International institute of
foreign trade & research
2009-10
SUBJECT CODE: 602
NEW TECHNIQUES IN
MULTINATIONAL MARKETING
ASSIGNMENT#1
STRATEGIC ALLIANCE
Presented To: Presented By:
Prof Dipesh Ag rawal Prer na
Bihani
MFT-VI Sem
STRATEGIC ALLIANCE
INTRODUCTION
One of the fastest growing trends for business today is the
increasing number of strategic alliances.
Acc. to Booz-Allen & Hamilton; Strategic alliances
are sweeping through nearly every industry and are becoming an
essential driver of superior growth. Alliances range in scope
from an informal business relationship based on a simple
contract to a joint venture agreement in which for legal and tax
purposes either a corporation or partnership is set up to manage
the alliance.
OTHER DEFINATIONS;
A strategic alliance is essentially a partnership in which you
combine efforts in projects ranging from getting a better price
for supplies by buying in bulk together to building a product
together with each of you providing part of its production.
A Strategic Alliance is a formal relationship between two or
more parties to pursue a set of agreed upon goals or to meet a
critical business need while remaining independent
organizations.
WHY STRATEGIC ALLIANCE ARE FORMED
FOR SMALL BUSINESSES; strategic alliances are a way to
work together with others towards a common goal while not
losing their individuality,
Alliances are a way of reaping the rewards of team effort and
the gains from forming strategic alliances appear to be
substantial,
Especially in a time when growing international marketing is
becoming the norm, these partnerships can leverage the
growth through alliances with international partners. Rather
than take on the risk and expense that international
expansion can demand, one can enter international markets
by finding an appropriate alliance with a business operating
in the marketplace you desire to enter.
Joint marketing,
Joint sales or distribution,
Joint production,
Design collaboration,
Technology licensing,
Research and development,
Relationships can be vertical between a vendor and a
customer,
Horizontal between vendors, local, or global.
An increasing intensity of competition,
A growing need to operate on a global scale,
A fast changing marketplace,
Industry convergence in many markets (for example, in the
financial services industry, banks, investment firms, and
insurance companies are overlapping more and more in the
products they supply).
BUSINESSES USE STRATEGIC ALLIANCES
TO:
achieve advantages of scale, scope and speed
increase market penetration
enhance competitiveness in domestic and/or global markets
enhance product development
develop new business opportunities through new products
and services
expand market development
increase exports
diversify
create new businesses
reduce costs
adding technological strength
enhancing strategic growth
building financial strength
Strengthening operations
REQUIREMENTS FOR EFFECITIVE
STRATEGIC ALLIANCE:
Advanced information systems
Top management commitment
Information must be shared
Power and responsibility within an organization might
change (for example, contact with customers switches from
sales and marketing to logistics)
Mutual trust
Information sharing
Management of the entire supply chain
Initial loss of revenues
PRINCIPLE CHARACTERSTICS OF A
STRATEGIC ALLIANCE
• Create an Alliance Strategy That Meets
Organizational Objectives and Needs
• Establish and Follow Alliance Processes
• Perform Due Diligence
• Create Flexible Teaming Agreements
• Create Measurement Processes
• Drive Toward Joint Profitability
• Create a Culture of Alliance Knowledge Sharing
• Understand When to Terminate the Relationship
STEPS IN STRATEGIC ALLIANCE
IMPLEMENTATION:
Contractual negotiations
Ownership
Credit terms
Ordering decisions
Performance measures
Develop or integrate information systems
Develop effective forecasting techniques
Develop a tactical decision support tool to assist in
coordinating inventory management and transportation
policies
STAGES OF STRATEGIC ALINCE
FORMATION
Building legitimacy Manufacturing and Asset specificity Diversification
and technology marketing and efficiency
Development alliances
Sta ge 1: Stage 2: Sta ge 3: Stage 4:
Conception and Commercialization Growth Sta bility
Development
STAGE 1:
CONCEPTION AND DEVELOPMENT:
During the conception and development stage, alliance
formation
decisions will be framed in the context of accessing the capital
resource for organizational survival. Also in this stage,
innovation is the key initiatives for alliance formation.
Therefore, companies should concentrate on exploratory
alliances such as R&D alliances. In addition, forming alliances
with prestigious
partners may help firms to build legitimacy and credibility for the
future growth.
STAGE2:
COMMERCIALISATION STAGE ALLIANCE
During the commercialization stage, alliance formation decisions
will be framed in the context of commercialization and accessing
the distribution channel for organizational growth. Therefore,
companies should concentrate on alliances in areas such as
marketing manufacturing and distribution.
STAGE3:
GROWTH STAGE ALLIANCE:
During the growth stage, alliance formation decisions will be
framed in finding alliance partners that fit their asset specificity
requirements and similar strategic scopes. Therefore, companies
should be able to achieve efficiency in manufacturing and
marketing activities.
STAGE4:
STABILITY STAGE:
During the stability stage, alliance formation decisions should be
framed in the context of seeking alliance partners of
complementary resources in order to gain diverse knowledge.
TYPES OF STRATEGIC ALLIANCE
JOINT VENTURE is a strategic alliance in which two or
more firms create a legally independent company to share
some of their resources and capabilities to develop a
competitive advantage.
EQUITY STRATEGIC ALLIANCE is an alliance
in which two or more firms own different percentages of the
company they have formed by combining some of their
resources and capabilities to create a competitive advantage.
NON EQUITY STRATEGIC ALLIANCE is an
alliance in which two or more firms develop a contractual-
relationship to share some of their unique resources and
capabilities to create a competitive advantage.
GLOBAL STRATEGIC ALLIANCES working
partnerships between companies (often more than 2) across
national boundaries and increasingly across industries.
Sometimes formed between company and a foreign
government, or among companies and governments.
ADVANTAGES OF STRATEGIC
ALLIANCE
Improved Cash Flow
Reduced Overhead
Improved Access to Capital
Obtain Capital
Credibility
Access to Facilities and Technology
Access to Expertise
Ability to Keep the Company Small
More Products to Sell
Innovative Products
Creative People
Speed and Flexibility in Delivering New Products
Ability to Hedge Your Own R&D Effort
Less Costly than Buying a Company
Cost Savings
Product Distribution
Diversification into New Markets
Manufacturing Capability
Reduced Risk
Knowledge and Know-how
Avoid Need to Reinvent What Has Been Invented Elsewhere
The Shoring up of Weak Areas in the Company
Strengthened Relationships with Key Suppliers or Customers
Ability to Move Quickly
Ability to Stay Focused on Core Competence
DISADVANTAGES OF STRATEGIC ALLIANCE
Sharing of Future Profits
Foreclosure of Other Opportunities
Barriers to Future Financing Opportunities
Distractions
Creating a Competitor or a Potential Competitor
Unexpected Disappointments and Headaches from Your
Partner
Conclusion
Strategic alliance has been prescribed as an important tool for
attaining and maintaining competitive advantage. Many
companies are prescribing to this in search for new technology,
new markets, to gain competitive advantage or simply to
outsource business functions.
While such relationships can pay off, no business should form
partnerships just because they are trendy. A number of
companies often enter into alliances without carefully weighing
all their options. It becomes imperative that companies are clear
about why they are entering the alliance and what they expect to
gain from it.
