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Alliances and Network first week of April

Alliances and Network first week of April. M. Tariq Yousafzai. Intro. Partnerships and alliances and supply (chain) networks. Why What When Where In what form. Intro. The content. Part I. Some changes influencing the need of alliances. Internationalization and globalisation

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Alliances and Network first week of April

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  1. Alliances and Networkfirst week of April M. Tariq Yousafzai S

  2. Intro Partnerships and alliances and supply (chain) networks Why What When Where In what form

  3. Intro The content

  4. Part I Some changesinfluencing the need of alliances • Internationalization and globalisation • International competition • Outsourcing and reduction in suppliers • R&D and shorter product life cycles • Time to market

  5. Give me examples of alliances!

  6. 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 enough? • Having control does not necessarily mean better management K. Omae, HBR, March-April,1989

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

  8. 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 ) Geographical spread 6. ( local, national, regional, global)

  9. Alliancessimplication Hertz, 2000 • Firm - Firm • Net - Firm • Net -Net

  10. Alliances as dyads

  11. 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

  12. Part II What is an alliance/partnership?Based how it is mostly used in literature Strategic. Alliance include. J/V and part- ownership alliance Partnership Relationships Transaction Degree ofcommitment

  13. Part II Relationships/ alliances Degree of commitment Economic exchange Frequency of exchange Type of interaction Adaptation Trust

  14. Alliances from different perspectives • Supply Chain Management • Industrial Marketing • Purchasing • Marketing • Service marketing • Relationship marketing • Social networks • Organisational and management literature

  15. Part II Supply chain network consisting of a a number of relationships Single relationship Focal firm Upstream Downstream

  16. Part II Interacting dimensions of relationship Social Communication/IT Legal Knowledge Physical Technical Economic

  17. Part II How? Relationship life cycle dissolution Enlargement/ termination? Disintegration Commitment dissatisfaction stable stage Institutionalization closer cooperation Dissolution Termination expansion Formation Revival Pre-relationship Formation or awareness stage Prerelationship stage

  18. Individual alliances will not easily break- Why? • Investments • Costs of breaking • Trust • Knowledge • This creates inertia

  19. 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

  20. Part II When and why to switch • Marketing forces • Internal conflicts • Acquisitions and mergers • New opportunities

  21. Different roads to dissolution • Who is breaking • Direct or indirect • Dissolution quality ( intracomp. exit, aftermath) • Task related, actor related or network related

  22. 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

  23. Alliances as networks

  24. 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

  25. Part III Firm network The firm

  26. Relationships and supply chain network simplified C1 Customers C1 C1 C1 C2 C1 C1= consumer C1 D C2= org. customer D C2 C2 D A A Distributor D D D or agent P D=distributor A= agent B P A P Partners P= partner S1 S1 S1 S1 S1 S3 S1 Supplier 1 tier S2 S1=supplier 1tier S2 S2 S2 Supplier 2 tier S2 S3 S3 S3 S2= supplier 2 tier Other suppliers S3= Other supplier What could this alliance mean to downstream and upstream partners?

  27. Part III Supply chain network change patterns • Supply chain network formation/ joining • Supply chain developmentinclude closer cooperation and enlargement • Supply chain closing up • Supply chain splitting- leaving • Supply chains drifting closer/away

  28. Joining of networks

  29. Closing up

  30. Horizontal and vertical alliance networks Horizontal network Transport firms representing each other in different countries Vertical networks include customers and suppliers

  31. Collective competition ?

  32. Alliance network developmenta 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 network • Development from close cooperation to closing up • Solving crises together cause of higher integration • Institutionalisation in EEIG common grouping

  33. What? Overlap or complementarity? in alliances of supply chain networks Type of products/services Different Same Different Overlap Fully complementary Geographical / complementary coverage Complementary/ Full overlap overlap Same

  34. 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

  35. 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

  36. Effects of overlap

  37. Domino effects C1 B1 A B2 C2 D2 E2

  38. A radical break often a result of strategic change at network level Exemple of strategic change strategic alliances, mergers and acquisitions

  39. Dynamics of alliances and market restructuring Competitor alliance processes Customers Network processes Internal developm. focal alliance Processes breaking/dissolving relationships Relationship processes Customer- focal firm Hertz& Mattsson SJM 2006

  40. Management of alliances as dyads and networks Can networks be managed? When and if

  41. Part VI Management of alliances • Performance • Development • Positioning • Handling effects

  42. Performance Part IV 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

  43. Performance Cultural fit? • Main stream culture • Organisational culture • Managerial style • ( autocratic,democratic • Individualistic-collectivistic • Trust)

  44. Part IV Performance From management to leadership Communication Financing Commitment Projects Behaviors Measurement Creativity Science Overcoming resistance Tools Self leadership Consulting etc etc

  45. Disparate benefit of alliances Lack of willingness to accept unpopular decisions Lack of propensity to reach consensus Lack of willingness to contribute to resources and alliance missions Types of tasks performed in concert Relational bonds and functional co-dependency High level of mutual control due to standardisation Trust and commitment to alliance welfare Dissatisfied? Intra-alliance fit?Inhibitors Stimulators Ludvigsen, 2001

  46. Inter- alliance fit?Before forming alliance? • Degree of overlap or complementarity? • Corporate cultural differences and management practices? • Power balance? • Differences in strategic interests? • Development - speed and direction? • Access to network partners? • Effects and costs of a change?

  47. Part IV performance Different types of strategiesdyads 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

  48. Positioning ? • Your firm´s position in the alliance- Relatedto actors-resources and activities • Your position in the network -horizontal or vertical (supply chain network) • Your network in comparison to others

  49. 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 effects? • Extension of the number of actors in the network • Interaction between actors

  50. Category of alliances? Prerequisites?

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