cost or risk than they can achieve alone. However, collaboration also often entails relinquishing some degree of control over development and some share of the expected rewards of innovation, plus it can expose the firm to risk of malfeasance by its partner(s). In this chapter, we will first consider the reasons that a firm might choose to engage in collaborative development or might choose to avoid it. We will then review some of the most common types of collaborative arrangements and their specific advantages and disadvantages.
The First Ever Handbook for Strategic Alliance Managers (Strategic Alliance H...Mike Nevin
The Strategic Alliance Handbook (SAH) gives practicing alliance executives all the tools they need to do their job, all in one place.
A sales manager has a sales manual and an accountant has an accounting manual, even a car mechanic has a car manual.
So why shouldn't an alliance manager have an alliance manual?
Alliance Best Practice Research into Cultural Factors in Strategic Alliance R...Mike Nevin
This research presentation was produced from 93 separate alliance manager inputs from organisations such as: PPD, Quintiles, Cognizant, Covance, ICON, and RPS.
The research shows a very high correlation between Cultural Success Factors in alliances and overall success.
Presentation for IE application - Greatest challenges facing the management consulting industry today....... And the role I hope to play in this industry in the medium term.
A presentation for subject MGMT90148 (Consulting Fundamentals) at Melbourne Business School.
Designed as an engaging look at strategic alliances as a tool in business. Highlights its application, effectiveness and a guide for what successful strategic alliances entail in the corporate world.
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This alliance lifecycle framework presentation was created as a tool to foster conversation and provide context on some of the questions to consider as you assess the importance and structure of a formal alliance lifecycle framework. I created this for a friend working with one of the leading Canadian consulting firms without a current formal strategy, framework or program in place for the development and management of IT channel business partner programs and relationships.
BIO 2014 Business Dev Fundamentals Course_Strategic Alliances_MWYoung 140620 Michael W. Young
Biotechnology Industry Organization 2014 Annual Conference - Business Development Fundamentals Course_Strategic Alliances Module.
FACULTY: Michael W. Young, Principal, biomedwoRx: Life Sciences Consulting LLC.
www.biomedwoRx.com
Shared Value in the Pharmaceutical IndustryRobert Au
Final assessment for MGMT90148 (Consulting Fundamentals). Designed as an application of a key tool used in management consulting applied to a practical industry context. The brief is as follows:
Your Consulting Engagement
In recent years there has been a global trend of big pharmaceutical companies expanding their presence and operations into emerging markets. One of Australia’s largest pharmaceutical companies, Medstar Ltd, has been lagging in this regard.
As such, Medstar’s board of directors have decided to engage a team of management consultants from your firm to undertake a market intelligence project to present a strategic business case. Specifically, they are seeking guidance on whether the company should revamp their strategic plan to incorporate emerging markets as part of their long term growth strategy.
The Board Chairman, Patrick Wynnan, has indicated that your report will be reviewed at their upcoming strategy planning retreat with the senior executive team. Patrick explained that emerging markets presents numerous opportunities for Medstar Ltd. on various fronts and would like your team to focus on building a business case on the concept of ‘shared value’. He wants your team to focus on emerging market opportunities in the Asia region.
Patrick was particularly interested in understanding how Glaxo Smith Kline (GSK) – one of their global competitors – have been doing with regard to their strategy and operations in emerging markets. GSK was one of the first
multinational pharmaceutical companies to execute an aggressive growth strategy in emerging markets and would serve as a good point of reference in the project.
Although your report will be a critically important input in their strategic planning process, Patrick reminded you that the executives do not have time to be reading through endless pages of over-intellectualised rhetoric. The final report has to be something that the executives will want to read otherwise the entire engagement is a waste of time and effort for everyone involved. The executives are seeking succinct and practical insights.
Strategic international alliance Commitment and TrustAdam Buji
This article argues that the success of international strategic alliances requires attention not only to the hard
side of alliance management but, also, to the soft side.
This study shows how the dynamics of trust and commitment – major components of social capital- affect the performance of international strategic alliances.
This presentation answers :
What does trust mean in international strategic alliance?
What does commitment mean in international strategic alliance ?
Why are trust and commitment important for international strategic alliance ?
How do alliances build trust and commitment?
How do trust and commitment affect alliance’s performance according to this study?
How can we apply this study on the business future ?
It’s one thing to sell to customers—it’s another to negotiate with business partners, corporate lawyers and investors. In this Entrepreneurship 101 lecture, we discuss the art of the sale in depth and give tips and tricks on how you can succeed when negotiating with various stakeholders.
Key topics covered: Partnerships, corporate agreements and negotiating.
The First Ever Handbook for Strategic Alliance Managers (Strategic Alliance H...Mike Nevin
The Strategic Alliance Handbook (SAH) gives practicing alliance executives all the tools they need to do their job, all in one place.
A sales manager has a sales manual and an accountant has an accounting manual, even a car mechanic has a car manual.
So why shouldn't an alliance manager have an alliance manual?
Alliance Best Practice Research into Cultural Factors in Strategic Alliance R...Mike Nevin
This research presentation was produced from 93 separate alliance manager inputs from organisations such as: PPD, Quintiles, Cognizant, Covance, ICON, and RPS.
The research shows a very high correlation between Cultural Success Factors in alliances and overall success.
Presentation for IE application - Greatest challenges facing the management consulting industry today....... And the role I hope to play in this industry in the medium term.
A presentation for subject MGMT90148 (Consulting Fundamentals) at Melbourne Business School.
Designed as an engaging look at strategic alliances as a tool in business. Highlights its application, effectiveness and a guide for what successful strategic alliances entail in the corporate world.
The M&A practice has a puzzle. The share of operations that are not able to deliver the value increase envisioned for the acquirer is more than half. And as time goes by the success rate is not improving. It is stagnant if not worsening. This thesis analyzes the state of the art of M&A practice and the fit of Design Thinking to make a turnaround in M&A.
This alliance lifecycle framework presentation was created as a tool to foster conversation and provide context on some of the questions to consider as you assess the importance and structure of a formal alliance lifecycle framework. I created this for a friend working with one of the leading Canadian consulting firms without a current formal strategy, framework or program in place for the development and management of IT channel business partner programs and relationships.
BIO 2014 Business Dev Fundamentals Course_Strategic Alliances_MWYoung 140620 Michael W. Young
Biotechnology Industry Organization 2014 Annual Conference - Business Development Fundamentals Course_Strategic Alliances Module.
FACULTY: Michael W. Young, Principal, biomedwoRx: Life Sciences Consulting LLC.
www.biomedwoRx.com
Shared Value in the Pharmaceutical IndustryRobert Au
Final assessment for MGMT90148 (Consulting Fundamentals). Designed as an application of a key tool used in management consulting applied to a practical industry context. The brief is as follows:
Your Consulting Engagement
In recent years there has been a global trend of big pharmaceutical companies expanding their presence and operations into emerging markets. One of Australia’s largest pharmaceutical companies, Medstar Ltd, has been lagging in this regard.
As such, Medstar’s board of directors have decided to engage a team of management consultants from your firm to undertake a market intelligence project to present a strategic business case. Specifically, they are seeking guidance on whether the company should revamp their strategic plan to incorporate emerging markets as part of their long term growth strategy.
The Board Chairman, Patrick Wynnan, has indicated that your report will be reviewed at their upcoming strategy planning retreat with the senior executive team. Patrick explained that emerging markets presents numerous opportunities for Medstar Ltd. on various fronts and would like your team to focus on building a business case on the concept of ‘shared value’. He wants your team to focus on emerging market opportunities in the Asia region.
Patrick was particularly interested in understanding how Glaxo Smith Kline (GSK) – one of their global competitors – have been doing with regard to their strategy and operations in emerging markets. GSK was one of the first
multinational pharmaceutical companies to execute an aggressive growth strategy in emerging markets and would serve as a good point of reference in the project.
Although your report will be a critically important input in their strategic planning process, Patrick reminded you that the executives do not have time to be reading through endless pages of over-intellectualised rhetoric. The final report has to be something that the executives will want to read otherwise the entire engagement is a waste of time and effort for everyone involved. The executives are seeking succinct and practical insights.
Strategic international alliance Commitment and TrustAdam Buji
This article argues that the success of international strategic alliances requires attention not only to the hard
side of alliance management but, also, to the soft side.
This study shows how the dynamics of trust and commitment – major components of social capital- affect the performance of international strategic alliances.
This presentation answers :
What does trust mean in international strategic alliance?
What does commitment mean in international strategic alliance ?
Why are trust and commitment important for international strategic alliance ?
How do alliances build trust and commitment?
How do trust and commitment affect alliance’s performance according to this study?
How can we apply this study on the business future ?
It’s one thing to sell to customers—it’s another to negotiate with business partners, corporate lawyers and investors. In this Entrepreneurship 101 lecture, we discuss the art of the sale in depth and give tips and tricks on how you can succeed when negotiating with various stakeholders.
Key topics covered: Partnerships, corporate agreements and negotiating.
Supplying innovation: Unlocking innovative behaviours in the supply chainKeith Wishart
IBM in conjunction with the researchers and other industrial partners at the Cambridge Services Alliance have been looking into ecosystem collaboration and how to put in place incentives to drive innovation and performance. Thinking about alliances with common objectives rather than traditional client-supplier relationships can unlock new value. Here is a short management summary of some of the work the team have done to date and some simple pointers to the keys to this value:
The aftermath of the share class haggle in UK retail investments, post RDRDavid Taylor
As the Retail Distribution Review took effect in the UK in 2013, many expected distributors of investment products to win the haggle with product providers.
This didn't happen. But the aftermath leaves as many questions unanswered by the industry. This presentation paints some scenarios and explores the implications for action
Your Challenge
Internal stakeholders usually have different – and often conflicting – needs and expectations that require careful facilitation and management.
Vendors have well-honed negotiating strategies. Without understanding your own position and leverage points, it’s difficult to withstand their persuasive – and sometimes pushy – tactics.
Software – and software licensing – is constantly changing, making it difficult to acquire and retain subject matter expertise.
Our Advice
Critical Insight
Conservatively, it’s possible to save 5% of the overall IT budget through comprehensive software contract review.
Focus on the terms and conditions, not just the price.
Learning to negotiate is crucial.
Impact and Result
Look at your contract holistically to find cost savings.
Guide communication between vendors and your organization for the duration of contract negotiations.
Redline the terms and conditions of your software contract.
Prioritize crucial terms and conditions to negotiate.
how to develop business skills with other firm or company or say alliances and what should be our strategies for increasing profit by developing their interpersonal relations and what should be the idea for making a good partnership.
With growing pressure on public bodies to commission more effective services and reduce budgets, third sector partnerships and consortia are often viewed as an answer.
Find out about common models, examples and recipes for success drawn from Locality’s work with members who are building bidding consortia.
Running head GLOBAL ENGAGEMENT 1 Global Engagement .docxwlynn1
Running head: GLOBAL ENGAGEMENT 1
Global Engagement
Student Name
Embry-Riddle Aeronautical University
Sample Paper for MGMT 335 IB Analysis – Author Note(s) and Key Words are NOT
REQUIRED for these short APA 6th edition papers.
GLOBAL ENGAGEMENT
2
Abstract
This paper will show the relationship between businesses that seek to expand in the global
community. Selection of key strategies for organizational success depend upon selection of
business partnerships that will expand markets and grow business. Expansion into the
international global community can bring increased value, new customer markets, logistic
support, and connections for both the home and host countries. Many companies seek to expand
through exporting, licensing, franchising, joint ventures or wholly owned subsidies in foreign
countries. This paper will focus on the alliances necessary to support the entry strategy into a
foreign market.
GLOBAL ENGAGEMENT
3
Global Engagement
The Issue - Business commitment to global operations or support can be key to the
business success or even continued operations. New and existing business must make strategic,
long term, decisions to increase or maintain growth and development of their products and or
services. A product and or service life cycle is based on many factors. Some of these factors
include selecting country relationships, business strategies, and the best strategies to develop low
cost or product differentiation opportunities to expand markets.
The problem – Finding the right product, country, and partner or business associate is
tough. Once a product/service is established and a country is selected the primary objective for
alliance must be decided. The firm’s strategies must also be compatible with a host partner. A
firm must spend the right amount of time investigating, visiting, talking, and collaborating with
potential strategic partners. Once a strategic alliance partner is selected the expectations of each
partner must be maintained. The integrity of the alliance must be a priority for each partner.
Developing expatriate and/or inpatriate manager associations and assignments can cement the
relationship as important and working for each partner. Getting stuck with the wrong partner can
add time, execution complexities, and cost to operations. Managers need to avoid this by
working diligently on this first step. Find the right partner (Taylor, 2015).
How do alliances and strategies meet to form and select the best entry mode and partner
relationships? Identifying the necessary skills and resources is key. Partners can be business and
other investors or business relations with the logistics necessary to buy, store, transport or sell
products that increase revenue above the costs necessary for each operation. Risk assessment and
sharing through partnerships can result in lower cost for required competencies like research an.
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Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s Dholera
Financial valuation of alliances and partnership
1. Alfred Griffioen
MSc, CSAP, FC
Presentation for ASAP
16 April 2014
Financial valuation
of alliances and
partnerships
2. Alfred Griffioen
• Specialist in business partnerships and
alliances
• Track record in marketing, business
development and strategy consulting
• Author of 2 books about alliances and
competitive advantage and 1 about
strategy
• Certified Strategic Alliance Professional
• Founding partner of Alliance experts
3. Alliance experts:
an international network of partnership specialists
Collabora'on
strategy
&
Market
research
Interna'onal
matchmaking
Nego'a'ons
&
Partnering
agreements
Benchmarks
&
Training
4. Agenda
1. Introduction
2. Traditional company valuation
3. Information alliances
4. Three ways to valuate a partnership
5. Roles in alliance management and their impact on value
5. The importance of alliance management
• Alliances can add direct value to a
company
• On the other hand, partnerships
frequently tend to fail
Poor$or$
damaged$
rela+onship$
40%$
Poor$strategy$
or$business$
plan$$46%$
Bad$legal$and$
financial$terms$
14%$
0%#
1%#
2%#
3%#
4%#
5%#
6%#
7%#
8%#
Exper1se#
alliances#
New#
business#
alliances#
M&A#like#
alliances#
7.7%#
1.3%#
0.7%#
Market response
to alliance
announcement
Source: BCG research Source: Vantage partners
6. Why financial metrics are important
• Practically every company is
driven by return on investment
• This makes the CFO in most
cases the second-in-command
• If you can’t show what the added
value is of an alliance, why
should a company invest in it?
www.allianceexperts.com
6
7. Agenda
1. Introduction
2. Traditional company valuation
3. Information alliances
4. Three ways to valuate a partnership
5. Roles in alliance management and their impact on value
8. Traditional company valuation
• In most cases the discounted cash flow method is used
• The value of a company then is:
• However, as it is difficult to predict the future cash flows, the average
normalised cash flow of the last three years is taken
• Interest and risk factor normally add up to 10 to 15%. Calculating the
formula for an infinite number of years will result in around 4 to 6 times the
normalised cash flow
cashflow in year x
(1 + interest + risk factor)x
x=0
∞
∑
9. Results from the past do not give any
guarantee for the future
• What happened to Nokia, Ahold, Enron or Microsoft?
• In three years time, more than half of the critical staff will have changed jobs
• New technologies make older business models obsolete
Like Darwin said: the companies that can adept best to changing market
circumstances, will be the companies that survive
www.allianceexperts.com
9
10. Agenda
1. Introduction
2. Traditional company valuation
3. Information alliances
4. Three ways to valuate a partnership
5. Roles in alliance management and their impact on value
11. The value chain relies heavily on information
• The value chain is not linear any more but has shortcuts, twists and bends
• Value chains and related production costs are heavily impacted by product
design and the application of the right production technologies
• Information about (end) customer needs is dissipated through the chain very
slowly
www.allianceexperts.com
11
12. Creating exclusive partnerships sets an
incentive on information sharing
• Information sharing takes time of key
employees
• Traditional sales or purchasing behaviour
is mainly filtering of information
• Only with a joint goal and the right
contractual setting companies start to
share about customer needs, leads and
experiences.
www.allianceexperts.com
12
13. Carefully create your alliance portfolio
www.allianceexperts.com
13
Direct
value
and
cash
flow
big
small
small
big
Contribu'on
to
the
company
mission
and
innova'on
Core
ac'vi'es
Oppor-‐
tunis'c
Innova'on
porKolio
extension
14. Agenda
1. Introduction
2. Traditional company valuation
3. Information alliances
4. Three ways to valuate a partnership
5. Roles in alliance management and their impact on value
15. According to IFRS-11
• The core principle of IFRS 11 is that a party to a joint arrangement
determines the type of joint arrangement in which it is involved by assessing
its rights and obligations and accounts for those rights and obligations in
accordance with that type of joint arrangement. [IFRS 11:1-2]
• Two types: joint operations or joint venture
• Procedure:
– Check for ‘Control’
– Check for ‘Joint Control’
– Check for ‘Significant Influence’
• Outcome can range from (partial) consolidation to classification as just
‘a financial instrument’
www.allianceexperts.com
15
16. The cost savings methodology
• Partnerships save on investments and
operational costs
• Examples:
– Choosing for a franchise concept
over opening own outlets
– Sharing investments for
instruments that are hardly used
– Joint product development
• Cost savings can easily be calculated
and should only be corrected for
income sharing
www.allianceexperts.com
16
17. The discounted cash flow method (revisited)
• The value of an enterprise is:
• The value of an alliance is:
• But typically:
– The duration of the alliance can be limited
– The initial investment is much lower
– The risk factor is higher
– Your share will be between 30 and 70% of the profits
your share ×
cashflow in year x
(1 + interest + risk factor)x
x=0
n
∑
cashflow in year x
(1 + interest + risk factor)x
x=0
∞
∑
18. Investments for market entry through a
partnership will be lower
• Your distribution partner will already have the economy of scale in his
sales force or logistic network
• Your partner (if selected properly) has a known brand name and credibility,
which allows the partnership to ask a premium price
• Your investment will mainly be in small adaptions to the product (e.g.
translations) and product support
19. The risk factor is higher
• Shared ownership means less flexibility in decision making: this is a risk in
itself for quick adaption to market conditions
• Having a shareholder’s agreement or other collaboration agreement also
means restrictions in divestments or changes in strategy
• There always is the risk of opportunistic behavior of the partner
On the other hand:
• Especially in less developed countries or countries you’re not familiar with,
working with a service provider or agent also brings risks.
20. You will have to share your profits
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21. There are three ways to enhance your share in
the alliance
• To make your offering more attractive
– Better adjusted to the new market
– Partly do your own branding and advertisement
• To become more attractive as a partner yourself
– Improving the ease to work with you
– Profiling yourself in a more attractive way
• To take the initiative in partnering
– This also enhances the chance of ending up with the best partner
22. Game theory shows that it’s favourable to
involve other companies one by one
A
B
C
A
B
C
First A and B, then C A, B and C simultaneously
1
2
3
23. Agenda
1. Introduction
2. Traditional company valuation
3. Information alliances
4. Three ways to valuate a partnership
5. Roles in alliance management and their impact on value
24. Roles in alliance management
Hinterhuber (2002) distinguishes four types of network orchestrator roles:
• Architect:
– Defines the objectives of the network
– Decides who becomes a member of the network
• Judge
– Defines and maintains performance standards
• Developer
– Creates new concepts and intellectual assets
• Leader
– Motivates partner firms and creates network identity
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25. Each role has a specific influence on value
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Architect
Developer
Judge
Leader
Has
influence
on
the
split
of
shares
Influences
the
life
span
of
the
network
Influences
the
investments
Reduces
risks
in
the
collabora'on
your share ×
cashflow in year x
(1 + interest + risk factor)x
x=0
n
∑
26. Conclusions
• We need to rethink how we valuate companies, the real value moves from
assets to exclusive collaborations
• Choose your collaborations carefully and balance your involvement
• The architect role is the most strategic one, but also other roles need to be
taken care of
• Proper alliance management increases both the pie and your share of it!
Questions or comments: alfred.griffioen@allianceexperts.com
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