Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Strategic Strategic AlliancesAlliancesChapter 9Chapter 9Strategic Management & Competitive Advantage – Barney & Hesterly2Strategic AlliancesStrategic Alliances22Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyMission ObjectivesExternalAnalysisInternalAnalysisStrategicChoiceStrategyImplementationCompetitiveAdvantageThe Strategic Management ProcessCorporate LevelStrategyWhich Businessesto Enter?• Vertical Integration• Diversification• Strategic Alliances• mode of entryStrategic Management & Competitive Advantage – Barney & Hesterly3Strategic AlliancesStrategic Alliances33Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyStrategic Alliances DefinedStrategic Alliance:Any cooperative effort between two or moreindependent organizations to develop, manufacture, or sell products or servicesStrategic Management & Competitive Advantage – Barney & Hesterly4Strategic AlliancesStrategic Alliances44Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyMotivation for AlliancesCreate economic value by:• accessing complementary resources and capabilities• leveraging existing resources and capabilitiesAn alliance is an organizational form of exchangethat: • should produce a gain from trade due tosome comparative or absolute advantageImplication: Choose partners that are better atsomething than you are (complementary resources)Strategic Management & Competitive Advantage – Barney & Hesterly5Strategic AlliancesStrategic Alliances55Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyThree TypesOfAlliancesNonequityAllianceContracts• licensing• supply &distributionagreementsJointVentureEquityAllianceCross EquityHoldings• partners ownstakes ineachotherJoint EquityHoldings• independentfirm iscreatedStrategic Management & Competitive Advantage – Barney & Hesterly6Strategic AlliancesStrategic Alliances66Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyHow Strategic Alliances Create ValueImprove Current OperationsShaping the Competitive EnvironmentFacilitating Entry and ExitValueCreationStrategic Management & Competitive Advantage – Barney & Hesterly7Strategic AlliancesStrategic Alliances77Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyHow Strategic Alliances Create ValueImproving Current OperationsExploiting economies of scale• a partner brings increased market shareand/or manufacturing capacityLearning from partners• a partner brings technology and/ormarket knowledgeRisk and cost sharing• a partner bears a portion of the risk and/orcost of the allianceStrategic Management & Competitive Advantage – Barney & Hesterly8Strategic AlliancesStrategic Alliances88Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyHow Strategic Alliances Create ValueCreating a Favorable Competitive EnvironmentFacilitating technology standardsFacilitating tacit collusion• partners may agree on a standard and avoida market battle for the standard • partners may communicate within an alliancein subtle, legal ways whereas the samecommunication between competitors outsidean alliance would be illegalNetwork Industries• increasing returns to scaleStrategic Management & Competitive Advantage – Barney & Hesterly9Strategic AlliancesStrategic Alliances99Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyHow Strategic Alliances Create ValueFacilitating Entry and ExitLow-cost entry into new industriesLow-cost exit from industriesManaging uncertaintyLow-cost entry into new geographic markets• a partner provides instant access and legitimacy• a partner is an informed buyer• alliances may serve as ‘real options’• partners provide local market knowledge, access,and legitimacy with governments and customersStrategic Management & Competitive Advantage – Barney & Hesterly10Strategic AlliancesStrategic Alliances1010Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyChallenges to Value Creation and AllocationIncentives to Misappropriate Value (Cheat)An alliance is an exchange context in which:• partner inputs may be difficult to monitor• actual value creation may be difficult to monitor• value appropriation (allocating the value) may be:• difficult to monitor• subject to power dynamicsStrategic Management & Competitive Advantage – Barney & Hesterly11Strategic AlliancesStrategic Alliances1111Copyright © 2006 Pearson Prentice Hall. All rights reserved. Copyright © 2006 Pearson Prentice Hall. All rights reserved. Strategic Management & Competitive Advantage - Barney & HesterlyStrategic Management & Competitive Advantage - Barney & HesterlyChallenges