Understanding Business

Strategy
Concepts & Cases

Part 3: Strategy
Chapter 9: Creating and Maintaining Alliances

Copyright © 2009 South-Western, a part of Cengage Learning 1

Power Point Presentation by Dr. Leslie A. Korb
All rights reserved. Georgian Court University
 Chapter 9: Creating and Maintaining
Alliances
 A strategic alliance is a type of cooperative
strategy the purpose of which is to develop a
competitive advantage
 Equity alliances, e.g. joint venture
 Nonequity alliances

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 Developing Strategic Alliances
 A very popular strategy
 Help firms grow and have a major impact on
partner firms

 What reasons can you think of that would

cause firms to form alliances?

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 Business-Level Strategic
Alliances
 Vertical strategic alliances
 Relationship between buyers and suppliers
 Produce products
 Most effective when trust exists between
partners
 Trust sustains transfer of technological
knowledge
 May manage supply chain rather than pricing
strategy

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 Business-Level Strategic
Alliances
 Horizontal strategic alliances
 Enhance the capabilities of the partners to
compete in their markets
 A response to competitor’s actions
 A response to substantial uncertainty
 Requires a smaller investment of capital
 Explicit collusion v. tacit collusion
 Most difficult to manage and sustain because
partners are also competitors

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 Corporate-Level Strategic
Alliances
 Diversification by alliance
 E.g. China’s SAIC Motorcorp & Nanjing
Automobile Corp.
 Synergy by alliance
 E.g. Coca-Cola and Cargill
 Franchising
 E.g. MacDonald’s

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 International Strategic Alliance
 Some countries require that firms form joint
ventures with local firms in order to enter their
markets

 Foreign firms need knowledge and perhaps

other resources to understand and compete
effectively in the newly entered markets

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 International Strategic Alliance
 Different cultures and a lack of trust can
hinder the transfer of knowledge or sharing of
other resources necessary to make an
alliance successful

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 Managing Risk
 Development of trust
 Educating about cultural differences
 Refusing to assume about partner’s
competencies
 Using contracts to guard against opportunistic
behavior
 E.g. Disney and Pixar

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Managing Strategic Alliances

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 Managing Strategic Alliances
 1. Even if the firm has a unit with the overall
responsibility of managing its network of alliances, a
manager or sponsor should be named for each
alliance (and a similar person should be named by
the partner). These managers keep each other
informed of major alliance activities, resource
allocations, and outcomes.

 2. The organization should analyze the alliance’s

priority within its resource allocations and ensure the
commitment needed for each alliance to succeed.

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 Managing Strategic Alliances
 3. A clear plan for implementing the alliance should
be created and activated after the partners have
agreed to the alliance.

 4. The means for analyzing the performance of the

alliance and distribution of performance outcomes to
the partners should be clearly established.

 5. In the evaluation of an alliance’s value, the

partners’ partners in other alliances should be
considered.
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