Building alliances

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Long Range Planning, Vol. 25, No. 6, pp. 10 to 17, 1992 Printed in Great Britain

0024+301/92 $5.00 + .OO Pergamon Press Ltd

Building Successful Strategic Alliances
Peter Lorange, Johan Roos and Peggy Simcic Bwnn

In this paper we will discuss (I) why a firm would want to go into a strategic alliance, (2) the different types of alliances, and (3) guidelines to follow when forming analliance.

Why the Strategic

Alliance Solution?

Thinking of a strategic alliance as a parental relationship is not a new idea, but it works. Two firms come togcthcr to give birth to an idea, a product, another firm, or research that embodies the best characteristics of each parent. And, just as in human parental relationships, the firms have varying lcvcls of rcsponsibilitics toward their‘child’. At one end of the spectrum a firm may wish to develop a product, and needs another firm for its cxpcrtisc, but they do not ncccssarily want any long-term commitment from the relationship. The opposite end of the spectrum is the classical parental relationship where both partners take full responsibility. In the business world, this is known as the full-blown joint venture. Both firmshave supplied resources towards the alliance and both have a stake in its success as an ‘adult’. An cxccllcnt example of this type of relationship is the alliance between Fuji Films and Rank Xerox in Japan to now one of the world’s largest crcatc Fuji Xerox, copy machine manufacturers. Rcgardlcss of which approach is chosen, the decisions by firms to co-operate arc not taken lightly and once mademust be handled with great cart. And bccausc individuals arc involved, thcrc will always be diffcrcnces of opinion and in the way that things arc seen. But, usually, if thcrc is not too much diffcrencc, common ground can bc found and fruitful relationships can be built.

Let’s start from ‘ground zero’, and talk about the very first decision that has to bc made; the decision to form an alliance. Forthe parent firms, thcrc arc a variety of reasons for wanting a strategic alliance including access to technology or access to a market. We find that thcrc arc four generic motives for forming alliances: as a dcfcncc, to catch up, to remain or to restructure. This can be understood by focusing on two strategy dimensions; the strategic importance of the business scgmcnt within the firm’s portfolioand the market position of the business segment.
Dr_fencr

A defensive position is normal when the offspring, or product/idca/rcscarch/busincss, is core or of primary importance to a firm’s family portfolio and whcrc the firm is a lcadcr in this particular business. At first glance it might bc difhcult to find any reason for such firms to consider an alliance. But the reasons arc sensible; thefirm may want additional access to new compctcncies, to markets, to technology or to specific rcsourccs in order to sustain its competitive advantage over time. Some examples of this arc IBMs numerous strategic alliances with key customers for dcvcloping specialized software, the Swedish ball bearing firm SKF’s alliance with the French firm SDM to dcvclop clcctromagnctic

Business’ MarketPosition
Leader

1 Follower

Peter Lorange Peggy Simcic Management, Norway.

is President, Johan Roos is AssIstant Professor, and Brmnn IS a Researcher at the Norwegian School of Elias Smithsvei 15, Postboks 580, N-l 301 Sandvika,

Figure

I. Generic

motives

for strategic

alliances

Building bearings, Japanese alliances penetrating Viet Nam, and so on. The main thing is that thesefirms use alliances to build and develop their firm’s specialties through learning new technologies or accessing difficult markets. Catch Up Another motive for an alliance is to catch up. This occurs in a situation where the business is still core in the firm’s portfolio, but where it is more of a follower in the business segment. The use of a strategic alliance in this case should strengthen a...
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