Strategic Alliances

Overview
What you will learn…
• Strategic Alliance defined
• Information requirements
• Examples of Strategic Alliances
• Factors promoting Strategic Alliances
• Types of Strategic alliances
• Risks and cost of Strategic Alliances
• Balancing co-operation and competition
• Alliances and Ethics
• Summary
Strategic Alliance defined
• Strategic alliances are co-operative relationships
between two or more independent organisations,
designed to achieve mutually beneficial goals for
as long as is economically viable.
• They carry uncertainties that are not manageable
in a contractual arrangement.
Figure 1: Information Phases for the
alliance process
IBM’s Global Alliances
• Early Alliances: Responding to Japan
• IBM’s Initiatives During the 1990s: Rebuilding
Competitiveness
The Global Airline Industry

• Airline industry consolidation of 1990s

• From code sharing, joint marketing
activities to combining operations.
• Examples of Alliances
– Star Alliance
– ONE world Alliance
 Global Airline Alliances

Airlines Type of Alliance

y United Airlines Star Alliance: Code sharing, joint
y Lufthansa marketing; includes up to 15 partners in
y Scandinavian 2002
y Thai International
y Varig Brazilian
yAir Canada
yAir New Zealand
y Mexicana
Factors promoting alliances

• New market entry

• Shaping of industry evolution
• Learning and applying new
technologies
• Rounding out a product line
Types of Strategic Alliances

• Licensing Arrangements
The least sophisticated and easiest-to-manage
type of alliance
• Joint Ventures
The creation of a third entity representing the
interests and capital of the partners
• Consortia and Networks
Highly complex linkages among groups of
companies
Licensing Arrangements
Primary reasons for entry
• A need for help in commercializing a new
technology
• Global expansion of a brand franchise or
marketing image
Joint Ventures
Primary reasons for entry
• Vertical integration
• Learning a partner’s skills
• Upgrading and improving skills
• Shaping industry evolution
Consortia and Networks
• Multi partner Consortia
Multi partner alliances designed to share
an underlying technology
• Cross-Holding Consortia
Formal groups of companies that own
large cross-holdings and equity stakes in
each other
• Industry-Spanning Alliance Networks
Firms sharing knowledge, costs, and risks
 Risks and Costs of Alliances

• Rising incompatibility
• Risk of knowledge or skill leakage
• Risk of dependence
• Strategic control costs
Balancing Cooperation and Competition

• Understand the firm’s knowledge and skill

base
• Choose complementary partners
• Keep alliance personnel long-term
Alliances and Ethics

• Balancing • The issue of loyalty

collaboration and among personnel
competition within assigned to the alliance
the alliance
Summary

• Strategic alliances are no longer a strategic

option but a necessity in many markets and
industries.
• Dynamic markets for products and
technologies coupled with increasing costs
has increased the use of alliances.
• It is hard to capture value in strategic
alliances.
• Knowledge resource exchange is important.
You are welcome to contact Nigel Bairstow at B2B
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