Strategic AlliancePresented By: Mohamed Zakaria

Presented To: Dr. Amr Kheir El dinESLSCA Global Business Diploma

October 2014

Definition of Strategic alliances

• Strategic alliances are cooperative agreements between two or more companies to work together and share resources to achieve a common business objective, Each company maintains its autonomy while gaining a new opportunity

• A global strategic alliance is an agreement among two or more independent firm to co-operate for the purpose of achieving common goal such as a competitive advantage or customer value creation while remaining independent

Definition of Strategic alliances

Strategic alliances are agreements between companies (partners) to reach objectives of a common interest. Alliancesare among the various options which companies can use to achieve their goals. They are based on cooperation between Companies

Motives for Alliances• You can’t do everything.

• Adding value to product.

• Improving market access.

• Strengthening operations.

• Adding technological strength.

• Enhancing strategic growth.

• Building finance strength.

• New market entry INFORMATION

WHY STRATEGIC ALLIANCE..?• Sharing resources like products, distribution

channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property, to create Synergy to gain Competitive Advantage

• “Our success has really been based on partnerships from the very beginning.” Bill Gates

Purposes of Strategic Alliances

• Alliances enable buying & supplying firms to combine their individual strengths & work together to reduce non-value-adding activities & facilitate improved performance.

• In order for both parties to remain committed to this form of relationship, mutual benefit must exist (i.e. a "win-win" relationship)

1+1=3

KEY FACTORS OF STRATEGIC ALLIANCE

• Select the proper partners for the intended goals• Share the right information • Negotiate A deal that includes risk and benefit • Come to a realistic agreement on the time• Mutual, flexible commitment on what's suitable to

change, measure and share within each partner's culture

• Respect and protect the brand of each partner

PROCESS OF STRATEGIC ALLIANCE

Re-evaluating the alliance

Managing the alliance

Structuring the alliance

Selecting a partner

Setting alliance strategy

Types OF STRATEGIC ALLIANCE

Joint venture Equity strategic alliance

Non- Equity strategic alliance

Global Strategic Alliances

Types of Strategic Alliances

• Joint Venture: an agreement by two or more parties to form a single entity to undertake a certain project. Each of the businesses has an equity stake in the individual business and share revenues, expenses & profits.

• Global Strategic Alliances: working partnerships between companies (often more than 2) across national boundaries & increasingly across industries. Sometimes formed between company & a foreign government, or among companies & governments

Types of Strategic Alliances

• Equity strategic alliance: an alliance in which 2 or more firms own different percentages of the company they have formed by combining some of their resources & capabilities to create a competitive advantage.

• Non- equity strategic alliance: an alliance in which 2 or more firms develop a contractual-relationship to share some of their unique resources & capabilities to create a competitive advantage.

ADVANTAGES • Improve organization efficiency.• Offer to access new market and technologies.• Reduce the impact of risk.• Learning from partners• Alliance could help a company develop a more

effective process expand into a new market or develop an advantage over a competitor.

Competitive Advantage

Disadvantages

• Significant differences between the objectives

• Irreconcilable differences in business culture and management styles.

• Loss of control over such important issues as product quality, operating costs, employees, etc.

Examples of Alliances Starbucks

Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-house coffee shops, benefiting both retailers.

In 1996, Starbucks partnered with Pepsico to bottle, distribute and sell the popular coffee-based drink, Frappacino.

A Starbucks-United Airlines alliance has resulted in their coffee being offered on flights with the Starbucks logo on the cups.

Mistakes Leading to Failure

• Alliance business is viewed internally by one partner.

• One of the partners is too dependent on the other’s capabilities.

• Problems and mistrust.• Cultural & language barriers. • Collaboration in competitively sensitive areas can

be difficult.• A clash of egos might occur.

Examples of Alliances• Nokia and Microsoft in alliance to make Zune phone

• Star Alliance – Airlines alliances.

• Philips and Sony jointly launched the mini-CD.

• Nestlé and Fonterra Sign Agreement on Dairy Alliance for the America

• McDonald’s with Disney, Coca-Cola & Walmart

• Motorola-Toshiba: In 1987- Toshiba to produce microprocessors & contribute access to the distribution network.

THANKS