Lecture notes
Lecture 9
- Institution
- Royal Holloway University Of London
CO-OPERATION AND ALLIANCES
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29/10/2019LECTURE 9: CO-OPERATION AND ALLIANCES
TODAY’S OBJECTIVES TODAY’S LEARNING OUTCOMES
• Alliance Capitalism By the end of this session you will be able to:
• Types of alliances and key advantages • Appreciate key trends in the era of Alliance
and disadvantages Capitalism
• Build, Borrow, Buy Framework and how • Describe the different types of alliances and
to apply this key advantages and disadvantages
• Collaborative advantage • Understand the Build, Borrow, Buy
Framework and how to apply this
• Understand what collaborative advantage is
STRATEGIC ALLIANCES-PREAMBLE
Stick to your strengths – deliver more…
• Alternative to organic growth, or M&A
• Enables all businesses to grow
• Retain independence
• Value creation
• Less risky than M&A
Japanese Approach: supply contracts have been famously vague and short –trust, commitment.
Departure from the arm’s length competitive bidding contracts from Anglo Saxon firms.
Buying Alliance, Supplier Contract for own branded products, Market Power.
Alliances are quick(er), easier and reversable in comparison to M&A…
ALLIANCE CAPITALISM
Hierarchical capitalism dominated up to the early 1970s-vertically integrated and diversified firms
Internal markets rule… and still do in Eastern/some developing economies…
• Along comes Peters & Waterman (1982)-Stick to the Knitting…
• Japanese approaches to management
• Also witnessed an increase both in scale and attention to-Global Value Chains (cooperation is key)
Alliance Capitalism- Encompasses both cooperation and competition between firms.
Happens because alliances reduce……
• the transaction and coordinating costs of arm's length market transactions
& allow Partners to
• leverage resources/capabilities & experience of partner firms
, STRATEGIC ALLIANCES
Strategic alliances: can be considered as voluntarily initiated cooperative arrangements between two or
more firms in the pursuit of agreed common goals.
Cross-border alliance: an international cooperative strategy across different countries to create a
competitive advantage.
Involves the sharing of:
• Knowledge
• Resources
• Capabilities with the intent of developing:
o Processes
o Products
o Services
Video about the alliance between Renault Nissan and Daimler.
https://www.youtube.com/watch?v=JIqpKuClbc0
ADVANTAGES OF ALLIANCES
• Achieve strategic goals faster
• Access and speed of access to markets
• Hedge against uncertainties
• Pool resources & capabilities
• Accelerate learning
Exclusive manufacturer and distributor of Pepsi’s non-alcoholic drinks in China.
ALLIANCE DIRECTION
1. Vertical cooperative alliance: businesses in the same industry, but different stages of the value
chain
2. Horizontal cooperative alliance: competing firms in the same sector work and same stage of the
value chain work together (R&D)
3. Diagonal cooperative alliance: firms from different industries work together
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Video about this example
https://static-content.www.your-now.com/media/videos/2019-02/NOW_Day1_Movie_16_9.mp4
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