Types of Strategic Alliances

1. Types of Strategic Alliances Chapter 2

2. Strategic Alliances for MarketingCross-Promotional Alliance • Cross promotion Alliances are one of the more common types of alliances • Companies promoting each other with the use of discounts, coupons, specials, shared advertising space or in-store promotions • Exceptionally efficient in reducing costs of advertising • Ex: Business Class flights offering a free AOL disk with peanuts

3. 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 exposure and market impact opposed to traditional single brand advertising • Ex: Mattel and McDonalds offering toys that produce McDonalds hamburgers and Fries

4. 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 for an alliance to succeed, especially when the scope of the alliance is national/global • 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 regions, which allows them to service the national need for awnings

5. 4. Industry-specific Geographical Strategic 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.

6. 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.

7. 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.

8. 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.

9. 8. Strategic Alliances for Buying Parity • Such as buying cooperatives or buying groups • Buying as a group can make similarity of prices 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.

10. 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

11. 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.

12. 10. Strategic Alliances to Beat competitor • 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.

13. 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.

14. 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.

15. 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 Ex. GM and the federal government of the U.S.A are combining forces to complete extensive research on electric car technology

16. 14. Strategic Alliances for Manufacturing and Construction • Partnering – Having all the keypeople involved on a project attend a workshop • Four Basic Components of Construction Project - Owner - General Contractor - Architectural and engineering - Sub-contractors • Advantages of Partnering - Save time and money Ex. Arizona Department of Transportation ( 19.45% time saved and total project saving of $2,329,026

17. 15. Strategic Alliances Between Private Business and State-Owned Foreign Business • Risky but can be profitable • Ex. Honeywell and Sinopec • Honeywell can double the sales to Sinopec’s 38 enterprises. • Honeywell anticipates a minimum of $75 million in new sales over the five years

18. 16. Strategic Alliances for Distribution • Coca Cola and Nestle - Both parties get benefits, Coke has good distribution channel, and Nestle has products that do not directly compete with existing products. • Non-Exclusive Agreement - Ex. Steelcase, the world’s largest manufacturer of the office furniture and office environments, distributes its products through a dealer network. Dealers can sell other products of other manufacturers to complete their own product line and serve their customers better. • Exclusive Agreement - Ex. State Farm Insurance Companies alliance with their agents is called the Marketing Partnership. It gives its agents everything they need to conduct business, and it also sell them other items to make improvements.

19. 17. Strategic Alliances with Your Customers • It can be very rewarding Vendor Managed Inventory (VMI) • Electronic Data Interchange (EDI) • Just-In-Time(JIT) • Integrated Supply (I/S) • Benefits for Participants - Improved inventory control - Reduced vendor base - Increased product and supply turns - Reduced inventory investment - Reduction of transaction cost - Improved service levels - Increased sales - Reduction in out-of-stocks - Improved profit margins - Reduction of purchasing staff

20. 18. Strategic Alliances with Your Suppliers • 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. • Examples

21. Techniques to build a strong alliance with your suppliers • Look for partners who wanted to partner with you • -- Spend your time building those relationship with your suppliers that will help you to serve your market and improve your bottom line • Ask your supplier “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

22. The Fuji Factor • It 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 - Accessibility - Trust

23. 19. Alliance on Internet • A perfect example 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

24. 20. Mastermind Alliances • Known as strategic alliances for individual development • “ Palm Springs Breakfast Club” - alliance with other California cities to draw tourists to the state - mastermind alliance with consisted of general managers from seven other deluxe hotels, the convention center director, and the owner of the aerial tram - they discuss issues uniquely important to the hospitality business in downtown Palm Springs