Three types of strategic alliancesTypes of strategic alliances and generic industry structuresWays to cheat in strategic allianceCooperative strategies: Strategic AlliancesThree types of strategic alliancesNon-equity allianceCooperation between firms is managed directly through contracts, without cross-equity holdings or an independent firm being created.Joint VentureCooperating firms form an independent firm, in which they invest. Profits from this independent firm compensate partners for this investment.Equity AllianceCooperative contracts are supplemented by equity investments by one partner in the otherpartner. Sometimes these investments are reciprocated.Sources of inter-firm synergies that can motivate strategic alliances1. exploiting economies of scale2. learning from competitors3. managing risk and sharing costs4. facilitating tacit collusion5. low cost entry into new markets6. low cost entry into new industries and new industry segments7. managing uncertaintyTypes of strategic alliances and generic industry structuresTypes of alliances Generic industry structuresymmetric Economies of scale Mature industries, fragmented industries (with strategic groups)Tacit collusionAsymmetric Low cost entry into new markets Emerging industries, fragmented industries (with not strategic groups), decliningindustries, global industriesLow cost entry into new industries and new industry segmentsLearning from competitorsMixed alliances Managing uncertainty All generic industry structuresManaging risks and sharing costsWays to cheat in strategic allianceAdverse selectionPotential partners misrepresent the value of the skills and abilities they bring to the alliance.Moral hazardPartners provide to the alliance skills and abilities of lower quality that they promised.HoldupPartners exploit the transaction specific investments made by others in the alliance.Substitutes for strategic alliancesInternal
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