Alliances and Network

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					Alliances and Network
 first week of April

   M. Tariq Yousafzai


   Partnerships and alliances and
      supply (chain) networks
        In what form

                        The content
    1. Background and         3.Alliances as networks
    purpose                   and supply chain
    Trends and motives        Types of networks
    Benefits of alliances     Network changes
                              Network effects

    2.Alliances as dyads      4. Managing alliances as
    Type of alliances         dyads and networks
    Different perspectives    Performance
    Dimensions                Positioning
    Changes of alliances      Development
                              Handling effects
Part I

               Some changes
          influencing the need of alliances

 •   Internationalization and globalisation
 •   International competition
 •   Outsourcing and reduction in suppliers
 •   R&D and shorter product life cycles
 •   Time to market
Give me examples of alliances!
Susanne Hertz, SSE,2000

                          Global logic of alliances

        • To compete on the global arena you have to
          incur fixed costs
        • With enough time, money and luck, you can
          do everything yourself. But who has
        • Having control does not necessarily mean
          better management
                                             K. Omae, HBR, March-April,1989
Part I

         Basic motives of alliances
    • Transaction costs - bargaining
    • Enhance competitive positioning and
      market power
    • Quest for organisational knowledge and
                                Gulati, 1998
Part I

         Classification of alliances

         1. Degree of commitment and integration
         low, medium, high

         2. Function based
         i.e. product development, distribution, production, purchasing

         3. Formal- informal
         4.Symmetry-assymmetry ( including the power issue)

         5. Type of actors involved (competitors,buyer-seller, distributors )
         6. Geographical spread ( local, national, regional, global)
Hertz, 2000

   • Firm - Firm

   • Net - Firm

   • Net -Net
Alliances as dyads
        Alliance definition

   ”A long term relationship where
      participants cooperate and
           willingly modify
        their business practices
    to improve joint performance”

Whipple and Frankel, JSCM, Summer 2000
Part II
          What is an alliance/partnership?
                        Based how it is mostly used in literature

                                                         Strategic. Alliance
                                                         include. J/V and part-
                                       alliance          ownership


          Transaction                         Relationships

           Degree of commitment
Part II
          Relationships/ alliances

            Degree of commitment
                Economic exchange
              Frequency of exchange
                Type of interaction
         Alliances from different
• Supply Chain Management
• Industrial Marketing
• Purchasing
• Marketing
•   Service marketing
•   Relationship marketing
•   Social networks
•   Organisational and management literature
Part II
                           Supply chain network
                  consisting of a a number of relationships

          Single relationship

                                Focal firm
               Upstream                       Downstream
Part II

              Interacting dimensions of


                                                                                      Part II

                       Relationship life cycle

termination?                                Enlargement/           Disintegration
                                            Commitment             dissatisfaction
                                            stable stage
                       closer cooperation   Institutionalization                     Dissolution
                       expansion                                                     Termination
Pre-relationship                                                                                Formatio
or awareness stage
      Individual alliances will not
          easily break- Why?
•   Investments
•   Costs of breaking
•   Trust
•   Knowledge

• This creates inertia
Part II

          Global logic of alliances
                    (K. Omae)

  • Nine times out of ten you will want to stay
    in the alliance if you can
  • The way to wreck an alliance is to become a
    check casher, a coupon clipper
Part II

          When and why to switch

   •   Marketing forces
   •   Internal conflicts
   •   Acquisitions and mergers
   •   New opportunities
  Different roads to dissolution
• Who is breaking
• Direct or indirect
• Dissolution quality ( intracomp. exit,
• Task related, actor related or network
Part II

   Gradual way - the most common way
           Three different ways

           • relationship of lower importance - less volumes
          • break but stay in the supply chain
          • break but stay in the firm network
          • leave the network
Alliances as networks
Part III

           Definition of a network
  • A network is a set of connected
    exchange relations between actors.
  • Exchange relations are defined as
    connected if exchange in one of
    relation is contingent upon exchange in
    other relations
Part III

           Firm network

             The firm
                             Relationships and supply chain network

          C1                                                                               Customers
                   C1    C1 C2                                 C1                           C1= consumer
                                                                            C1       C1
               D                                                                          C2= org. customer
      D                                              C2            C2
                                      A                                 A                 Distributor
                             D                             D
           P                                                                     D        or agent
                                                                                           A= agent

          P              A                                     B             P            Partners
                                                                                            P= partner

                    S1                                    S1
 S1        S1                    S3                                 S1
                                               S2                                S1       Supplier 1 tier
                                                                                             S1=supplier 1tier

                    S2                                    S2            S2              Supplier 2 tier
              S2              S3                                                          S2= supplier 2 tier
                                                  S3            S3
                                                                                     Other suppliers
                                                                                     S3= Other supplier
What could this alliance mean to downstream and upstream partners?
Part III

               Supply chain network
                 change patterns
      • Supply chain network formation/ joining
      • Supply chain development include closer
           cooperation and enlargement
      • Supply chain closing up
      • Supply chain splitting- leaving
      • Supply chains drifting closer/away
Joining of networks
Closing up
  Horizontal and vertical alliance

                                                               Horizontal network
     Transport firms representing each other in different countries

Vertical networks
include customers and suppliers
    Alliance network development
       a study from J. Ludvigsen, 2001 doctoral dissertation

• E1 a network formed of transport alliances
• To meet European transport MNEs
• In order to reach operational and strategic fit
• Developing from smaller networks to a joint
• Development from close cooperation to closing up
• Solving crises together cause of higher integration
• Institutionalisation in EEIG common grouping
                 Overlap or complementarity?
                  in alliances of supply chain networks

                            Type of products/services

                       Different               Same

                  Fully complementary     Overlap
Geographical                              / complementary

                   Complementary/        Full overlap
Part III

                            Network effects

     • Externalisation effects (ex.telecom)
     • Forrester or bullwhip effects amplication
           of demand changes ( dynamic performance -info and physical systems -
           small disurbance large effects

     • Domino effects
     Overlapping supply chains
         and firm networks

Firms are part of several supply chains

Movement between supply chains in firm network

 Once you are in, you have a bigger chance
        Effects of overlap

Overlapping supply chain networks

                                  a) increase
                                  b) decrease
    a) Decrease    a) Decrease
    b) increase    b) increase

Supply chain       Supply chain
network 1          network 2
      Domino effects



              A radical break
often a result of strategic change
         at network level

 Exemple of strategic change
  strategic alliances, mergers and acquisitions
         Dynamics of alliances and market restructuring
                                           Competitor alliance
   Network processes

                     Internal developm.
                     focal alliance

Relationship processes                        breaking/dissolving
Customer- focal firm     Hertz& Mattsson      relationships
                         SJM 2006
Management of alliances as
   dyads and networks
Part VI

          Management of alliances

  •   Performance
  •   Development
  •   Positioning
  •   Handling effects
Part IV     Performance

                    Problems to be handled
    •     Missions and domains
    •     Job division
    •     Expectations
    •     Cultural differences
    •     Power distribution

        ( Ludvigssen, 2001 ” The international networking between
        European Logistics Operators” Doct dissertation, SSE

                       Cultural fit?
      • Main stream culture
      • Organisational culture

      • Managerial style
      • ( autocratic,democratic
      • Individualistic-collectivistic
      • Trust)
Part IV Performance

   From management to leadership

      Financing       Communication
      Projects        Commitment
      Measurement     Behaviors
      Science         Creativity
      Tools           Overcoming resistance
      Consulting      Self leadership

     etc              etc
  Dissatisfied? Intra-alliance fit?

      Inhibitors                          Stimulators
• Disparate benefit of             • Types of tasks performed
  alliances                          in concert
• Lack of willingness to           • Relational bonds and
  accept unpopular                   functional co-dependency
                                   • High level of mutual
• Lack of propensity to              control due to
  reach consensus                    standardisation
• Lack of willingness to           • Trust and commitment to
  contribute to resources            alliance welfare
  and alliance missions
                            Ludvigsen, 2001
           Inter- alliance fit?
               Before forming alliance?
• Degree of overlap or complementarity?
• Corporate cultural differences and management
• Power balance?
• Differences in strategic interests?
• Development - speed and direction?
• Access to network partners?
• Effects and costs of a change?
Part IV performance

            Different types of strategies
                           dyads and / networks

 • Dyad - establish, develop, break or switch
 • Supply chain network - changing your position
 •   Increasing/ decreasing integration
 •   Conflict/ cooperation- group work
 •   Changing direct and indirect relationship
 •   Leave/ enter
 • Industry network
 • Overlapping/ complementary
 • Moving in or out or supply chains

     Making use of relationship lifecycle pattern
                  Positioning ?
• Your firm´s position in the alliance- Related to
  actors-resources and activities
• Your position in the network -horizontal or
  vertical (supply chain network)
• Your network in comparison to others
               Handling the effects?
• How to prepare for the domino effects?
•   Where can we expect large acquisitions or mergers
•   How would such an alliances influence us? Directly -indirectly?
•   What can we do to prepare? Alternative solutions?

• How to make use of the externalisation
•   Extension of the number of actors in the network
•   Interaction between actors
Category of alliances?
Part VI

           Success factors expressed as
          ”8 i´s for successful alliances”
             (Rosabeth Moss-Kanter” Collaborative advantage- The art of alliances HBR 2:4 July Aug 1994)

    • Individual                                 •     Information
      excellence                                 •     Integration
    • Importance                                 •     Institutionalisation
    • Interdependence                            •     Integretity
    • Investment
    What have you learnt?

When and why do you need alliances?

Alliances of different types?

How do partnerships or alliances change?

Network of relationships   - a supply chain network

Strategies for alliances

The industry networks and alliances dynamics

Management and implications
       The ASG- Danzas case
• What are the main objectives of the alliance
• What were the strengths and weaknesses
  before when forming the alliance ?
• How have these strength and weaknesses
• How would you as a new CEO cope with
  the situation? What different problems have
  you solved with your suggested solutions?