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What is Alliance? (“Building, Leading and Managing Strategis Alliance”, Kuglin and Hook) An alliance is business agreement and relationship with two or more firms interfacing with executives of top global or European companies As a role of global alliance partner, they should act as • Working with client and extend the joint service offerings that developed with our alliance partner • Working with many members of our alliance partner organization and other members of the firm to both educate and promote the value of the alliance. To be sucessful on business alliance, people should be considered on the alliance behaivor at all the times in order to build trust and relationship with their partners Definition of “Alliance” The definition of the word “alliance” differs from company to company and industry to industry. Each of the firm entering in to an alliance does not necessarily agree on what is meant by “alliance” because there are various different types of alliances. However, according to Webster, it defines the word “alliance” as an allying or close association, as of nations for a common objectives, families by marriage an agreement for this the countries, groups in such association Another way to define “alliance” is that the Synonyms from Webster’s Thesaurus: “The state of being allied, connection, membership, affinity, participation, cooperation, support, union, agreement, common understanding, marriage, collaboration, partnership and the act of joining, etc.” Before you will enter into an alliance agreement, it is very important to understand the common objective of an alliance. The first step of this process is that you need to be categorized in the types of alliances in order to connect the concept of an alliance with the successful creation and implementation of an alliance. 2 Types of Alliance: 1). Transactional alliances and their characteristics; They generally last less than 5 years The partners do not share critical capabilities The relationship does not involve control and is usually contract driven The partners do not share a common strategy or act in unison; they remain at arm’s length 2). Strategic alliances and their characteristics; A commitment of at least 10 years A linkage based on equity or on shared capabilities A reciprocal relationship with a shared strategy in common An increase in the companies’ value in the marketplace, placing pressure on competitors A willingness to share and leverage core capabilities Strategic Alliance Objectives 1. Risk sharing The company could not afford the high risk of investment. Example: Kodak and its 4 competitors develop the new Advanced Photo System technology. 2. Economies of scale Industry with high fixed cost faces strong pressure on cost reduction through economies of scale. Example: British Airway and American Airline cut cost 3. Market segment access • Lack of understanding in customer preferences and poor distribution system. • Example: Wal-Mart and Cifra promote products in Mexican market. 4. Technology access • Companies are collaborated to emerge a new technology. Companies have limitation in terms of time and resources to develop a new technology. • Example: IBM, Motorola, and Apple Computer an alternative to Microsoft Window. 5. Geographic access The company finds it difficult to penetrate in a foreign market where there appeals to be an opportunity to sell the product. Example: Anheuser-Busch (U.S.) and Kirin (Japan) strengthen the position in other’s home markets. 6. Handling of funding constraints The company is facing a very large cost of developing new products. Example: Pentagon contract for fighter aircrafts high return too costly for one company to do alone form alliance even with rivals. 7. Skills leverage Because other companies able to provide you with the skill, expertise, and capabilities at a lower cost than that if company develop it internally. Example: IBM and NTT (Japanese telecommunication) develop a personal handy phone system. 8. Value-added barriers Want to increase the level of competition in the industry by improving skills. This will lead to greater barriers for new entrants to enter the industry. Example: The Washington Post Company and Russian publisher Russian version of Newsweek magazine. Types of Alliances When engaging in an alliance, it requires a significant and careful planning and negotiating. Choosing who to perform alliance with, or what types of alliance should be use, can be complicated. When done wrong, alliances can turn out to be a disaster; carrying out a negative market place perception for both companies and can impact a company’s business beyond the specific market tied to the alliances. Sales Alliance o WHEN TO USE? Two companies agree to enter the market together to sell complementary products and services. o MAIN PURPOSE? To create sales; especially for companies that have joint selling activities with specific clients. o Example: i2 Technologies : Ernst & Young (CGE&Y) i2 Technologies (i2) that sells eBusiness and APS (Advanced Planning and Scheduling) technology enter market together with Cap Gemini Ernst & Young (CGE&Y), a professional service provider, in order to provide program management and system integration services. o Exclusivity is NOT a requirement in performing Sales Alliance. For example; i2 has many sales alliances with other professional services providers other than CGE&Y. At the same time, CGE&Y also has several sales alliances with other technology providers excluding i2. Due to multiple alliances, partnership agreement around specific clients or specific industries is needed in order to build trust between each other. Solution-Specific Alliance o WHEN TO USE? Two companies agree to jointly develop and sell a specific marketplace solution. o MAIN PURPOSE? Joint selling of a jointly developed solution Usually there are incentives to maximize the return to both parties for their parts of joint development effort. o Example: Whirlpool, Hearst, and Boston Consulting Group Whirlpool, Hearst, and Boston Consulting Group combined together to create alliance to develop and sell an Internet eMarketplace, which will provide accessible information source for appliance buyers. This eMarketplace, called Brandwise.com, was intended to provide up- to-date information on products. Whichever brand that wanted to be advertised would pay a percentage of the sale (e.g., 5 percent). o Exclusivity: may or may not be required. Often, one alliance partner will own the solution developed, whereas the other alliance partner will have a preferred partner as a result of the joint solution development work. Geographic-Specific Alliance o WHEN TO USE? Two companies agree to jointly market or co-brand products and services in a specific geographic region. has been practiced for many years in the beer industry o MAIN PURPOSE? Being able to enter to an important geographic market without having to bear high-cost from exportation. o Example: Fosters Brewing Company (Australia) : Molson (Canada) Fosters Brewing Company is a famous beer brewing company of Australia. The company decided to expand its brand to North American, but instead of exporting and incur high-cost of shipping, Foster’s then entered into an alliance with Molson Canada. Foster’s licenses its beer brands with Molson through licensing agreement. Molson brews the Foster’s beer, according to Foster’s formula and distribute through normal distribution channels. By engaging an alliance with Molson, Foster can save cost from paying export supply chain and avoid spending capital on building a brewery in North America, at the same time, being able to gain access to important geographic market. In return, Molson achieves additional product volume in both its brewery and its distribution network, driving efficiencies in both its brewery and distribution. o NOTE: Geographic alliances (such as, Foster and Molson) can sometimes be investment alliances as well, this is occurred in the case that it involves investment in plant and equipment if the particular product that is co-manufactured needs to be manufactured in different process (such as Foster and Molson). Investment Alliance o WHEN TO USE? One company makes an investment in another company and at the same time developing an agreement to jointly market their products o Example: viaLink, CGE&Y, i2, HP viaLink (company providing data synchronization and scan-based trading solutions to the consumer products, retail, and other industries) is working together with CGE&Y and i2 to sell the viaLink solution in marketplace. Also, HP alliances with viaLink by providing hardware infrastructure for the viaLink solution. Joint Venture Alliance o WHEN TO USE? Two companies come together and form third company to exclusively market and/or develop specific products and services. Positive Aspect: o There is a financial and legal commitment between two companies. Negative Aspects o Failure of joint venture alliance can be PAINFUL. Responsibility of a separate company, including financial implications that are tied to the performance of both companies o Example: Northern Telecom (now known as Nortel) : Motorola Nortel formed joint venture with Motorola in order to sell wireless infrastructure equipment worldwide. However, the joint venture failed later on because each partner refused to help each other in different regions of the world. Even though both companies are successful companies working on their own, the joint venture could possibly fail due to 1) This joint venture underestimated the challenge of merging organization in culturally diverse regions of the world OR 2) Their joint does not draw enough incentives for joint venture partners to behave in a win-win manner. Types of Strategic Alliances Strategic Alliances for Marketing 1) Cross Promotional Alliance: - Cross promotion Alliances is one of the more common reasons for an alliance. - Concept: companies promoting each other with the use of discounts, coupons, specials, shared advertising space or in-store promotions. Ex: Business Class flights offering a free AOL disk with peanuts 2) Strategic Alliances for Co-Branding: - Co-branding strategy involves two companies putting their name on a common product. - At the very least, co-branding offers twice the marketing impact as a traditional single brand style. Ex: Mattel and McDonalds offering a toy that makes McDonalds hamburgers and fries. 3) Strategic Alliances to Serve National Customers: - Serving National customers is often too costly or too difficult for a firm to handle by themselves. - To create an alliance to serve national customers, companies share information, sales accounts and materials with the other members. This also allows for a more consistent customer satisfaction that otherwise wouldn’t be available. - Trust is a very important factor in alliances, especially in national/global alliances. Ex: Awnet: Canvas Awnings drawing together with several other fabricators to meet the needs of clients all over the U.S. by dividing the country into 5 sectors and helping one another to facilitate local, as well as national sales. 4) Industry-Specific Geographical Alliances: - Focuses on a specific industry in a certain geographical area. - These businesses are general within very close proximity to one another and can satisfy all the needs of their customers in one phone call or visit. Ex: The Minnesota Connection: Services the Direct Marketing Industry, alliance involving Telemarketing, Plastic, Printing, Envelope, Lettershop, and Listing Services. 5) Community-Based Alliances: - Involves working together with other companies to create some community benefit that essentially differentiates your organization from your competitors in the eyes of your customers. - Community-Based Alliances are typically a form of advertising, although they allow different companies to come together for the benefit of the community, and the resulting networking and friendships are a priceless benefit for the companies involved. Ex: Investors Advantage Corporation holding an Economic Forum in Westlake Village, California. By providing high-profile speakers and representatives from many companies, the forum benefits the citizens and customers and also provides the companies involved with exceptional advertising and name recognition as well as the ability to attract new customers in attendance. 6) Alliances with your Competition: - Competition is NOT bad. Competition breeds success. - This concept is exactly as it sounds, you work with your competitors in search of mutual benefits. - This approach is beneficial in economic/industry downturns or when costs of machinery or resources are extremely high. - It is possible to reduce costs by sharing space, advertising or commercial space with competition. Ex: American, Delta and United Airlines sharing a store-front ticket office to reduce rental fees and attract more customers. 7) Alliances with Competitors to Open New Markets: - Often time’s foreign or new markets have some characteristic that makes them unserviceable for an organization. Examples are markets that are too large, too far away, too different, undeveloped, and so on. - Forming alliances with competitors is a viable solution is many cases when these issues are at large. - By working together with the competition, organizations are able to increase output, lower costs of distribution and provide advertising and marketing that make the penetration of the market much easier that it would be if they were to go at it alone. Ex: La Tapatia Tortilleria and El Aguillea Tortillas formed a strategic alliance to open the new market of California to fresh tortillas. Neither of the companies had the production ability to service the market alone, but together they were able to capture a huge market and become very successful. 8) Strategic Alliances for Buying Parity - Such as buying cooperatives or buying groups - Buying as a group can make similarity of prices A list of Buying Group Benefits from office Dealer Magazine: Lower product costs Lower operating costs Industry information Education and training Networking Pricing guidelines Competitive information Advertising support Catalogs Credit information Reduced-price services Ex. In American Dental Cooperative (ADC), the ADC members came together in an alliance for buying parity to as they called “level the playing field”. As buying in group, they can get prices similar to that of the two giants in their industries. 9) Alliances with Competitors to Build an Industry - The form of cooperative alliance to raise the awareness and increase sales of particular business in the area Ex. In Southern Ontario, Canada, a group of craft breweries formed a cooperative alliance to raise the awareness of craft brewing in the area. All competitors get together to create the Ale Trail, the idea to bring visitors to the area. 10) Strategic Alliances to Beat Competition - The alliance that the two companies combine their strength to make new products Ex. Coca-Cola developed an alliance with Nestle to make cannd and bottled coffees and teas for a worldwide market in order to compete with Pepsi. 11) Alliances to Block New Competitors - The two main competitors make an agreement alliance to stop another main competitor from its new strategy or entering into the industry. Ex. GTE and Pacific Bell, the two California telephone companies, entered into an alliance agreement, and they successfully blocked Metropolitan Fiber Systems (MFS) from developing a fiber optics dual communication system for the University because it will undercut price to local phone companies. 12) Strategic Alliances for Product Development - When some products or ideas have to be developed using more advance technology and hard to do by own. Ex. Chrysler and Westinghouse collaborated to develop an advanced electric motor and power controller that would boost acceleration and operating rage between charges in Chrysler electric vehicles. 13) Strategic Alliances for Research - Often times, the contemporary understanding of concepts is either outdated or flawed, and in worse cases, completely mistaken. Often times the research and development for newer or more appropriate concepts is costly and difficult. Forming alliances with companies or governments with common goals can be a very good alternative to an otherwise difficult situation. Ex. GM and the federal government of the U.S.A are combining forces to complete extensive research on electric car technology. With GM’s current financial situation they would be unable to perform such research and the U.S. government having the money and resources to help GM seems to be taken a step in the right direction. 14) Strategic Alliances for Manufacturing and Construction - Partnering is having all key people involved on a project attend the workshop. - There are four main components of construction project, which are the owner, the general contractor, architectural and engineering, and the sub contractor. - The main benefit is save time and money. Ex. the Arizona Department of Transportation has made partnering of its 15) Strategic Alliance between Private Business and State Owned Foreign Business - This strategy can be risky but can be profitable as well. Ex. Honeywell and Sinopec create cooperative joint venture to help Sinopec to be a world-class refining and petrochemical corporation by 2000. Honeywell can double the sales to Sinopec’s 38 enterprises. Honeywell anticipates a minimum of $75 million in new sales over the five years 16) Strategic Alliances for Distribution - Both parties join each other to distribute their products. - Both parties get benefits. Ex. Coca Cola and Nestle distribute Nestle iced coffee drink in Korea. Coke has good distribution channel and Nestle has products that do not directly compete with their existing products. 17) Strategic Alliances with Your Customers - It can be very rewarding 18/ Vendor Managed Inventory (VMI) Coupled with the idea of VMI, you will find Electronic Data Interchange (EDI), Just-In-Time (JIT), and Integrated Supply (I/S). As distribution moves closer to Supply Chain Integration, there are a lot of benefits for people who participate in such as – Improved inventory control - Reduced vendor base - Increased product or supply turns - Reduced inventory investment - Reduction of transaction costs - Improved service levels - Increased sales - Reduction in out-of-stocks - Improved profit margins - Reduction of purchasing staff 19) Strategic Alliances with Your Suppliers As American companies shrink the number of suppliers, they are putting more energy into the remaining relationships, and are even willing to pay a premium on the theory that getting things right initially is cheaper in the long run. This is in contrast to how we think of American business for the last 60 years or so, functioning within the paradigm of adversary relationships. Squeezing the life blood from your supplier had become standard. Ex. Nowadays big firms are slashing their vendor rolls and working more closely with a select few. Xerox has reduced their suppliers from 5,000 to 500, Motorola from 10,000 to 3,000, and Digital Equipment from 9,000 to 3,000. Techniques to build a strong alliance with your suppliers 1. Look for partners who wanted to partner with you You must indentify which of your suppliers truly want to develop alliances with you Spend your time building those relationship with your suppliers that will help you to serve your market and improve your bottom line When you commit to a closer relationship with your suppliers, it helps them and they can offer you a better total value package 2. Ask your suppliers, “What can I do for you?” We can help to come up with strategies for the end-users to buy better from the manufacturers in a way that served the manufacturers The Fuji Factor Among the major suppliers to the graphic arts industry, Fuji was by far the most advanced in building quality relationships with its dealers. The Fuji factor is a model that more manufacturers should embrace and more purchasers should demand of their suppliers. The key elements to Fuji’s success are as follows: A limited number of dealers offering their products to their market Manufactured products of the highest quality with zero defects as the norm Build tight relationships with a limited dealer network Seek constructive feedback from dealers and act upon the ideas shared Consistency of leadership -- ( no changes in leadership) Accessibility -- (dealers can pick up the phone and reach the president of Fuji easily) Trust 20) Alliances on the Internet Ex. of an internet strategic alliance is Lifelines. The site is an alliance between the company and several health and employee productivity related companies. The site lets corporate decision makers know what is available for them in the area of employee effectiveness and productivity. The information on the site helps people to improve their effectiveness through improved health and optimal wellness. 21) Mastermind Alliances It is also known as strategic alliances for individual development. The group of the mastermind alliances must be geographically close to each other. This will allow them to get together regularly to have a meeting to discuss the problems or something that occurs. Ex. Palm Springs Breakfast Club which has a strategic alliance with other California cities to draw tourists to the state. This mastermind alliance is consisted of general managers from seven other deluxe hotels, the convention center director, and the owner of the aerial tram. They meet every Wednesday and rotate member locations weekly. They discuss issues uniquely important to the hospitality business in downtown Palm Springs. What is Alliance Strategy: Introduction Business Alliance Presentation Outline Introduction of “Mastering Alliance Strategy” Introduction In the past, alliance was just a tool for entering restricted overseas market, but today it is an effective tool to help increase the corporate value and competitive advantages, around 20-50% of corporate value comes from alliances. Many successful firms use alliance as their fuel such as British Petroleum, Eli Lilly, General Electric, Corning Glass, Federal Express, IBM, Starbucks, Cisco Systems, Millennium pharmaceuticals, and Siebel Systems. Body - Definition of Alliance o Three characteristics Separate firms involves in resource contributions to create joint value. Still maintain the corporate structure All alliances are in the sense of “incomplete contract.” No specific structure, very flexible Joint decision making to manage the business and share the value. - Why we need to do alliance? o 30-70% of alliance fail Unclear strategy, Poor Partner choice, Weak or unbalanced alliance economics, Dysfunctional governance, Crashing corporate culture and goal, Lack of sufficient operating staff skills and parent commitment. Alliance Strategy - Alliance Design o Identify the role of alliance (Roles of alliance in business strategy) Example, Corning Glass has three main firms ally together, which each firms have different roles of alliance. With Samsung for the role in responsible for TV glass With Dow Company, responsible for silicones With Siemens, responsible for fiber-optic cabling o Setting goals (Lower cost, more effective) o What criteria for selecting partners (Match with our strategies) o Crafting the structure and process Ex, how the negotiate and making decision - Alliance Management o How to manage to achieve the alliance design? Ex. Xerox in Fuji. These companies have a very strong management. They were flexible and forwarding looking in managing their two relationships. o Management changes overtime due to the change in industry environments. If we misinterpret, it leads to weaknesses. o Continuous improvement o Everyone involvement - Alliance constellation o What’s alliance constellation? o With the alliance constellation, the firms inside the group need to be able to design and manage as a group. Every firm must have the same understanding about the management and the goal. o Conflicts and inefficiency may arise if mismanagement. o On the other hand, if well managing, it can save resource and diversify the growth. - Alliance Capability o How well of our internal capability, which is the infrastructures in the organization. Ex. Skills of people and skills of organization o A good alliance strategy therefore start at home Weak internal capability creates obstacles A good internal capability can expose business to broader choices of partners The Arc of Alliance Strategy This is the integrated view of what is take to success with alliance. The strongest linkage is between the alliance design and alliance management. Alliance management must be accordingly to the design. Those four elements are all related. This Arc of alliance strategy is based on the most important factors, which are business strategy and business organization. At the left hand side, the relationship between the alliance constellation and alliance design represents the relationship where the constellation leads to individual design because it influences goals and partner selection. At the right side, the link between the alliance capability and alliance management represents the relationship where the internal infrastructures affect and create the management of the alliance. Conclusion In conclusion, as we know that many firms cannot succeed if they try to do everything by themselves, so alliances is in need and very important for progress and growth. However, there is no perfect alliance strategy for every business type and situation. Therefore, firms should keep an eye on change and opportunity and have to wisely adjust and adapt themselves to the environment due to the mastery comes from deep understand, practice, and the wisdom of others Corporate Self Analysis Corporate Self-Analysis process focuses on the elements of your company’s profile. 1. The Culture Clusters 2. The Financial Picture 3. The Business Definition and SWOT Analysis 4. The Possible Strategic Direction 5. The Senior Executive Input 6. Selection of Alliance Strategy I. The Culture Clusters A corporate or organizational culture is a set of coping mechanisms or adaptation skills that members of the culture use both within and outside their corporate environment. Corporate culture manifests itself in a variety of corporate habit patterns, often seen in the form of rituals, ceremonies, etc. Ex: Many companies have sports teams and different departments compete against each other. OR Friday causal dress day is another company cultural norm. The Culture Cluster can de divided into 10 separate areas that should be examined. 1. Decision making and problem solving This covers all the ways decisions are made in an organization, including those that reflect management and board receptivity to new ideas, esp. the alliance concept. This is one of the most common areas for culture clash in alliances. One decision-making style is the “shoot from the hip” (To make a decision or execute an action in the spur of the moment), haphazard decision making style of some Start-up companies. Ex: Retail Clothing Business. However, the companies may run into a brick wall when everyone in the organization defers to the Warrior manager and makes no decision without the Warrior’s approval. An important aspect of decision making is conflict resolution. The issue here is the facilitation and solution-finding process, which generally involves finding compromises. Is an issue send to a more senior executive to be solved and if not, how are the problems solved. It is essential to understand the decision-making process of the organization. 2. Authority –delegation and control; reporting methods Decision-making analysis will naturally raise issues concerning authority. “How is authority delegated and what management controls are in place, including reporting responsibilities?” This is interrelated to the decision-making process. 3. Work behavior This topic comprises of dress, management of work space, arrival and departure norms and whether a company is task or process-oriented. Ex: IBM corporate uniform of well-tailored suit, white shirt, and tie, and formal clean-cut looks, also seen in the conservative dress of many large consulting and law firms. One Start-up company involved in speech recognition was actually more productive at night than during daylight hours. Other organizations use time cards to regulate and record the comings and goings of all employees. 4. Compensation and incentives Most organizations have standard policies and procedures regarding compensation and incentives. The problems occur when an alliance might call for a company to find a different way of looking at compensation. A clear statement of understanding of the corporate culture regarding this issue in the inception stages of relationship planning would have averted the bad feelings and diminishment of trust that later were very difficult to repair. 5. Leadership and mentoring styles Leadership styles can vary from autocratic (exerting total control) to totally delegative (exerting little or no control). The amount of leader control is inversely proportional to the amount of group participation. (Clearly, at the autocratic level there is no group participation). Ex: in certain parts of India a good business leader will be one who makes decisions without asking for the input of his subordinates. Mentoring programs is an important part of many companies management style. Apple computer is one of them.The company chooses individuals steeped in organizational culture to groom others who are less familiar with the cultures. Mentoring provides political and substantive internal access for fast-track junior executives. 6. Communication—oral; written; nonverbal The message being communicated is not only one written down, but also the act itself causes the delay, shelves the project, and avoids risk—and risk avoidance is the real message. That is why the way people present information to partner is an issue in self analysis. Some companies could not make decisions unless the material was presented in a way with which they felt comfortable. If the partner is unprepared, the company may change the perception about the partner and think that their partner is sloppy and did not give the project serious enough attention. Country (macro) culture is of course important in communications. Miscommunication can occur on many levels when you combine country cultures, beliefs, systems, values, protocol, and traditions. When managing an alliance, understanding the difference in communication styles helps to lesson the tension. But the real struggle occurs at the earlier point, the planning stage. If you can not conquer your organizational reluctance to analyze this issue now, it may come back to haunt you later when you are already invested in a partnership. 7. Level of secrecy Closely related to communication, the level of secrecy considered necessary also follows the continuum of life-cycle stages, with Start-up companies generally being most opened. The exception to this is that family or closely privately held companies are often very secretive, no matter what stages of the cycle are in. This law of secrecy applies to revealing corporate goals, knowing who the actual decision makers are, close-door meeting, etc. However, public company cannot be secretive about the information that must be disclosed by law, but that does not mean that internally and politically they are open. 8. Attitude Toward Time and Milestone Individual, companies, and countries, differ enormously in their conceptions of time. “On time” to one may be “half an hour late” to another. This issue has particular impact where decision making is multilayered. Time is a cultural norm. The terms “now,” “soon,” and “on time” have a corporate cultural meaning and sometimes a vastly different macro-cultural one as well. Example, Speedcom, Computer Company, schedules the meeting at 9.00 a.m., but the meeting actually had begun 9.20 a.m. A twenty-minute delay in start time was the corporate norm. Milestone has to do with the time-related expectations that placed within and around alliance projects. 9. Ethics and Value Each of us has an individual code of ethics. It can be based on religions or a nonreligious code. Now, many organizations are actively developing a code of ethics. Ethical attitude permeate the entire culture; people with similar beliefs are attracted to each other, whereas those with different code of ethics will gravitate elsewhere. It is important to raise the issue as part of the Culture Cluster analysis because ethic has come up with increasing frequency as an alliance deal breaker in recent years. Your ethical position as an organization will clarify the decision that you must make when you balance business opportunity with ethical decision made in selecting a compatible partner. 10. Personal versus Corporate Goals The final aspect of the Culture Cluster is of particular importance in family owned company. If the company is privately held, the family will have no reason to share their intimate concerns with others. In this case, the personal goals of the family are the corporate ones and they may be unclear to anyone in the entire organization except the family members. In an alliance with family-owned company, the other partner needs to understand the family way of doing things, especially if it isn’t rational from a business perspective. Example, The U.S. Company behaves in a U.S. fashion, looking at issue in terms of money valuation only. Other cultures value relationships more. II. The Financial Picture To get a clear financial picture of the organization, you must look at the financial history and past plans and focus on financial projections that were not attainable and got bad performance. This is because it will help you to analyze how you implemented plans and which one was fit or was not fit with the strategies to avoid the same mistakes. III. The Business Definition and SWOT Analysis 1. The Business Definition There are two goals for the business definition - To define existing business. - To assess future potential. 2. SWOT analysis The way to do SWOT analysis - List the major characteristics of a company which contains A description of the company Products and services Market Competition Physical Human Financial resources - Outline both strong and weak areas. - Include product, service, and market evaluation in SWOT information and prepare questions and thoughtful answers that you think your international strategic partner might ask such as “Has the product been tested and proved in the home market?” or “How has the product/service been doing in the United States?”. Organization responsibility SWOT analysis should include sources of strength for membership on the alliance team. In the planning stages, the team should include representatives from Corporate planning group Operations CEO R&D Marketing Finance This is because cross-functionality is very important to broad-based responsibility for the alliance. IV. The Possible Strategic Direction In this process, it will need to discuss the preferred strategic direction into which the company will direct its alliance activity For large company, the strategic information gathering and SWOT analysis is repeated in each division. The information has to be shared and centralized to gain the maximum benefit. There should be a central repository for competitive analysis such as in the departments of business development, corporate alliances, or strategic planning. In one company, centralized sharing of information and planning did not take place; therefore, a number of divisional managers found themselves bumping into their colleagues in the lobbies of the same potential partners V. The Senior Executive’s Input: “Golf Course” and “Designer” Alliances Golf course alliance – arises when two chief executives meet on the golf course and agrees that they really should do something together. After that each CEO goes back to tell his staff to work on the problem and let do strategic alliance with XYZ Corp. The staffs are more forthright. Designer alliance is a relationship that is announced with great fanfare and press coverage and hailed as a great new step toward changing an entire industry. Because of inadequate strategic fit and a short-circuiting of the process of the strategic, corporate, and personality analysis, the task are much publicized, so actual work will slow down. For example, the latest high-fashion designs, which are given enormous, press coverage, but few normal people actually wear such clothes, not do they have real practical work. VI. Selection of Alliance Strategy Now, you need to decide what type of alliance strategy is most appropriate for you. Since now you understand how your organizational culture works, and the financial and strategic pictures of your company, the risks can be managed. Develop a mission statement You should now be in a position to develop a mission statement for your alliance activity that has both qualitative and quantitative. An important of writing a mission statement is that it serves as a reference point to assess your company’s success in the alliance. Examples of statements of success expectations are ROI, expanded distribution, certain sales revenues from new products. Statements of goals that are too generic and undefined may lead to unreasonable and misaligned expectations. If you do not clearly state your success criteria in the planning stages, it will be difficult to make strategically correct decisions. Defining your success criteria at this point will assist you in looking clearly at the opportunity within your corporate guidelines, and will help you refocus your energies in a strategic direction. New team members in both planning and implementation may not remember the starting position in relationship development and may undervalue some of the concessions and compromises. This is good reason to develop a formal, explicit, written statement of your objectives and your success criteria for the alliance. Group 10: Dada, Vorakarn, Natcha, Patharaporn How To Find and Select Alliance Partners: Chapter 3: How to Find & Select Alliance Partners Finding an Alliance Partner Partnering Axiom Number One: You can only partner with someone or an organization that wants to partner. Where Does One Find Great Alliance Partners? There are several places to start finding great alliance partners: Your suppliers: They know your competitors and other local business people from a different perspective than you. You can learn about their buying habits, bill-paying habits, and other important information about them. They are generally a wealth of knowledge. Your customers: They have most likely done some business with the person or company that you are seeking. They, too have a unique window through which they have viewed your potential alliance partner. Your professional or trade association: a great place to search if you want to build an alliance with either competitors or suppliers. The executive director of the association is usually the person who is most in tune with the players in your industry. Newspaper and trade magazines: These sources offer current information on the movers and shakers in many industries. They also compare, research, and tell interesting bits of information about businesses and key layers. Study these publications as a source for selecting possible alliance partners. Local successful business people: They can be found at the chamber of commerce activities and mixers, civic service clubs, charitable organizations, and even local seminars. Study groups and mastermind alliances: If satisfied partners are unable to be found, start one with people in your community. Think about outside professionals: consultants, lawyers and accountants. Internet Selecting an Alliance Partner Identifying a Strategic Alliance Partner’s Core Values First, compare your core values with the five values. Be clear on what both you, and your company, are all about. Then, as you start looking at possible partners, seek to understand their values and try to determine if your circles of interest overlap. The more your circles of interest overlap, the better the chance for your future alliance to be successful and lasting. If you have little information on your potential partner, first try working with them on a small project. Though the project is small, be sure it is somewhat difficult. Then wait and watch to see how they operate under pressure. You will then have a better idea about their viability as an alliance partner. Understand your needs, strengths and weaknesses. Be sure to also understand those of alliance partners. Do this and your success is nearly certain. 5 Values 1. Trust For alliance relationships, trust is the necessary element to move the possible alliance from inertia to action. Without the trust factor, alliance relationships are sure to fail. To help you in building trust and creating an environment where all partners have the ability to grow fully comfortable with one another. 1. Recognize and reinforce the relationship behaviors you want of you alliance partners 2. Break down the communication barriers between your and your alliance partner’s organizations. 3. Quarterly, or at least semi-annually, complete a relationship value update form, and then encourage your alliance partner to do the same. Send your completed form to your alliance partner and ask your partner to send theirs to you. 4. Be a role model of the behaviors you believe are important for alliance partners. However, trust wisely, and with caution. Do the right things, looking toward the long-term rather than the short term. Help your alliance partner to help you. Let the trust build and grow over the years. Do these things, and the benefits that you and your partner share will multiply. 2. Tolerance For an alliance to work, the core value of tolerance must be cherished and practiced by all the alliance members. When you can accept the value of an idea rather than be concerned about whose inspiration it was, you will truly exhibit tolerance. Then you exhibit tolerance, the by- product of your effort is understanding. When you understand your alliance partner and their needs, you will work toward creating value for them in their areas of need. 3. Cooperation Success is only possible through an attitude of cooperation. Today, most business want to grow and that is an important reason for developing strategic alliances. And growth is the natural outcropping of cooperation. Therefore, in order for alliances to grow and succeed, they must cooperate and work together, rather than separately. 4. Commitment Caring enough about your strategic alliance and its members is the necessary foundation to making a commitment. It is this element that allows each partner in an alliance to feel he will be heard, and will be reasonably safe from criticism. 5. Mutuality A strategic alliance must be an institution where individuals, organizations, and companies come together to develop a relationship of trust, tolerance, cooperation, commitment, and mutuality. Importantly, couple these values with the desire to win and now you have the foundation for successful strategic alliances. If one strategic alliance has no design to win, it will adhere to another and enjoys free ride, hanging on and benefiting from one another’s effort and contributing nothing. It can only be dislodged with great difficulty and pain. So mutuality is the must have ingredient in a successful partnering alliance. The 10 Crucial Qualities to Look In An Alliance Partner 1. Your partner wants to win. Pick a partner who is already a winner. The relationship with a weak partner will only bring you and your organization down. Both you and your partner must have a desire to win, want to be better, to be useful in creating only what will be valuable to all concerned. 2. Your partner must understand that they are ultimately responsible for their own success. A person who will partner because he or she understands the value of synergies is a great partner. Important, too, is knowing when partnering is and is not the best choice for a situation. Caveat parts! (Beware of Partner!). Accountability is a double-edge sword. Don’t always assume that your partner is looking out for your best interest. You both are human – and as such, are susceptible to the fault of not always acting in your partner’s best interest. 3. Your partner must be an active listener. To truly keep in touch with the heartbeat of an alliance, active listening is a crucial skill. This helps you to know what you need to do and when the other side is falling behind in their commitment to you. Alertness from both sides equals mutual success. 4. Your partner must understand and care about what drives your business. Because successful partnering is about synergies, you must consistently give and receive additional value in the relationship. The only way to add value is to know what it is that creates value for your partner. This is the only possible with an understanding of the needs and goals of your partner. 5. Your partner must respond to, and act on, feedback. The only possibility for a forward and beneficial movement in any organization is with leaders who are willing to accept council. Not one of us is smart enough to know it all! 6. Your partner must be flexible, especially when events or circumstances are not what were expected. If you don’t have the ability to change direction when the road ahead is washed out, you will most likely find yourself wishing for rescuers as you float uncontrollably down the stream. Flexibility is absolutely necessary because things will never be exactly as we expect. Silicon Graphics’ Stan Meresman believes in “saying flexible enough to evolve our relationships.” 7. Your partner must be trusting, trustworthy, and with integrity, respecting all with whom they come in contract. You can’t always be looking over your shoulder in an alliance relationship. Partnering with people who are trusting and trustworthy relieves a major nuisance, one that you can do without. 8. Your partner seeks win/win arrangements and solutions. You must look after yourself. But if that’s all you do, you’re of little value as a partner. You must win for the sake of your organization. And your partner must do the same. You do not want a partner who sees the world as zero-sum game. You want a partner that is interested in making the pie bigger, so everyone gets more. This creates a desire for both of you to continue the relationship. The partnering advantage becomes stronger, the longer the relationship lasts. 9. Your partner must understand that partnering is a relationship of interdependence. Not dependently or independently, but together, you are weaving a tapestry. Visualize your partner and yourself as overlapping circles. The parts that overlap are your area of mutual interest and value. The greater the overlap, the greater the mutual interest and value. This overlapping area is your area of interdependence. Working together for mutual improvement is one of the great benefits received from partnering. 10. You and your partner must have great chemistry. If both people or organizations exude many of the above qualities, and have good chemistry, it is an unstoppable alliance. This is what we all desire to achieve. Credentials of Your Future Alliance Partner The ability to do and produce what your partner perceives you can (individual or company) through skills, technology, and relationships. Alliance agreements are of little value when a partner cannot deliver what is promised. Have something new to bring to the party. If you are selling hamburgers, then lettuce, pickles, and catsup are necessary but not innovative. Building an alliance with someone who only has these to offer is fine, but limiting. Suppose someone could supply you with all of the above, and had guacamole? The guacamole is different, thereby allowing you to create new product – the guacamole burger (it is a silly example but it makes the point). A partner that had an innovative method to produce fat-free fried chicken would also be bringing something new to the party, allowing you to increase your penetration within a limited local market. Having the financial ability to stay-the-course. If your alliance partner has the means to continually contribute their agreed share, your continued success is promising. Cultural compatibility, operates from integrity, and is willing to challenge existing corporate paradigms. Complimentary core strengths, allowing for benchmarking of overlapping capabilities and the elimination of “recreating of the wheel syndrome.” The ability to think not only strategically, but also tactically. - Following are three relationship realities, unpleasant as they are. These realities will have a powerful effect, good or bad, on the success of your alliance relationship. People do not change after marriage! What you see is what you get! You deserve the partner you select! Knowing the alliance partner: Who they are is important. You should visit your potential partner at their place of business. This may seem a bit on the edge, but.. set up an appointment to visit for, say Tuesday, but show up on Monday. When they say you’re a day early, say “I’m sorry, my mistake. Can we visit anyway?” If they are less than willing to let you look around, you would be suspicious and consider the situation a red flag. Why? On a personal level, when you have a party at your house, don’t you always clean up, get special food for the party and so on? Sure you do. You want to put on your best face and it is not really who you are everyday. It is not how you live, you want to catch you potential alliance partner in their real life, not with the special face they put on for you. Knowing who your partner really is eliminates much of the need for conflict resolution and exit agreements. If you are clear about what you have to offer an alliance partner and what you want from an alliance, you have discovered purposes. When you have a purpose in developing a strategic alliance, your plan seems to arrive on its own. Then the road map of success will become clear to you. Selecting the Partner Choosing the alliance is one of the most important issues in forming the alliance. It is because it deals with the success and failure of the alliance, and when the alliance fails, there is no recovery from choosing the wrong partner just like the marriage. The partner selective process is a step 5 of the Alliance Framework, which can be split into three issues: 1. Which potential partner shows the minimum trouble for some disagreements in SAEs? 2. Which potential partner provides the best match of required resources? 3. Which potential partner agrees with our deal itself? In an ideal world, the best partner will be seen after step 3 and 4. However, in the real world, selecting partners or narrowing down the partners is very difficult because it is rare to find the partners who are completely aligned on all strategy and resources. Therefore, we come up with the Alliance Framework to help choosing the best possible alternative of potential partners and then move forward to the negotiation on an agreement in step 6 through the strategic and resource fit reconciliation maps. The Strategic Fit Reconciliation Map Many companies planning for an alliance often come across with a problem of differences in strategy. To solve the problem, there are three possible ways which are, to agree with the partner’s position, to convince the partner to agree with your position, or to develop a compromise between the two positions. The strategic fit reconciliation map plays an important role in helping the firm to choose the right partner. The process will simply provide a visual summary of the strategic fit between each partner in a matrix form, which also makes it easier to communicate to the top corporate management by allowing them to assess the information in just a glace. Structure & Process of the Strategic Fit Reconciliation Map Strategic Assessment Our firm Partner 1 Partner2 Elements (SAE) Objective Roles Market Models Symbol Meaning Symbol Meaning OK The partner accepts our position in the SAE OK+ The partner’s resources are outstanding and complementary to ours ? We have disagreement, and are unsure about the resolution We have disagreement, but the partner is likely to accept our position We have disagreement, but the partner’s position is acceptable to us ~ A compromise can probably be negotiated that meets both firms’ strategic needs x A probable deal-killer. We have disagreement and cannot accept partner’s position. An acceptable compromise is unlikely A partner has a weakness that can be overcome through the use of third-party resource in a financially viable manner Sample Case: The Pet food Company Background: A large pet food company wants to form the alliance with a biological firm to come up with new nutrition ingredients into its pet foods. The goal is to jointly develop a series of new product lines with a biological firm. The pet food company would distribute the improved products through its distribution network. Problem: There were two biotechnology candidates (company A and company B). The pet food company decided to go on the process of strategic assessment. As a result, in step 3 of SAE, it showed clearly that both firms had conflicts with the pet food company. Conflict: Our company To establish and maintain reputation for innovation though sole-branding The customers would see the pet food company brand only, not biotechnology brand Intended to do the alliance to achieve long-lasting advantage over competitors Company A Wanted its name associated with the new pet food Any jointly developed product will be cobranded Company B Gave a pet food firm a one-year exclusively right to use the nutrients, after which Company B would be free to provide licenses to others After analyzing each company’s requirements, we can simply put them in the map below. SAE Pet food company Company A Company B Our objective Sole brand ? [cobranded] OK Market Model Sole brand ? [cobranded] OK Strategic Exclusivity Exclusive rights OK ? [one-year head start] Resolving the disagreement: The pet food company looped back to step2 and reconsidered whether sole branding was necessary? Therefore, they came up with a solution that joining with company A would also help them to achieve their marketplace objective. However, the solution for company B was impossible for them as they believed that it was too risky to build a strong foothold in the market to defend competition in only one year Therefore, the updated strategic map will as the table below. SAE Pet food company Company A Company B Our objective Sole brand OK Market Model Sole brand OK Strategic Exclusivity Exclusive rights OK X The Resource Fit Reconciliation Map Purposes: To summarize the resources that potential partners provided whether which one was best fitted to the company in order to develop a successful joint venture To test the quality and quantity of the potential partners’ resources whether it could fit with the firm’s resource or not Example of the Resource Fit Reconciliation Map Key Resource Company A Company B Resource 1 Resource 2 The example of pet food company (Con’t) Company A: Outstanding research commitment and development Satisfactory level of technical support provision Satisfactory ability to work closer with the pet food company’s staff to jointly develop new products Company B: Outstanding research commitment and development Satisfactory level of technical support provision High ability to work closer with the pet food company’s staff to jointly develop new products After analyzing these scenarios, we can put it in the resource fit reconciliation map in the same way as we plotted the strategic fit reconciliation map as followed Key Resource Company A Company B Research capability OK+ OK+ Technical support OK OK Contribution to joint development of product OK OK+ based on preexisting nutrients After analyzing both the strategic and resource fit reconciliation map, the pet food company concludes that they will choose to do the alliance with Company A even though they contribute less than Company B because Company B’s one-year exclusive right in the Strategic fir Reconciliation map is not acceptable. Therefore, Company A is chosen. Self-Selection: The Intangible Factor in Partner Selection Strategic fit and resource fit are important to select partners, but another important factor is commitment by partners toward the project. Motivation behind a successful alliance comes from the hearts and minds of key people. When the firm’s people have self-selected themselves into the deal, the energy that comes from self-motivation is tangible and translates into positive alliance results. The Multiple Partners Option In the best case, one potential partner stands out above the other and is clear choice for step 6 negotiation. However, sometimes the strategic fit, resource fit, and commitment level show that two or more candidates are highly qualified. In this case, the best course of action is to move forward to step 6 negotiations with multiple firms. Final partner selection depends on the results of other alliance framework elements such as Financial Pie-split. There is another situation where multiple step 6 negotiation is required. Sometimes, step 2, 3, and 4 show that the alliance should be a multiparty relationship For example Battelle’s MicroCATS alliance, the resource fit assessments show that an alliance with several partners could best meet Battelle’s needs. Before starting step 6 negotiations, you will need to review the strategy fit and resource fit assessment carefully. In that review, you must evaluate the likelihoods that all of the companies involved will agree to compatible positions on all Alliance Framewo
"What Is an Alliance "