BU491 Chapter Notes - Chapter 6: Joint Committee, Strategic Alliance, Franchising
Chapter 6 – Engaging in Cross-Border Collaboration
Why Strategic Alliances?
Strategic alliance – formal and mutually agreed commercial collaboration between companies
Level of interaction from lowest to highest
oCooperation Agreement Patent Licensing Franchising Cross-Licensing R&D
Consortia Co-production/buyback Joint Venture (equity Participation)
5 Key Motivation of Formation of Strategic Alliances
Technology Exchange – can help develop new technology without a lot of sacrificing resources
Global Competition – you would form alliances to go up against a global giant the “common
enemy”
Industry Convergence – e.g. the makers of HDTV, allied with others to develop the range of
products necessary for that system offering
Economies of Scale – pool resources and concentrate their activities not only to raise the scale
of activity but also to increase the rate of learning,
Alliance as an Alternative to Merging – may agree in a long term partnership rather than merge
The Risks of Competitive Collaboration
One party may soon later learn and internalize the other’s skill while carefully protecting it’s
own, thereby creating the option of discarding the partner and appropriating all the benefits
created by the partnership
As well the competitor’s newly acquired strength will be used against its alliance partner in the
future, as such alliances involves task sharing so they will learn new things and will benefit from
this
Building and Managing Collaborative Ventures
There is a big difference between establishing alliances and making them work
Three pre-alliance processes for alliance to succeed:
o1.) partner selection – needs data bout the partner’s physical assets (condition and
productivity of P&E) and less tangible assets (strength of brands, quality of customer
relationships) and organizational capabilities (managerial competence, employee
loyalty, shared values)
o2.) Escalating commitment – can cause unrealistic expectations and wrong choices, the
person negotiating the alliance should be involved with pre and post alliance actions, as
this creates a commitment and long term understanding
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