Scribd
Upload
40 views16 pages

Unit 8 Global Strategic Alliances

Strategic alliances allow firms to pursue strategic goals while remaining independent. There are several types of international strategic alliances, including those between non-competing firms for international expansion, vertical integration, or diversification, and those between competitors to share resources. When selecting partners, firms consider strategic and cultural fit to ensure compatibility and mutual benefit. Control and managing risks are also important factors for alliance success.

Uploaded by

Cyriel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
40 views16 pages

Unit 8 Global Strategic Alliances

Strategic alliances allow firms to pursue strategic goals while remaining independent. There are several types of international strategic alliances, including those between non-competing firms for international expansion, vertical integration, or diversification, and those between competitors to share resources. When selecting partners, firms consider strategic and cultural fit to ensure compatibility and mutual benefit. Control and managing risks are also important factors for alliance success.

Uploaded by

Cyriel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 16

Strategic Leadership &

Implementation
GLOBAL STRATEGIC ALLIANCES
Definition of Strategic Alliance
 A strategic
alliance is “a strategic cooperative agreement, or agreements, between
two or more firms to pursue a set of agreed upon strategic goals while remaining
independent organizations.”
 An international strategic alliance has three features:
1. Cooperative: a partnership agreement between two or more firms, which
remain independent organizations.
2. Strategic: it is a response to strategic challenges or opportunities that the
partner firms face.
3. International: it is an agreement between firms from at least two different
countries.
Types of Strategic Alliance
Partnerships between non-competing firms:
1. International expansion alliance
2. Vertical integration alliance
3. Diversification alliance
Alliances between competitors:
4. Complementary alliance
5. Shared supply alliance
6. Quasi-concentration alliance
International Expansion Alliance
 An international expansion alliance is a partnership for expanding
into a new geographical area.
 Partners originate in different countries.
 One of the partners seeks to enter a market - the other partner has
privileged market access.
 Example:

Fiat’s alliance with China's Guangzhou Automobile Industry Group


to enter the Chinese market
Vertical integration alliance
 A vertical integration alliance is formed between a supplier and a
buyer that agree to use and share their skills and capabilities in the
supply chain.
 Suppliersinvest in a long-term collaborative relationship with the
customer and become partners rather than mere subcontractors.
 Example:

Hewlett Packard and Intel partnership to innovate computer


processors and other products
Diversification alliance
 A diversification alliance is a partnership between companies in
different lines of business.
 The partners are neither competitors nor linked in a customer/supplier
relationship.
 The aim of a diversification alliance is not to facilitate international
expansion, but to facilitate diversification into an unfamiliar product
or service.
 Example:
Honda joint venture with General Electric to design and manufacture
engines for light business jet aircraft
Complementary alliance
 A complementary alliance is a partnership between competing firms,
which contribute different and complementary assets and capabilities
to their joint endeavour.
 One partner typically contributes a product design or set of critical
technologies, while the other provides in-depth knowledge of and
access to international markets.
 Example:

Medicalgorithmics partnerships with other firms in the


pharmaceutical and health sector
Shared supply alliance
 A shared supply alliance is a partnership between competing firms,
which collaborate to achieve economies of scale or to share research
and development (R&D) with regard to a specific input within the
production process.
 The alliance is limited to upstream activities (R&D, parts &
components, subsystems), with partner companies normally
remaining direct competitors in end products.
 Example:

Fiat partnership with Tata to jointly produce diesel engines and


transmission systems in India
Quasi-concentration alliance
 A quasi-concentration alliance is a partnership between competing
firms, which contribute similar capabilities and assets to the alliance
in order to develop, manufacture and market a joint product.
 The aim of such an alliance is to benefit from advantages enjoyed by
larger rivals without having to merge.
 Example:
International Launch Services - joint venture between Lockheed
Martin and two Russian firms for launching commercial satellites
Partner selection criteria
 Partner-related criteria: associated with the efficiency and
effectiveness of partners' cooperation, such as partner’s corporate
culture, compatibility, motivation, commitment, and reliability.
 Task-related criteria: associated with the operational skills and
resources which an alliance requires for its competitive success, such
as financial resources, marketing resources, customer service, R&D
technical resources, organizational resources, and production
resources.
Optimal business partner
 The most successful strategic alliances are those that achieve both
high strategic fit and high cultural fit.
 Strategic
fit is the degree to which a potential alliance partner
augments or complements a firm’s strategy.
 Cultural fit is the compatibility between partner firms as reflected in
the similarity of their corporate culture and their national culture.
Strategic Fit and Cultural Fit
Control in Strategic Alliance
 Control can be defined as “the process by which one entity
influences, to varying degrees, the behaviour and output of another
entity through a wide range of bureaucratic, cultural and informal
mechanisms”.
 Insufficient control can limit a firm’s ability to align the strategic
direction of the partnership with its own strategy, and it can limit a
firm’s ability to protect its interests in the partnership.
Types of control
Two types of control can be exercised in alliances:
 Strategic control is “control over the means and methods on which
the whole conduct of an organization depends” (e.g. control over the
use of capital, the setting of strategic priorities and the making of
senior appointments).
 Operational control is “control over the production process within
an organization, in the sense of determining how the employees of
an organization perform their work” (e.g. control over purchasing,
manufacturing and quality control).
Alliance risks
 Multinational firms engaged in international strategic alliances face
two different kinds of risks:
 Relationalrisk in strategic alliances is the probability and
consequences of not having satisfactory cooperation.
 Performance risk is the likelihood that an alliance may fail even
when partner firms commit themselves fully to the alliance.

You might also like