Conceptualization and delineation

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P.R. Varadarajan M.H. Cunningham Reviewed by
Group 11
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Strategic Alliances

• Long-term agreements for collaboration and/or
  cooperation in spesific areas of international
  marketing activity between companies from two or
  more countries
• They entails the pooling of spesific resourses
  and skills to achieve common goals.
• They are not static they can change over time

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Skills
Resources

• Product innovation, development,
• and marketing skills related to
• cereals

General Mills Inc.

• Cereal Brands Name

• Corporate name with
• widespread recognition
• Network of manufacturing with
• spare capacity
• Sales force distribution
• infrastructure
• Access to clout with
• retailers in Eurpoe

Nestle S.A.
The alliance were not to be executed in the North
American market which General Mills were already
established.
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Conceptualization and delineation

• Interorganizational partnerships can be viewed as
  a strategic alliance if it would enable the firms
  to achieve a competitve advantage.
• Strategic alliances can be structured as either
• A distinct corporate entity (The partners hold an
  equity position)
• A distinct interorganizational entity (The
  partners hold an unequity position)

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Conceptualization and delineation

• Interorganizational relationships can exist
  between two firms in two different ways
• Primary economic commitment is to the same set of
  value chain activities
• Primary economy commitments are to adjacent
  stages of the value chain

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Motives for strategic alliance

• Enter new international markets
• Circumvent barriers to entering new international
  markets
• Protect competitve position in the home market
• Broaden product line/fill product line gaps
• Enter new-product market domains/gain a foothold
  in emerging industries
• Shape industry structure
• Reduce potential threat of future competition
• Raise entry barriers
• Overcome entry barriers
• Enchance resource use efficiency
• Resource extension
• Acquire new skills

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Theoretical perspectives

• Several theoretical frameworks explain why
  strategic alliances are formed because of the
  following factors
• Market uncertaincy
• Increased efficiency
• Resource dependency
• Skill and resource heterogeneity
• Imperfect factor markets

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Strategic Alliance Scopes

• Rivals join in Intraindustrial Strategic
  Alliances
• SA between Market followers
• Team up to gain competitive advantages
• SA between market leaders
• Cross market alliances
• Firms usually have strong competitive positions
  in their home markets
• SA between market leaders and followers
• Market leaders secure their home markets by
  involving in foreign markets through cross market
  alliances
• Precompetitive Resource Sharing
• Manufacturing-Marketing Alliances

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Strategic Alliance Scopes

• Interindustry Strategic Alliances
• Promoted by the convergence of technologies
• Complementary products
• Value added
• Substitutes
• Lower cost alternatives
• Emerging markets
• Gaining foothold
• Secure first mover advantages

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Strategic Alliance Scopes

• Geographic Scope
• Intranational and International Strategic
  Alliances
• Functional Scope
• The characteristics of a each alliance is
  determined by the objective
• Joint Product Development
• Joint Manufacturing Alliances
• Reciprocal Manufacturing
• Joint Marketing

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Drivers Strategic Alliance Factors

• The propensity of firms to enter into strategic
  alliances is influenced by these factors
• Firm characteristics
• Product Mix
• Corporate Identity/Culture
• Industry Characteristics
• MES Minimum Efficient Scale
• Competition
• Environmental Characteristics
• Markets
• Regulations

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Strategic Alliances

• Two ways of classifying competitive positional
  advantages cost leadership and differentiation
  advantage
• Skills and resources are the factors underlying a
  firms competitive advantages
• Requirements for a resource to be a sustainable
  competitive advantage Valuable, Rare, Difficult
  to imitate and No equivalent substitutes

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Achieving Competitive Advantage Through Pooling
of Skills and Resources

• Firms have different abilities
• Pooling the abilities together can lead to a
  competitive positional advantage
• Firms should concentrate on their strengths
• Goal is to achieve cost leadership and/or
  differentiation advantages
• Only valuable if effective

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Example Strategic Alliance
Strategic Alliance Partner A
Strategic Alliance Partner B
Pooled Resources and Skills

Tangible Resources
Intangible Skills

• Patents
• Product line
• Costumer base
• Marketing resources
• Location, Suppliers
• Etc.

• Innovation and product develo.
• Positioning and segmentation
• RD skills
• Organizational expertise
• Experience
• Etc.

Value Chain Impact of Pooled Resources and
Skills on Performance of Primary - and Support
Activities
Competitive Positional Advantages of Strategic
Alliance Cost Advantage or Differentiation
Sustainability of Competitive Positional
Advantages Barriers to Imitate

• Strategic Alliance Performance
• Extent of Realization of Common Goals
• Extent of Realization of Unique Goals

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Role of Marketing in Strategic Alliances

• Marketing has great importance
• Achieving market growth and increasing sales, and
  gaining access to new markets
• Marketing involvement depends on the planning and
  implementation of the alliance
• The roles of marketing are dominant,
  participative or advisory, example licensing
  agreement is a typical advisory role

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Future research directions

• There is a need to find the factors underlying
  the success and failure of alliances
• Issues relating to systems, structures, and
  controls that encourage to effective management
  of alliances
• To find out why strategic alliances are more
  pervasive in some industries relative to others

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Conclusion

• In periods of rapid change, decision makers face
  three strategic challenges
• - Demand uncertainty
• - Differentiation risks
• - Inefficiency risks
• In order to be more effective competitors, firms
  must learn and implement cooperative strategies

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Question

• In our opinion it is a paradox that firms have to
  cooperate with their competitors to get an
  advantage
• What are the main advantages and disadvantages of
  forming strategic alliances?

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Advantages

• Synergies and economies of scale
• Increase sale
• Gaining access to new markets
• Market growth
• Increased knowledge
• Efficient value chain

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Disadvantages

• Less flexibility
• Lack of control
• Expose corporate secrets
• Piracy and copying issues
• Might possibly limit future profitability