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Case 5 - Strategic Alliances and Partnerships

Strategic alliances are voluntary arrangements between firms, sharing knowledge, resources,
and capabilities, leading to gaining and sustaining competitive advantage.
Companies sometimes use strategic alliances or collaborative partnerships to complement their
own strategic initiatives and strengthen their competitiveness. Such cooperative strategies go
beyond normal company-to-company dealings but fall short of merger or full joint venture
partnership.

Please brainstorm, what are possible strategic alliances for the following companies:
1. What are their possible strategic partners, for the basic types of strategic alliances?
2. Analyze what are the strategic alliances activities and its implementation.

First, an alliance strategy is the pooling of skills, means and/or resources (commercial network,
product, technology) between competing (or potentially competing) companies in the form of a
cooperation between the two entities. The companies retain their autonomy, which is not the case
with a merger and acquisition.
We can observe three different alliance strategies:
- Non-Equity Alliances: In a non-equity strategic alliance, organizations create an agreement to
share resources without creating a separate entity or sharing equity. Non-equity alliances are
often looser and more informal than a partnership involving equity. These make up the vast
majority of business alliances.
- Equity Alliances: A strategic equity alliance is created when one company purchases a certain
percentage interest in another company.
- Joint Ventures: A joint venture is formed when the parent companies create a new subsidiary.

Secondly, we can say that strategic alliances offer opportunities to accelerate the growth of
partners, increase their competitiveness, maximize their profits, decrease their risks, improve
their productivity... while allowing each one to keep its independence.
This form of cooperation allows for the sharing of skills and knowledge, the pooling of various
costs and risks, access to markets by circumventing barriers to entry and the development of
technologies.
We can also say that alliance strategies represent strategic interests for alliance members:
- small businesses will have an easier time growing,
- preservation of a flexible organization by limiting the costs,
- enlargement of the product range of the companies,
- reduction of costs through the pooling of purchases.

However, there can also be disadvantages such as a fragile durability of the advantages acquired,
a confidentiality that is difficult to protect, an imbalance of power between the partners that can
have a negative impact on the relationship with a dominant partner or the alliance can be
undermined by a competition between the signatories.

In a market where the competition is tough, it is interesting to make alliances with companies
that will be complementary to our activity, or even competitors, or that are in a different market
from ours, but that could bring us advantages through communication / commercial offer that
would be interesting for the customer. First of all, the company needs to choose its partner
properly so that its brand image corresponds to its own or that the quality of the products is
similar. It is necessary to be able to propose an attractive offer, for example a partnership

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between a telephone operator and a smartphone brand. The service goes with the product, it is an
offer that is complementary and therefore interesting for the customer.
But, a company can also join forces with a company from a new field that would allow it to
improve its skills and quality by sharing its knowledge, to improve its products and production
processes.

In this case we will study 3 companies: SNCF, L’Oréal and Weiss.

• SNCF: The Société nationale des chemins de fer français (SNCF) is the French public railway
company, officially created by agreement between the State and the pre-existing railroad
companies. It is active in the fields of passenger and freight transport and is responsible for the
management, operation and maintenance of the national railway network owned by the State.
The parent company SNCF is responsible for the general management of the Group. It also
houses activities that offer their services to the entire SNCF Group:
- the Shared Services Centers, which support the Group's activities (social assistance, medical
services, payroll, etc.)
- Railway security (Suge), which ensures the daily protection of passengers, property and staff
on the entire national railway network, in stations and on trains
- SNCF Immobilier, which manages and optimizes the SNCF group's tertiary and social,
industrial and railway assets with its subsidiary S2FIT; which develops and enhances the value
of land and property not used by the railway system with its development and property
development subsidiary.

L’Oréal: L'Oréal is a French industrial group of cosmetic products. The company, created by
Eugène Schueller on July 30, 1909, has now become an international group, number one in the
world in the cosmetics industry.

Chocolat Weiss: Weiss is a French chocolate factory created in 1882 by Eugène Weiss in Saint-
Etienne.
For 138 years, Chocolat Weiss has been producing its chocolates, pralines and confectionery for
all gourmet consumers and gastronomy professionals throughout the world. Its rare artisanal
know-how has been rewarded by the state label Entreprise du Patrimoine Vivant.
Wishing to share its know-how with as many people as possible, Weiss has opened Les Ateliers
Weiss in Saint-Etienne: a lively and accessible place with activities, a visit to the chocolate
factory, a store and a hot chocolate bar, for a gourmet break.

We will therefore look for strategic partners for these companies in 3 different modes of alliance
strategies seen previously:

Companies Non-Equity Alliances Equity Alliances Joint Ventures

SNCF (Société With AirFrance  SNCF and Blablacar SNCF and SNCB
Nationale des SNCF may want to set (French company of (Société Nationale des
Chemins de fer up a reservation system carpooling). Chemins de fer Belges)
Français : comparable to that of The SNCF can create a are joining forces to
French the airlines but adapted capital alliance with the create a joint venture to
company of to the specificities of company Blablacar by manage Thalys
transport by rail transport. The selling its bus connections in Northern
train). company could subsidiary "Ouibus" in Europe.
therefore form an exchange for 10% of The joint company would
Objective: to alliance with AirFrance. the capital. This be 60% owned by SNCF
develop its This French airline has alliance strategy will and 40% by SNCB. Their
market by a system, called allow the two German counterpart

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reaching new "Sabre", which can companies to combine previously owned 10% of
ones through optimize revenues by their strengths in shared Thalys' capital.
strategic modulating the fare mobility and strengthen
alliances. policy in order to both companies.
maximize aircraft
occupancy. Based on
the "Sabre" system, the
two partners co-
developed the
"Resarail" system that
SNCF has been using
since 1993 under the
name "Socrate".
L’Oréal L’Oréal and My Little The L'Oréal group and L'Oréal and Bonduelle.
(French box  M Shu Uemura Both companies are well
cosmetics My Little box is a (Japanese cosmetics known on the French
company). surprise box that is sent group). Named after its market, one for food and
every month to founder - a pioneer not the other for cosmetics. If
Objective: the subscribers in which only in the art of make- these two parent
objective for they discover beauty up but also in skin care companies create a joint
L'Oréal is to products, care, makeup, and cleansing - Shu venture, consumers will
reach new sales brands, jewelry, Uemura has become have confidence. They
locations and decoration and many one of the best-known can develop a product
establish a other surprises. cosmetics brands in based on a food
presence Through this strategic Japan, where it is sold supplement sold in
through alliance without equity in more than 90 pharmacies for hair, for
companies. participation, L'Oréal department stores and example.
can propose a new exclusive boutiques. This new company
product for the My Outside of Japan, the allows the two parent
Little Boxes in order to company has a presence companies to develop in
have publicity and to in more than 25 a new field but also to be
allow consumers to test countries through more present on a new point of
this product. than 100 department sale. It is a company that
Subscribers can even stores and specialty will be able to sell
choose between stores. products developed with
different L'Oréal The L'Oréal Group will a lot of research and
products to encourage take over all of Shu development and that
them to consume or Uemura's international will arouse the curiosity
subscribe. This activities, including the of consumers.
partnership without rights it holds to its
participation in the brands outside Japan.
capital is advantageous For Shu Uemura, this
for both companies: new agreement meets
l'Oréal will be able to two expectations: on
advertise on a product the one hand, to further
and acquire new strengthen its already
consumers (those who strong positions in
will have loved the Japan thanks to
product and who will L'Oréal's resources, and
buy l'Oréal) and for My on the other hand, to
Little Box: l'Oréal is a become a leading
very well-known global brand thanks to

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 French brand which the power of the
will bring customers to L'Oréal Group's
the company My Little research, marketing and
by its presence in the international network.
boxes For L'Oréal, this
agreement will
accelerate its
development in Japan,
particularly in selective
distribution, by
enriching its portfolio
with a modern, highly
innovative brand of
Japanese origin for the
first time.
Chocolat Weiss Weiss with Disneyland Weiss and l’Occitane. Weiss and Haagen-Dazs.
(French Paris. Disney is the L'Occitane is a French These two companies can
chocolate market of brand of body and face develop a subsidiary
company). entertainment, films care products. It is a (Weiss-Dazs for
and cartoons for mixed brand that has example) which would
Objective: children, present in already developed allow to develop ice
Develop its several markets such as internationally. creams with the
product line and clothing or toys but in In the case of creating chocolate of the Weiss
sales locations this case we will talk an alliance by share, brand. This company can
to reach new about the universe of Weiss can buy a certain develop by creating other
customers. Disney in the percentage of interest food products such as ice
Disneyland Park in from L'Occitane to cream cookies. This
Paris. develop products company will be focused
Weiss can buy rights combining food and on chocolate and ice
from Disney to produce beauty care. For cream to bring together
chocolate bars in the example, L'Occitane the fundamentals of the
shape of Disney advent calendars are two parent companies.
characters to be very famous. Weiss can
distributed in the buy a share of capital
Disneyland Paris park. from the beauty care
Here, Weiss could company to integrate
distribute its products in Weiss chocolates in the
the image of Disney. advent calendars.

For SCNF, the most advantageous alliance seems to be the non-equity alliance, which will allow
SNCF to develop in a new market and not lose funds. It is a commercial offer that is easy to set
up and that could work well with customers.

For L'Oréal, the joint venture is very advantageous, as it allows the development of the activity
in a new market, a new location and a deeper brand image focused on the well-being and now
the health of consumers.

For Weiss, the best strategic alliance seems to be the one with Disneyland: the non-equity
alliance because Disney is a large group that is difficult to reach, it is unlikely that they would
want to enter the confectionery market, but a collaboration of this type could be interesting
because it would generate revenue for Disney and would allow Weiss to increase its notoriety
and to develop with new targets.

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To conclude, creating a blue ocean is not an easy thing. You have to find a way to get a real
competitive advantage over your competitors so that none can produce a similar product. You
have to be able to prove the advantage, the new value, that this will bring to the consumer. So the
importance of value innovation is very important. The message transmitted by the company must
be perceived in the same way by the consumer.

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 References

1° Céliance, “Understand strategics alliances”, 2020

https://www.celiance.fr/bien-comprendre-les-alliances-strategiques/

2° L’Oréal, “Strategic alliance possible or not?”, 2010

https://www.loreal.com/-/media/project/loreal/brand-sites/corp/master/lcorp/press-releases/
group/strategic-alliance-announced-between-the-loral-group-and-shu-uemura-cosmetics-inc/
tv1h-gqb8ycy-1-868.pdf

3° My Little Box, “The concept”, 2021

https://www.mylittlebox.fr/concept

4° L’Express, “L’Oréal without Nestlé”, 2014

https://lexpansion.lexpress.fr/entreprises/vivre-sans-nestle-l-oreal-le-veut-bien_1994197.html

5° Petite Entreprise, “Les alliances stratégiques d’entreprises », 2019

https://www.petite-entreprise.net/p-1642-84-g1-les-alliances-strategiques-d-entreprises.html

6° L’Oréal, « Who are we ? », 2020

https://www.loreal.com/fr/groupe/

7° Chocolat Weiss, « The story », 2019

https://www.chocolat-weiss.fr/fr/