Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-1
Strategic Alliances: Teaming and Allying for Advantage
by Robert Pitts & David Lei
Slides prepared byJohn P. Orr
Cameron University
Chapter 9
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-2
What you will learn…
• The characteristics of a strategic alliance
• Why companies around the world are forming strategic alliances
• The different broad types of strategic alliances, including:– Licensing– Joint ventures– Multipartner consortia
Slide 1 of 2
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-3
What you will learn…
• The benefits and costs of entering into strategic alliances
• How to balance the need for cooperation with competition
Slide 2 of 2
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IBM’s Global AlliancesSlide 1 of 2
• Early Alliances: Responding to Japan
• IBM’s Initiatives During the 1990s: Rebuilding Competitiveness– Motorola– Apple Computer– Perkins-Elmer, Silicon Valley Group, and Elite
Systems– Toshiba– Siemens– Phillips
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IBM’s Global AlliancesSlide 2 of 2
• Current Strategic Alliance Initiatives– Electronic commerce– Telecommunications– Smart technologies– Health care– Ongoing relationships
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-6
Ex. 9-1. IBM’s Alliance Strategy(Selected Categories)
Personal Computers• Matsushita (low-end
PCs)• Ricoh (hand-held PCs)
Telecommunications• NTT (value-added
networks)• Motorola (mobile data
pets)
Factory Automation• Texas Instruments• Sumitomo Metal• Nippon Kokan• Nissan Motor
Health Care• Pfizer• Microsoft
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-7
The Global Airline Industry
• Airline industry consolidation of 1990s
• From code sharing to combined operations
• Network versus network– Northwest – KLM– American Airlines – British Airways– Lufthansa – United Airlines– Delta “Sky Team” alliance– “Oneworld” alliance
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-8
Ex. 9-2: Global Airline AlliancesSlide 1 of 4
Trans-Atlantic Linkages/Relationships
Airlines Type of Alliance
• Northwest Airlines
• KLM Royal Dutch
Full partnership (antitrust immunity)
Wings alliance
• United Airlines• Lufthansa
Full partnership (antitrust immunity)
Part of Star Alliance
• Delta Air Lines• Swissair• Sabena• Austrian Airlines
Full partnership (antitrust immunity)
Relationship unwound in 1998-1999
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-9
Ex. 9-2: Global Airline AlliancesSlide 2 of 4
Trans-Atlantic Linkages/Relationships
Airlines Type of Alliance• Continental Airlines• Alitalia
Code sharing, joint marketing (antitrust issues pending)
• American Airlines• British Airways
Code sharing, joint marketing (antitrust request withdrawn)
• Delta Airlines• Air France• CSA Czech Airlines• Alitalia•Aero Mexico
Full partnership (antitrust immunity)
Sky Team alliance
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-10
Ex. 9-2: Global Airline AlliancesSlide 3 of 4
Globe-Spanning Linkages/Relationships
Airlines Type of Alliance
• United Airlines• Lufthansa• Scandinavian Airline
System (SAS)• Thai International• Varig Brazilian
Star Alliance: Code sharing, joint marketing; includes up to 17 partners in 2002
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-11
Ex. 9-2: Global Airline AlliancesSlide 4 of 4
Globe-Spanning Linkages/RelationshipsAirlines Type of Alliance• American Airlines• British Airways• Cathay Pacific• Qantas Airways• Aer Lingus• Lan Chile• Finn Air• Iberia
Code sharing, joint marketing, arrangement for global flights. New alliance known as ONEworld.
• Northwest Airlines• Continental Airlines• Japan Air System
Code sharing for Trans-Pacific flights
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-12
Factors Promoting Alliances
• New market entry
• Shaping of industry evolution
• Learning and applying new technologies
• Rounding out a product line
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Types of Strategic Alliances
• Licensing ArrangementsThe least sophisticated and easiest-to-
manage type of alliance
• Joint VenturesThe creation of a third entity representing
the interests and capital of the partners
• Consortia and NetworksHighly complex linkages
among groups of companies
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-14
Licensing Arrangements
Primary reasons for entry• A need for help in commercializing a
new technology
• Global expansion of a brand franchise or marketing image
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Ex. 9-6. Sun Microsystems’ Licensing Strategy in the Early 1990s
Slide 1 of 2
Sun Microsystems
Sun Microsystems
BipolarIntegrated
Technology
BipolarIntegrated
Technology
LSILogic
LSILogic
PhilipsN.V.
PhilipsN.V.
CypressSemi-
conductor
CypressSemi-
conductor
TexasInstruments
TexasInstruments
FujitsuFujitsu
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-16
Ex. 9-6. Sun Microsystems’ Licensing Strategy in the Early 1990s
Slide 2 of 2
Company Benefit of Linkage
Philips N.V. Gives Sun access to European market.Phillips will specialize in RISC chips for consumer and telecommunications products.
Texas Instruments
Gives domestic credibility to new product design
Fujitsu Gives access to low-cost production
LSI Logic, other small firms
Provides for cross-licensing and exchange of ideas
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Joint Ventures
Primary reasons for entry• Vertical integration
• Learning a partner’s skills
• Upgrading and improving skills
• Shaping industry evolution
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Consortia and Networks
• Multipartner ConsortiaMultipartner alliances designed to share an
underlying technology
• Cross-Holding ConsortiaFormal groups of companies that own large
cross-holdings and equity stakes in each other
• Industry-Spanning Alliance NetworksFirms sharing knowledge, costs, and risks
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-19
Risks and Costs of Alliances
• Rising incompatibility
• Risk of knowledge or skill leakage
• Risk of dependence
• Strategic control costs
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-20
Automotive Joint Venture Fades
FordFord VolkswagenVolkswagen
Autolatina
• Impasse on strategy to face General Motors
• Reluctance to share design, marketing ideas
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-21
Ex. 9-7. Deepening Dependence on Alliance Partner
Sourcing forcomponents
Sourcing forcomponents
Low pricedeters futureinvestment
Low pricedeters futureinvestment
Sourcingextends tojoint venture
Sourcingextends tojoint venture
Venture includesshared technologydevelopmentaround core
Venture includesshared technologydevelopmentaround core
Sustainedlosses induceresignation, exit
Sustainedlosses induceresignation, exit
Domestic firm feels pricepressure inevery marketbasedon coretechnology
Domestic firm feels pricepressure inevery marketbasedon coretechnology
Alliance partner becoming stronger,attacks firm’s othermarkets
Alliance partner becoming stronger,attacks firm’s othermarkets
Domestic firm loses its core competencebase
Domestic firm loses its core competencebase
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved. Slide 9-22
Balancing Cooperation and Competition
• Understand the firm’s knowledge and skill base
• Choose complementary partners
• Keep alliance personnel long-term