Negotiating Strategic Alliance Partnerships by Associate Professor Rajesh Kumar Navigate the complex challenges of strategic alliances through planning your partner relationships Deal with ambiguity management problems http www negotiationtraining com au articles planning alliances strategically Strategic alliance negotiations have become a vital part of the portfolios of many companies In an era of rapid technological change an altering competitive landscape and the globalization of competition many more companies are choosing to partake in alliances Frequently the decision to join in alliances is not one of the companies own choosing With their competitors forging alliances firms are often faced with fewer choices other than that of forming alliances to negate the potential advantage of their rivals That said studies reveal that the failure rate in alliances occurs anywhere from 30 70 i The high failure rates are mirrored in the collapse of some alliances that have gained widespread publicity The failure of the Meiji Borden alliance the collapse of Cornings alliance with Vitro and the early termination of Corning s alliance with Nestle are some prominent examples of alliance failures ii There is no easy why for why a negotiated partnership falls apart Some fail because of the incompatibility of the goals between the partners iii Others are unable to navigate cultural differences among partner firms iv Still others collapse because of the opportunistic behaviour by their partner or the inability to effectively coordinate their activities v Yet others are the victims of changing environmental conditions that call into question the reason for forming an alliance Still others suffer from the challenge of forming an alliance with a partner who may be their competitor vi Given the diversity of the underlying reasons for failed partnerships it is perhaps understandable why managers often consider alliances as an organizational form that maximises rather than minimizes ambiguity Ambiguity is inherent to alliances as are numerous variables that often come into play These variables mutually influence each other and their interaction often occurs in an environment that is far from benevolent For example where the partners objectives are or are perceived to be dissimilar they may take actions that may surprise their partner This in turn may cause the offended partner to question the motivations of their partner This will certainly undermine trust and make cooperation among the partners exceedingly difficult The collapse of the alliance between Borden and Meiji milk illustrates this dynamic quite clearly The ambiguity that is a trait of any alliance is not a one time event by any means although the causes of ambiguity may clearly be unique at different phases of alliance evolution Joint venture partnerships go through the phases of Formation Operation and Outcome vii Each of these phases presents distinct problems about managing ambiguity At the formation stage the alliance partners agree on forging an alliance and proceed to make their agreement operational At the operation stage the alliance starts its operations such as a marketing arrangement an R D partnership or a manufacturing one Finally at the outcome stage alliance partners must make the decision whether to proceed with the alliance or terminate the partnership be it premature or otherwise I propose that at the formation stage the underlying ambiguity surrounds the terms of the agreement The potential partners to the alliance are obviously motivated to get the best possible agreement but they also clearly recognize that they cannot push their partner too far or there will be no alliance The crucial question is What should be the right balance between assertiveness and acceptance The ambiguity in international alliances may also be fostered by cultural differences Although these differences are always present they are likely to be particularly significant at the start of the interaction Partners may not understand each other or may incorrectly understand each other They may or may not feel at ease with the negotiation tactics used by their partners For example the relationship oriented negotiation strategy so characteristic of Asian and Latin American cultures may not be well received with the time conscious North Americans Similarly the Asians or the Latin Americans may be displeased with the assertiveness of the North Americans which may cause them to lose face Without a cultural interpreter or a mediator present misunderstandings may well be commonplace under these conditions The operational stage is often marred by managerial ambiguity A lack of clarity may exist as to how decisions are going to be made or the basis for these decisions Differences may exist in how effectively the partners communicate or share information and make the situation worst If partners distrust each other they may not fully trust the information that is being provided and surely this can only complicate matters If these problems persist they may result in an unfavourable process and or outcome discrepancies This is most certainly an unwelcome development as it is likely to lessen their trust and diminish the psychological commitment of the venture partners viii Process discrepancies mean that the partners are discontented with the manner in how they interact with each other This could include information sharing putting in the required effort and or making decisions in a timely way Outcome discrepancies mean that at the operational stage the alliance has failed to generate results that are satisfactory to one or all of the partners The marketing strategy may not have yielded the desired results or slow the progress in product development Obviously these negative outcomes will put pressure on managers to either reverse course or embark on radical changes to revive the venture Lastly at the outcome stage the managers are faced with the issue of evaluative ambiguity This takes on particular relevance when the alliance has not fared well The alliance partner or partners must now decide whether they wish to pursue the alliance When should they pull the plug on the venture What current alternatives are available to restructure or renegotiate the venture How will their partner reply to their decision If the alliance is with a partner from Asian or Latin American cultures would the decision to exit be perceived as a face loss for the culturally distant
View Full Document
Unlocking...