S4: Strategic Alliances Flashcards
(27 cards)
Why do companies establish a dedicated alliance management office?
to coordinate alliance knowledge, enable cross-learning and support the growth of new business opportunities gained through various collaborations
Name two considerations in a partner scope?
- Company internalizes operations to maintain control over value chain and avoid delays and other problems
- Company focuses on a select number of segments of the value chain.
What are strategic alliances?
voluntary agreements between companies to share resources, coordinate joint marketing, share production facilities or develop new products or technologies.
What is the business alliance paradox?
Most companies say alliances are a core part of their strategy, yet:
- 30-70% of alliances fail to achieve their self-set goals
- Alliance termination rates are over 50%
- Negative alliance dynamics can permanently disrupt the relationship between two former partners
- Alliances are often more successful in transferring an existing businesses between partners than in terms of jointly developing a new business.
What are the 4 drivers of alliance activity?
- Capacity development
- Reaching optimal scale
- Focusing management attention
- Matching a rival’s value chains
Why is capacity development a driver of alliance activities?
New market/product opportunities may require new capabilities that focal company may lack. Strategic alliances can then be a cost- and effort-effective means of developing the required capabilities.
How can reaching optimal scale be a driver of alliance activity?
Companies need a certain scale, below which the cost of managing and monitoring partners will almost certainly be lower than the cost of doing things in-house
How can focusing management attention be a driver of alliance activity?
Few management teams have the expertise and ability to manage very different companies
Different companies need different capabilities, planning systems, HRM practices etc
Most companies therefore chose to compete in a much narrower set of activities in the value chain.
How can matching a rival’s value chains be a motive for alliance activity?
Potentially there are very high barriers to entry and mobility due to years of dedicated investments in sustainable market positions by competitors
Strategic alliances between complementary partners can then be the first-best alternative to companies replicating expensive value chain positions themselves.
Name three risks of strategic alliances?
- Relational risk
- Learning races
- Performance risk
What is relational risk?
- Is the likelihood that partner companies will not commit to the alliance, so that opportunistic behaviour can undermine the alliance.
What are learning races?
- What is the goal of the learning alliance:
Give partners access to other company’s capabilities, creating learning opportunities as much as possible
Acquire capabilities of the other company, without allowing the partner to learn on its own.
What is performance risk?
- Is the likelihood that an alliance can fail even when partner companies are fully committed to the alliance
- Elements of performance risk:
Lack of competence in critical areas
Incompatibility in terms of organizational systems
Breakdowns in product development or marketing.
What are the three stages of the alliance life cycle?
- Alliance strategy, partner screening, mode selection
- Negotiation and designing the alliance
- Relationship management
What are the components of the alliance life cycle stage: alliance strategy, partner screening, mode selection
- Viewing alliances as portfolio games
- Choosing right partners, and look beyond your peers
- Know where to ally and acquire
What are the components of the alliance life cycle step negotiation and designing the alliance?
- Prepare well for negotiation and design phases
- Build trust
- Develop a sound governance system
- Set milestones and make an exit plan from the start
What are the components of the alliance lifecycle step relationship management?
- Relationship management
- Understand alliance has to be nurtured
- Establish an alliance office
- Keep alliance portfolio agile
Name three considerations in the alliance formation phase?
- Complementarity of partners: extent to which partners contribute non-overlapping resources to the relationship
- Partner engagement: willingness to contribute resources and make short-term sacrifices for long-term profit
- Partner compatibility: fit between working styles and partner cultures
Name two considerations of alliance governance?
- Alliance governance is essential to avoid coordination problems and moral hazard
- Three governance modalities:
- Share binding and hierarchy
- Establish reciprocal rights and obligations in a contractual manner
- Informal governance – trust, goodwill, reputation, shadow of future, network effects
Name two considerations in alliance management?
- Coordination
- Working programmatically
- Hierarchy
- Feedback - Trust
- Signaling trust through unilateral commitments
- Show reliability by delivering on commitments
- Building personal trust / relational capital.
What are alliance portfolios?
refer to all active alliances – horizontal and vertical – at any given time
Name 4 reasons having an alliance function is important?
- Learning effects
- Signaling
- Legitimize
- Monitoring
Why are learning effects an important reasons for having an alliance function?
alliance feature is a central point for capturing and storing alliance management lessons
Why is signaling a reason for having an alliance function?
improving visibility and awareness of a company’s alliances among external stakeholders, gaining buy-ins and support
