GROUP VERSUS GROUP: HOW ALLIANCE NETWORKS COMPETE
Nowadays there is a new form of competition across global markets called group versus group. These groups consist of companies joined together in a larger, overarching relationship. They can be networks, clusters, or virtual corporations. Companies within the group have different sizes, focus and roles.
Some examples of alliance groups are:Swissair’s alliance with Delta Air Lines, Singapore Airlines and SAS (to increase bookings on transatlantic and European-Asian flights) or General Motors´ network partners (Toyota, Isuzu, Suzuki and Saab) to compete with Fords´ group partners (Nissan, Mazda, Kia and Jaguar).
Before joining an alliance network, executives should ask themselves some questions and evaluate the advantages and costs ofthis type of organizations.
The growth of group-based competition:
In the 80s and 90s companies all over the world have matched US companies´ achievements so US companies started to search for peers abroad in order to enter new markets. Another factor of creating alliances was the growing complexity of products and services and of their design, production and delivery.
Companies creatednetwork alliances to obtain competitive advantages that an individual company or two-company alliances cannot.
Networks have distinct advantages in 3 kinds of situations:
• Network competition is growing in battles over technical standards:
- Various technologies may contend for market share.
- Outcome: depends on the number of companies adopting each technology.
-Alliances help to promote their technologies and persuade more companies to join their group.
• Importance of global scale has created a fertile ground for alliances:
- Linking with local companies help to spread costs over larger volumes.
- Example: alliance groups in the airline industry (hub-and-spoke system allows operations over multiple national markets).• New technologies are creating links between industries that were formerly separated:
- Networks allow specialists in each field to cooperate and exploit new opportunities much faster than separated.
- Example: alliances emerging in the multimedia field (where computer technologies is merging with telecommunications, video and audio technologies) to create, for example, PDAs.The characteristics of Alliance Groups:
An alliance group is a collection of separate companies linked through collaborative agreements. Not all the companies of the group are linked directly to all the others.
Example: the groups created to promote the RISC (reduced instruction-set computing). The company at the center usually designed the RISC technology, licensed semiconductorcompanies to produce chips and supplied systems to resellers. Some of the companies were linked to one another through equity investments.
Alliance groups vary by size, pattern of growth, composition, internal competition and governance structure.
□ SIZE: Alliance networks often grow out of the need to gain scale economies or market share. Thenumber of companies in the network and their combined share of the total market are critical to success.
Example: The RISC Groups
- Mips and Sun recruited a lot of companies (Mips more than 150).
- IBM neutralized the numerical advantage of the other groups joining Apple and Motorola.
- Mips was acquired by Silicon Graphics and the initiative died.
□ PATTERNOF GROWTH: Most alliance networks are built piece by piece. A network’s competitive success can be affected by the rate of growth and the sequence in which members join.
Example: The RISC Groups
- Kubota provided Mips with capital at a critical stage ( supported the network’s growth.
- DEC´s decision to join the group gave them credibility and attracted other companies as...
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