Global Strategic Alliances

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Global Strategic Alliances
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GSA Facts

• 32,000 alliances formed 1995-1998
• ¾ are cross-border alliances
• Drivers are globalization and core competence
• Alliances account for 18 of revenues of top 1000
  US companies
• Liks are co-branding, marketing,
  co-manufacturing, RD agreements, not equity
• Alliances are more cost-effective than takeovers

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GSAs and Competition

• Strategic Alliances are a means of improving
  competitiveness, at a time of.
• Increasing international competitive pressure
• Globalization of markets
• Decreasing trade barriers
• some companies find it difficult to match the
  offerings of their rivals

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Why government interest in GSAs?

• Situations where market power is maintained,
  created or enhanced
• Focus on conspiracy and abuse of dominant market
  position
• Investigate if undue lessening or prevention of
  competition
• Source Strategic Alliances under the Competition
  Act, Industry Canada 1995

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Global expansion strategies

• Preference for alliances in
• North America 16
• Western Europe 15
• Eastern Europe 20
• Latin America 25
• Middle East 30
• Japan 30

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• One large and successful Consumer goods
  alliance..

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McD Disney - Coke

• McD Disney cross-promotion, 10-year
  formal alliance started in 1997
• McD Coke Coke key supplier, helps with new
  foreign operations have common vision and
  trust
• Disney Coke Coke sole provider since 1955
• marketing alliance since 1985
• helps Disney overseas
• Source Economist, The Science of Alliance, April
  4, 1998, pp.91-2

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McD Disney - Coke

• Triad derives its success and power because
• All are market leaders in their industry
• They start on a more equal footing
• Relative informality and openness of arrangement
• Markets are slower-moving, less drastic change

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• One large and successful industrial goods
  alliance..

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Komatsu-Demag Alliance

• Mannesmann-Demag
• Large construction equipment
• Large market for heavy hydraulic earthmovers
• Holds 20 market share
• Mannesmann objective
• - needs expertise, market access
• Komatsu objective
• - entry into super-large segment
• - offer package deals
• - strengthen competitive position

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GSA Overview

• Traditional options
• Dramatic changes
• Barrier and markets
• Consequences
• New approaches

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Demands on Strategic Alliances

• Competitive collaborations offer significant
  advantages
• Characteristics
• Participants remain independent following to the
  formation of the alliance
• Participants share the benefits of the alliance
  as well as control over the performance of
  assigned tasks
• Participants make ongoing contributions in
  technology, products and other key strategic
  areas

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Four Principles of GSAs

• Partners are still in competition with each other
• Some conflict is to be expected
• Must understand where cooperation ends
  competitive compromise begins
• Learning from partners is critical

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Forms of GSAs

• Narrow, as in JV or equity investment
• Broad, as in inter-firm cooperative arrangements
  beyond contracts in the ordinary course of
  business
• Competitive effect of GSA and varying impact in
  the marketplace is its raison detre

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Why German-Japanese JVs fail

• Incompatible business or cultural practices 40
• Incompatibility of culture-based behaviour 33
• Competition from parent 30
• Incompatible management systems 26
• Different priorities 26
• Different time horizons 23
• Language and communication difficulties 20
• Dominant organization culture of local
  partner 16
• Personnel assigned by partner 13
• Note multiple mention possible, Source
  Absatzwirtschaft, 10/94

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Attributes and Success Factors

• Success factors
• Mission
• Strategy
• Governance
• Culture
• Organisation
• Management

• Attributes
• Joint long-term strategy
• Reciprocal relationship
• Global vision and efforts
• Lateral relationship
• Retain identity in excluded markets

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Summary

• Alliances as part of expansion strategies
• Alliances in many forms flexible
• Culture plays an important role
• Examine the matching of characteristics and
  requirements for success