What is an Alliance Strategy?

1. What is an Alliance Strategy?

2. Agenda • What is an Alliance Strategy? • Why do companies engage into an Alliance? • Why do Alliance sometimes fail? • Four Elements of Alliance Strategy: Alliance Design Alliance Management Alliance Constellation Alliance Capability • Conclusion • References

3. Differences • Strategic Alliance This is a formal relationship or a deal (new venture) between two or more parties to pursue a set of agreed goals to meet critical business needs while remaining independent organizations. • Alliance Strategy An alliance strategy represents much more than a deal. It is an intent, a dynamic process, and a logic that guides alliance decisions.

4. A Strategic Alliance without an Alliance Strategy is condemned to fail

5. Why do companies engage into an Alliance? • To enter restricted overseas market. • To gain Competitive Advantage. • Facts: Today, Alliances account for 20- 50% of corporate value; whether it is measured in terms of revenue, assets, income or market capitalization.

6. Number of Alliances formed

7. Why do Alliance Fail? • Over the years, numerous studies have shown 30- 70% of Alliances fail. • Do not meet the goals of the parent companies. • Clashing corporate cultures and goals. • Unclear strategies • Weak or unbalanced alliance economics. • Lack of sufficient operating staff skills and parent commitment.

8. Four Elements of Alliance Strategy Alliance Design • Why use an alliance? • What is the scope of the alliance? • Criteria and methods of selecting partners • Options for structuring the alliance

9. Four Elements of Alliance Strategy Alliance Management • Process of making decisions • Operational decisions • Performance and relationship between the parent company and other company Example, Venture between Xerox and Fuji Photo Film was created to help Xerox sell copiers in Japan.

10. Four Elements of Alliance Strategy Alliance Constellation • Should the alliance be formed? • How many and what type? • Interaction among alliances Example, The global airline business case between Lufthansa and United .

11. Four Elements of Alliance Strategy Alliance Capability • Who in the corporation should be responsible for specific tasks? • The success of external alliances often depends on having a supportive internal infrastructure

13. Conclusion • The Success of an Alliance Strategy depends much on the unfolding relationship between the partners. • Companies will not survive if they try to do everything themselves. • Alliance Strategy wins the race!!!!!

14. References • http://www.alliancestrategy.com/PDFs/BGC%20AllianceStrategy%20CriticalEYE04.pdf • www.google.com • Alliance Strategy: Fundamentals for Success, Ben Gomes-Casseres (2003) : The Arc of Alliance Strategy

15. Example • Over time, Xerox’s strategy and Fuji Xerox’s capabilities evolved so the venture became a supplier of products to Xerox globally and a partner in developing technologies. • The joint venture was profitable, grew in size and issued modest dividends to Xerox. Today, this forty two year old joint venture is arguably the most successful US-Japanese alliance on record, because of the way it helped Xerox compete globally. The alliance’s role in corporate strategy is much bigger than the partnership itself.

16. Example • The global airline business today provides excellent examples of the importance of alliance constellations. Every major airline today is part of one of the global constellations. • Lufthansa and United form the core of the Star constellation, but other partners, such as Singapore Airlines, ANA, Air Canada, and Varig fill important roles in regional markets. • Similarly, American Airlines and British Airways form the core of one world, and Air France & Delta the core of Sky Team. • The battle in global air travel, increasingly, is between these constellations of allies, rather than between individual firms. So, the design and management of these constellations is critical to the success of the member firms.