These are less formal and demand fewer partner commitments. These are unsuitable for complex projects requiring effective transfers of tacit knowledge between partners. Typically taking the form of a nonequity strategic alliance, outsourcing is the purchase of a value-creating primary or support activity from another firm. Other types of nonequity strategic alliances include licensing, distribution agreements, supply contracts, and marketing agreements (such as code-sharing agreements among airlines). Reasons Firms Develop Strategic Alliances. Technology companies cannot possibly acquire the technology they need fast enough, so partnering becomes essential. Some believe strategic alliances may be the most powerful trend in American business in a century. Among other benefits, strategic alliances allow partners to create value that they couldn’t develop by acting independ ently and to enter markets more quickly than they could without a partner. In large firms, alliances account for more than 20 percent of revenue and are a prime vehicle for firm growth. In some industries (e.g., airlines), firms compete more alliance against alliance than BUSINESS POLICY LEARNING NOTES
Chapter 9: Cooperative Strategy 9-2 firm against firm. Firms form strategic alliances to reduce competition, enhance their competitive capabilities, gain access to resources, take advantage of opportunities, and build strategic flexibility. To do so means that they must select the right partners and develop trust. TABLE 9.1 - Reasons for Strategic Alliances by Market Type. Table 9.1 presents reasons for strategic alliances for firms operating in slow-cycle, fast-cycle, and standard-cycle markets. Slow-Cycle: Gain access to a restricted market Establish a franchise in a new market Maintain market stability Fast-Cycle: Speed up development of new goods or services Speed up new market entry Maintain market leadership’ Form an industry technology standard Share risky R&D expenses Overcome uncertainty Standard-Cycle: Gain market power Gain access to complementary resources Establish better economies of scale Overcome trade barriers Meet competitive challenges from other competitors Pool resources for very large capital projects Learn new business techniques Slow-Cycle Markets Firms in slow-cycle markets often use strategic alliances to enter restricted markets or to establish franchises in new markets (especially global markets). Slow-cycle markets are becoming rare in the twenty-first century competitive landscape for several reasons, including the privatization of industries and economies, the rapid expansion of the Internet’s capabilities in terms of the quick dissemination of information, and the speed with which advancing technologies make quickly imitating even complex products possible. Firms competing in slow- cycle markets should recognize the future likelihood that they’ll encounter situations in which their competitive advantages become partially sustainable (in the instance of a standard-cycle market) or unsustainable (in the case of a fast-cycle market). Cooperative strategies can be helpful to firms making the
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- Summer '12
- Business, joint venture, strategic alliance, Cooperative Strategy