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Strategic Alliances in Distribution

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					Strategic Alliances in
Distribution
Chapter 11 with Duane Weaver
What is a Strategic Distribution
Alliance?
 …when two or more organizations have
 a connection that cause them to
 function according to a perception of a
 single interest whereby the connections
 that bind the organizations are:
  – Enduring
  – Substantial
  – Cut across numerous aspects of each
    business
Establishing Strategic Alliances
Three Areas of Consideration – “FIT”


      • Chemistry Fit


      • Operations Fit



      • Strategic Fit
        Reference:
           Lynch, Robert P., 1993. Business Alliances Guide: The Hidden Competitive Weapon -- How to plan,
                                 negotiate, and manage strategic partnerships for increased corporate profits.
Establishing Strategic Alliances
Corporate “FIT”
     CHEMISTRY FIT:
      A measure of the quality of the
      relationships among the people involved
      in operating the alliance

       • A fool may be known by six things:
          1. Anger without good cause
          2. Speech without profit or direction
          3. Change without progress
          4. Inquiry without object
          5. Putting trust in a stranger
          6. Mistaking foes for friends.
                                            -- Arabian Proverb
Establishing Strategic Alliances
Corporate “FIT”
      OPERATIONS FIT
       “Some executives fall into
       their own trap by assuming
       that a good strategic “fit”
       implies a good operational
       fit.”
       E.g.: Olivetti and AT&T
Establishing Strategic Alliances
Corporate “FIT”
      STRATEGIC FIT:

      – Looks at STROI to build strategic synergy
        whereby the weaknesses of one company
        are offset by complementary strengths of
        the other.
        Thus, strategic direction is similar while
        operational strength and weaknesses are
        dissimilar.

      – STROI = Strategic Return On Investment
         • measures: Market Strength, Innovative
           Capacity, Financial Gain, Organizational
           Capability, and Competitive Advantage.
Styles of Alliance Operations
Motives for creating distribution
alliances
• Upstream Motives
  – Respect downstream, motivate to represent us,
    coordinate marketing, small players to giants
    (mergers) trend, erect barriers to entry, logistics
    cost reduction
• Downstream Motives
  – Assure stable supply, make marketing efforts
    more successful, cut costs, differentiate from other
    distributors,
• Alliances as out performers of ordinary
  channels
  – Discuss in your groups…what do you think?
Building Alliance Commitment
via incorporating mutual vulnerability

•   Expectations of Continuity
•   Necessity of Mutuality
•   Gauging Commitment
•   Actions Binding Distributors to Suppliers
•   Actions Binding Suppliers to Distributors
Building Commitment by
managing daily interactions
•   Manufacturing Trust
      Relative to your confidence in each other’s
      integrity and concern for mutual well-being
      • Economic Satisfaction
         – Positive affective response to economic rewards
           from the union
      • Non-economic Satisfaction
         – Psychosocial affect – relationship valued
      • Choosing Partner and Setting
         – Need complementary capabilities that can be
           exploited for competitive advantage
      • Decision Making Process
         – Centralization hurts trust
Life of a Marketing Channel Partnership:
Relationship Stages

•   See Figure 11.3, p. 339

Marketing Channel Relationship Stages
  1. Awareness
  2. Exploration
  3. Expansion
  4. Commitment
  5. Decline and Dissolution
Conditions of potential success

• One side has special needs

• The other side has the capability to meet
  the needs

• Each side faces barriers to exiting the
  relationship

• The FIT is good across all three areas of fit
Thank You!



    Have a great day…



         ☺