Strategic Alliances

Sessions 7-8 Strategic Alliances
The Paradox of Competition and Cooperation

An effective business level strategy it is necessary to integrate functional strategies into a consistent whole. Marketing, operations, finance, logistics, human resources and development strategies need to be systematically aligned for a business to be successful. It is also generally accepted that when a number ofbusiness reside together in one corporation an overarching multibusiness level is required.

The issue arises whether or not an overarching strategy is required for a group of interacting companies; if a network or multicompany level strategy is necessary to align the strategies of a network firms. The question is “What type of relationship a company wants or needs to have with otherorganizations in its environment?”

Interorganizational relationships can be primarily competitive based in conflicting interests and/or objectives or, they can be primarily cooperative which can vary from occasional collaboration to virtual integration.

Two opposite ways:

The discrete Organization Perspective
The embedded Organization Perspective

|Features |DiscreteOrganization Perspective |Embedded Organization Perspective |
|Emphasis on |Competition over cooperation |Cooperation over competition |
|Structure of the environment |Discrete organization (atomistic) |Embedded organization (networked) |
|Firm boundaries |Distinct|Fuzzy |
|Preferred position |Independence |Interdependence |
|Interaction outcomes |Mainly zero-sum (win/lose) |Often positive-sum (win/win) |
|Source of advantages |Bargaining power|Specialization and coordination |
|Multicompany level strategy |No |Yes |
|Use of collaboration |Temporary |Durable partnership |
|Basis of collaboration |Power and calculation|Trust and reciprocity |
|Structure of collaboration |Limited, well-definided, contract-based |Broad, open, relationship-based |

Defining de Issues: Boundaries and Relationships

Two major issues: Which activities the firm wishes to limit itself and how it wishes interact with organizations and individuals in itsenvironment. In other words “How many different activities should a firm be involved in and how much of each activity should a firm want to perform?

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Relationship between the Firm and its environment

Upstream Vertical (Suppliers) Relations: Providers of all production factors can be seen as suppliers if they are not part of the firm its self, they can be also an intermediary. The firm mayalso have relationships with suppliers further upstream in the business value system

Downstream Vertical (Buyer) Relations: On the output side the firm has relationships with its customers. Clients can either be actual users of the product or intermediaries trading the output. The firm may also have relationships with buyers further downstream in the business system.

Direct Horizontal(competitors) Relations: Relationship between the firm and other industry incumbents, because this competitors produces the same goods or services.

Indirect Horizontal (industry outsider) relations: When the firm has a relationship with a company outside the industry. Two firms with roots in different industries.

Besides relatioships with these market actors, there can be many contacts with...