Sustainable Growth:

Developing Partnerships

Strategic Alliances

Why and How To Build Them

 

Vadim Kotelnikov personal logo Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

"A good neighbour is a fellow who smiles at you over the back fence but doesn't climb over it." ~ Arthur Bear

Strategic Alliances Synergy Corporate Capabilities Outsourcing Fast-growing Companies Technology Licensing Sustainable Competitive Advantage

Alliances versus Transactions1

In transactions:

  • Negotiations may be divisive between neither firm cares about the other's well-being.

Wise Agreement

Forms of Strategic Alliances

  • Direct cooperation, the most common form.

  • Joint ventures, where partners create a separate unit they own and control together.

  • Minority investments, in particular corporate venture investing in young rapidly growing firms.

Ten Reasons to Create a Strategic Alliance

By Rupert Aarons, Profit Glory

  1. You could offer your customers a larger variety of products or services. This will allow you to spend less time and money developing new products to sell... More

Structuring a Strategic Alliance

10 Questions To Answer

  1. Do you have a strategic architecture which employees understand?... More

 

Developing Business Partnerships

10 Reasons To Create a Strategic Alliance

Alliances vs. Transactions

Structuring a Strategic Alliance: 10 Questions To Answer

10 Key Features of Effective Partnerships

Core Competencies

Trust as a Source of Competitive Advantage

Developing Trust Between Two Organizations

Mutual Creativity

Joint Ventures

Common Reasons for Joint Venture Difficulties

Causes for Joint Venture Failure

Forming a Successful Joint Venture

Choosing a Joint Venture Governing Structure

Joint Venture Human Resources Strategy

HR Action Steps to Prepare for a Successful JV

Joint Venture Agreement: a Checklist

Mergers & Acquisitions

Venture Acquisitions

Getting People Issues Right in Mergers and Acquisitions

Innovation Strategies

Strategic Innovation

Case Studies

Toshiba: Strategic Alliances as a Key Element of Strategy

Partnership Between TraveLinx and ICit

Alliance Between Canon and Hewlett-Packard

New Tool Development by British Petroleum and Shlumberger

Progroup's Various Sources of Knowledge

Joint Engineering Design by Ford and ABB

AT&T: Developing New Credit Card Service

Harnessing the Power of Diversity

Synergy

Effective Negotiation

Wise Negotiation DOs and DON'Ts

Principled Negotiation

Separate the People from the Problem

Negotiation Tips

How To Sell Your Ideas To Decision Makers

Negotiating Transfer of Technology

Cultural Intelligence

Cross-cultural Communication

Corporate Culture

Managing Cultural Differences

Jokes

Cross-Cultural Differences

Alliance Defined

A strategic alliance is when two or more businesses join together for a set period of time. The businesses, usually, are not in direct competition, but have similar products or services that are directed toward the same target audience.

Alliance means "cooperation between groups that produces better results that can be gained from a transaction. Because competitive markets keep improving what you can get from transactions, an alliance must stay ahead of the market by making continuous advances."1

Strategic alliance is a primary form of cooperative strategies. "A strategic alliance is a partnership between firms whereby resources, capabilities, and core competences are combined to pursue mutual interests."2

Alliances can be structured in various ways, depending on their purpose. Nonequity strategic alliances, equity strategic alliances, and joint ventures are the three basic types of strategic alliances.

Why Strategic Alliances?

In the new economy, strategic alliances enable business to gain competitive advantage through access to a partner's resources, including markets, technologies, capital and people.

Sustainable Competitive Advantage - Synergy of Capabilities

Teaming up with others adds complementary resources and capabilities, enabling participants to grow and expand more quickly and efficiently. Especially fast-growing companies rely heavily on alliances to extend their technical and operational resources. In the process, they save time and boost productivity by not having to develop their own, from scratch. They are thus freed to concentrate on innovation and their core business.

Many fast-growth technology companies use strategic alliances to benefit from more-established channels of distribution, marketing, or brand reputation of bigger, better-known players. However, more-traditional businesses tend to enter alliances for reasons such as geographic expansion, cost reduction, manufacturing, and other supply-chain synergies.

As global markets open up and competition grows, midsize companies need to be increasingly creative about how and with whom they align themselves to go to the market. 

 Case Study  Toshiba

Toshiba’s approach is to develop strategic alliances with different partners for different technologies because a single company cannot dominate any technology or business by itself... More

Functioning as an Alliance

Alliance is defined by its synergistic outcome – results must exceed the sum or the parts. This definition implies needed behavior. "For superior results you can't simply call each other partners. You must function as partners. Alliances go beyond doing things between firms that become transactions afterwards – like licensing, co-locating resources, starting to outsource, or trading a lower price for a longer term. Such tactics may be involved in alliances; alone they produce one-time gain. In an alliance, continued joint creativity leads to regular improvement, outperforming what any single change can do."1

Planning for a Successful Alliance

Before entering into a strategic alliance, enough thought is to be placed behind the structure of the relationship and the details of how it will be managed. Consider the following in your planning process:

  • define expected outcomes from the relationship for all the parties in the strategic alliance

  • define and document the elements provided by each party, and the benefits a successful alliance brings to each

  • identify the results that will cause the alliance to be most beneficial for your business and define the structure and operating issues that need to be addressed to achieve these results

  • protect your company's intellectual property rights through legal agreements and restrictions when transferring proprietary information.

  • define the basics of how you will operate

  • be certain that the company cultures are compatible, and the parties can operate with an acceptable level of trust... More

Some Pros & Cons

Strategic alliances can allow your business to meet its objectives, while maintaining the flexibility to adapt quickly by switching partners, as appropriate.

However, such a partnership may be too informal if your corporate strategy requires the long-term certainty of a joint venture, merger or acquisition. In this case, if your success depends upon a strategic partner's continued cooperation with your business - and not your competitor's business - a strategic alliance might be a trial phase before committing to such an arrangement.

The Seven Dimensions of Strategic Innovation

The Strategic Innovation framework weaves together seven dimensions to produce a range of outcomes that drive growth.

Core Technologies and Competencies is the set of internal capabilities, organizational competencies and assets that could potentially be leveraged to deliver value to customers, including technologies, intellectual property, brand equity and strategic relationships... More

 Case in Point  BP Partners with Schlumberger To Develop a New Tool

British Petroleum wished to measure the effectiveness of their horizontal well drilling processes, but there was no available device to do so. BP pooled their intellectual and financial resources with Schlumberger, the oil field services company, to build such a tool. The result was that BP got a tool that has taught them a lot about making horizontal wells even more effective, and Schlumberger got a new business... More

 Case in Point  Partnership Between TraveLinx and ICit

ICit America and TraveLinx, Canada have entered into a cross-marketing and supplier agreement to deliver Travelinx travel and tourism content as well as a reservations and ticketing engine to TeleCenter installations in hospitality and retail locations... More

SMART Business Architect (Ten3 Mini-course)

 

 
 

References:

  1. Trusted Partners, Jordan D. Lewis

  2. Strategic Management: Competitiveness and Globalization, Edition 4, Thomson Learning

  3. Strategis, Canada's Business and Consumer Site

  4. Mastering Alliance Strategy: A Comprehensive Guide to Design, Management, and Organization, James D. Bamford, Benjamin Gomes-Casseres, Michael S. Robinson