Strategic Alliance

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Strategic Alliances

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Strategic Alliance is a significant long/term partnership and collaborative agreement entered into by two or more companies to pursue a set of agreed upon critical goals while remaining (legally) independent organizations. These collaborations can come in many shapes and sizes, including contractual and equity forms. It normally is a synergistic arrangement whereby the participating organizations each brings different strengths and capabilities to the alliance. 

Firm A Partnerships between firms Firm B where their Resources Capabilities Core Competencies

are combined to pursue mutual interests to
Goods

Services

Types of Strategic Alliance
Strategic Alliance
Contractual Equity

Licensing Franchising Joint R&D Turnkey Project …

commitment

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Joint Venture Purchase of Equity Share Equity Swap …

Types of Strategic Alliance
Contractual

Licensing –
the sale of a right to use certain proprietary knowledge in a defined way

Franchising –
a method of doing business wherein a franchisor licenses trademarks and tried and proven methods of doing business to a franchisee

Joint R&D –
two or more organizations agree to combine their technological knowledge to create new innovative products

Turnkey Project –
a project in which a separate entity is responsible for setting up a plant or equipment and putting it into operations



Equity Joint Venture Independent firm is created by the joining assets from two other firms where each contributes 50% of the total



Equity Strategic Alliance Partnership where the 2 partners don’t own equal shares



Non-Equity Strategic Alliance Contract is given to supply, produce or distribute a firm’s goods or services (without equity sharing)

Complementary Alliances

BusinessLevel

Competition Reduction Alliances Competition Response Alliances Uncertainty Reduction Alliances Diversification Alliances

CorporateLevel

Synergistic Alliances Franchising

Business-Level Strategic Alliances


Vertical Strategic Alliance
◦ A cooperative partnership across the value chain. ◦ Are most effective when partners trust each other.



Horizontal Strategic Alliance
◦ A cooperative partnership in which firms at the same stage of the value chain share resources and capabilities. ◦ Intended to enhance the capabilities of the partners to compete in their markets. ◦ Developed to respond to competitors’ actions, share risks, and/or to reduce the competition.

Vertical and horizontal alliances

Strategic alliances

Corporate-Level Strategic Alliances


Diversification by Alliance
◦ Integrating unique knowledge stocks to create products that serve new markets and customers. ◦ Valuable if the new products developed are related to current products in such that synergy can be created.



Synergy by Alliance
◦ Partners share resources or integrate complementary capabilities to build economies of scope. ◦ Franchising: the licensing of a good or service and business model to partners for specified fees (usually a signing fee and a percentage of the franchisee’s revenues or profits).

Supplier Value Chain

Partnerships that build on the complementarities among firms that make each more competitive Include distribution, supplier or outsourcing alliances Vertical where firms rely on upstream Alliance partners or downstream partners to build competitive advantage Japanese manufacturers rely on close relationships with and among suppliers to implement Just-In-Time inventory systems

Buyer Value Chain

Used to increase the strategic competitiveness of the partners

Buyer Value Chain

Horizont al Alliance

Buyer Value Chain

Marketing agreements between Various Airlines

International Strategic Alliances


Cross-border strategic alliances are the most prominent means of entering foreign markets. ◦ Countries require that firms form joint ventures with local firms in order...
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