Post on 23-Dec-2015
transcript
CHAPTER 8
Strategic Alliances
HISTORICAL VISION PARTNERSHIP VISION
INTERNAL FOCUS
TOTAL SYSTEM ECONOMICS
30%
20%
50%
0%
20%
40%
60%
80%
100%
CUSTOMERECONOMICS
MY ECONOMICS
SUPPLIERECONOMICS
MY ECONOMICS
CREATING VALUE BY FOCUSING
ON THE SYSTEM
VALUETO
CUSTOMERVALUE
TO CUSTOMER
VALUE TO SUPPLIER
VALUE TO SUPPLIER
TRADITIONAL RELATIONSHIP
STRATEGIC PARTNERSHIP
• Interdependence between partners is low (e.g., pooled)
• It is easy to measure the contributions of each partner and write it in a contract.
Contractual AllianceCooperation between firms is managed directly through contracts
Equity AllianceCooperative contracts are supplemented by equity investments by one or both partners into the other partner.
Joint VentureCooperating firms combine resources to form an independent firm in which they invest.
Preferred when:• Interdependence
between firms is moderate (e.g., sequential).
• Firms bring knowledge or difficult to measure contributions but each can perform their roles separately.
• Interdependence between firms is very high (e.g., reciprocal).
• Firms bring knowledge or difficult-to-measure contributions that must be combined into a single organization to coordinate effectively.
Types of Strategic Alliances
Pool Similar Resources
WAYS TO CREATE VALUE IN ALLIANCES
Combine Unique Resources1
2
Create New Alliance-specific Resources3
Lower Transaction Costs (Build Trust)4
COMBINE UNIQUE RESOURCES
• Pixar Animation Studios• Walt Disney Pictures
Pool Similar Resources
WAYS TO CREATE VALUE IN ALLIANCES
Combine Unique Resources
2
1
Create New Alliance-specific Resources3
Lower Transaction Costs (Build Trust)4
POOL SIMILAR RESOURCES
• Disney• OLC Group• Tokyo Disneyland
DISNEY-ORIENTAL LAND CO. ALLIANCE
Disney Resources & Capabilities
• Disney brand• Disney theme park rides
and designs• Park management
processes• Ongoing stream of Disney
characters from movies• Disney consumer
products to sell at the park
OLC Resources & Capabilities
• Land for the park near Tokyo
• Financial resources to build the park
• Relationships with construction firms to build the park
• Knowledge of Japanese culture and how to manage Japanese workers
Pool Similar Resources
WAYS TO CREATE VALUE IN ALLIANCES
Combine Unique Resources
3
1
Create New Alliance-specific Resources
2
Lower Transaction Costs (Build Trust)4
TOYOTA’S SUPPLIER - CUSTOMER INTERFACE
Surface Contact vs. Multiple-Point Contact(Correct)
Customer SupplierPoint Contact(Wrong)
TopExecu-tives
R & D
Manufacturing
TopExecu-tives
Quality AssuranceQuality Control
Purchasing
R & D
Manufacturing
Quality AssuranceQuality Control
Sales
TYPES OF ALLIANCE-SPECIFIC RESOURCES (DEDICATED ASSETS) THAT CREATE VALUE.
Dedicated Site Investments (locating plants in close proximity to economize on inventory, transportation, coordination costs).
Dedicated Physical/Process Investments (making relation-specific capital investments in machinery, tools, processes)
Dedicated Human Investments (dedicating personnel to develop relation-specific know-how and improve communication/ coordination)
TOYOTA PLANT CONFIGURATION IN JAPAN*
30 miles
6 miles
Motamachi, TC
Tahara, Nagoya
Affiliated Supplier Plants• Avg. distance of 30 miles vs 427 GM• 43.5 weekly deliveries vs 7.5 GM• 10,635 man days of face-to-face contact (1,107 GM)• 12.5 guest engineers vs .17 GM
Independent Supplier Plants• Avg. distance of 87 miles• 40.5 weekly deliveries• 3,764 man-days of face-to-
face contact
• 2.6 guest engineers
Tsutsumi, TC
3 miles
28 miles
1 mile
3 miles
Takaoka, TC
Honsha, TC
Headquarters & Technical Center
* Excludes more recently build Kyushu plant making small cars for export to Asia.
GM PLANT CONFIGURATION IN THE UNITED STATES
200 miles
Lansing, MI
External Supplier Plants•Avg. distance of 427 miles•7.5 Weekly deliveries•1,107 man days of face-to-face contact
•.17 guest engineers
Flint, MI
Hamtramck, MI
Ypsilanti, MI
Internal Supplier Plants• Avg. distance of 350 miles
North Tarrytown, NY
Linden, NJ
Wilmington, DE
Lordstown, OH
Bowling Green, KY
Spring Hill, TN
Arlington, TX
Wentzville, MOKansas City, KS
Van Nuys, CA
Fremont, CA(Nummi)
650 miles
900 miles
455 miles
1400 miles
387 miles
2400 miles
51 miles55 miles
85 miles
ALLIANCE LIFECYCLE
PartnerAssessment &Selection
PartnerAssessment &Selection
AllianceNegotiation &Governance
AllianceNegotiation &Governance
Assessment &Termination
Assessment &Termination
* Needs Analysis Checklist*Make vs. buy vs. ally analysis*List of possible alliance partners with resources to meet needs.
* Partner Screening Form* Technology and patent domain maps* Cultural Fit Evaluation Form* Due Diligence Team
* Negotiations guidelines* Needs v/s wants checklist* Alliance Contract Template* Alliance Structure Guidelines* Alliance Metrics Framework
* Decision making template* Trust-building worksheet* Work planning worksheet* Alliance Communication Infrastructure
* Relationship Evaluation Form* Yearly Status Report* Termination Checklist* Termination Planning Worksheet
AllianceBusinessCase
AllianceManagement
Building Alliance Capabilities:Tools to Use Across the Alliance
Lifecycle
Pool Similar Resources
WAYS TO CREATE VALUE IN ALLIANCES
Combine Unique Resources
4
1
Create New Alliance-specific Resources
2
Lower Transaction Costs (Build Trust)
3
THE PARADOX OF TRUST
• Alliances are fraught with risk even though they look good on paper
• Things often don’t work out because of the issue of trust and equity
BUILDING TRUST
• Formal Contractual Mechanisms – long term contracts (position as an “expectations”
document), – stock ownership (align incentives), – collateral bonds (signal credible long-term commitment).
• Processes and Information – Trust is often built on company processes and information, not
people. A partner is trustworthy if its interorganizational processes are understandable, predictable and stable and information flows freely.
• Informal Mechanisms (Affect) such as:– Reputation (give gifts as a signal of benevolence), – Personal trust
THE VALUE OF TRUST
• Increases learning (greater information sharing)
• Increases customized investments (willingness to risk tailored investments)
• Increases speed to quickly respond to market changes
• Lowers transaction costs
THE COST OF MISTRUST
0%
10%
20%
30%
40%
50%
GM Ford Chrysler Toyota
Percent of face- to-face contact time with suppliers
Negotiating price/contract
Assigning blame for problems47%
28%
21% 21%
Alliance Equity Alliance AcquireDegree of Resource Interdependence
Relative value of “soft” to “hard” resources
Proportion of synergies from redundant resources
Degree of market uncertainty
Importance of exclusive access to target firm’s resources
Low High
Low High
High Low
Low High
High Low
CHOOSING TO ALLY OR ACQUIRE:KEY FACTORS TO CONSIDER
Low
Low
High
High
Degree of resource/activity interdependence
Degree of mutual customization
Pooled/modularInterdependence
SequentialInterdependence
ReciprocalInterdependence
Low Investments in Customized Assets-Site (locations)-Physical (Plant & Equip.)-Human
High Investments in Customized Assets-Site (locations)-Physical (Plant & Equip.)-Human
Alliances Joint Ventures Acquisitions
CHOOSING BETWEEN ALLIANCES AND ACQUISITIONS
Human Resources
Physical Plant & Equipment
Technological Resources (e.g. Patents)
Intangible Resources (relationships; brands)
“Soft” Resources “Hard” Resources
Financial Resources
Difficult to Value Easy to Value
TYPES OF RESOURCES THAT GENERATE VALUE IN ALLIANCES/ACQUISITIONS
THE FUTURE….• Teams of companies (ecosystems) will increasingly
compete with other teams.
• Leveraging the full resources of the partners to create competitive advantage will be critical for success.
• Value is created through:– Combining unique resources– Pooling similar resources– Creating new alliance-specific resources– Lowering transaction costs