Strategic Management Fit: The Enabling Role of Alliances for an individual Firm

T O P I C S Different Strategic Needs Means Different Alliance Strategies As Needs Change So Does Alliance Strategies Reasons For Using Alliance Preparing For Problem Involved In Translating The Strategic Alliance Concept Into Action Crafting A Workable Strategic Alliance

Who we are, where we are, where we would like to be >> objective Organizations have their own set of strategies. Strategies help in govern all aspect of organizations to achieve their objective/goal. All organizations are different on many endless factors such as the nature of the business & industry, the outside force and etc. Differences in organization objective = Different strategic needs = Different alliance strategies Different Strategic Needs Means Different Alliance Strategies

Example News Corporation, based in Australia –Company objective: bring all programs to home in US, Europe, Asia and South America. –Company situation: own 2 satellites, Star TV in Asia, B Sky B in UK. –Company strategy: wish to penetrate into the South America market (strategic needs). Real Case Example

Example News Corporation –Solution: 1995, announced a direct broadcast of TV program in Latin American. Formation of partnership with 3 parties. –Brazil > Globa, leading media company –Mexico > Grupo Televisa, mexican broadcaster –US > Tele-Communication, cable operator Real Case Example

Example Mitsubishi Motor Corp, Japan’s youngest auto maker –Company objective: to increase sale in an oversea market –Company situation: was faced with heavy competition from Honda & Toyota in Europe and USA market condition in Asia was more favorable: auto sales were booming, less competition –Company strategy: wish to penetrate into the Asia market ( strategic needs) avoid heavy competition in Europe and USA –Solution: Established a joint-venture and a wholly-owned subsidiary in Asia region Real Case Example

As needs change so does alliance strategy: An evolving strategic fit decision Environment of business keeps changing Changing environment leads to changing of needs Changing of needs leads to alteration in alliance strategy Alliance strategy is dynamic. Changing of circumstance needs –Changes in alliance strategy –Formulation of strategic response –Adaptation of company to stay competitive

Alliance Strategy is dynamic Example  Motorola  Strategic framework depends on many factors  Motorola’s strategic framework emerged over a 20-year period as the company attempted to form strategic responses to changing competitive market condition with limited resource.  Motorola has used multiple forms of alliances -Licensing agreement -Joint Venture -Exports -Wholly owned subsidiaries

Licensing agreement  Situation -Motorola produces microprocessor -Japanese manufacturers were the major market for microprocessor -Motorola’s financial resources & other resources were limited -Motorola had no access to the Japanese market  Strategic needs - Motorola wishes to gain an access to potential customers in Japan  Strategy -Formation of a licensing agreement with NEC & Hitachi (Japanese firm) -Gain a quick access into the Japanese market -Resource leveraging -No large capital investment is needed Licensing agreement

Joint Venture  Situation -Keiretsu: Japan’s keiretsu system promoted favouritism among domestic companies and often locked out foreign company, involve formal & informal relationship with supplier & marketing channels - Motorola had trouble entering Japan effectively  Strategic needs - To effectively enter into the Japanese keiretsu system  Strategy -Formation of joint ventures with Japanese firms eg. Toshiba, DDI corp, Mitsubishi -Able to break through the tight keiretsu system of the Japanese -Receive an acceptance from involved parties -Share of technology knowledge -Share of investment costs -Share revenue TT1T2T3 M Keiretsu System

Exports  Situation -Motorola exports to many countries including Japan -Direct exportation in Japan was not a success -Japanese regulation protected domestic techno-firm as the Japanese firms were much less advanced compare to Motorola’s -Motorola was not able to fully adapt the product according to Japanese market needs  Strategic needs - Motorola needs to obtain other method to access the customers in Japan  Strategy -Consider for other possible methods Exports -Minimize risk

Wholly owned subsidiaries Motorola established a wholly-owned subsidiary in China because: –China is major Asian market –One of the world’s fastest-growing economies –Supported by Chinese government –Sufficient financial resource Advantages: –Established in one of China’s economic zones –Low-cost labor –Good supporting infrastructures Continuing relationship with Chinese government for the further advantage –Exporting products to China again when the demand of electronic increases. –Joint venture with state-owned firms.

Motorola’s success in China was due to largely to its superior product and service, which the Chinese government seemed to “trust” Need of changes leads Motorola uses different alliance strategy which enable them to stay competitive in the market

Reasons for Using Alliances Help add value of the product Launch product to market faster Expand overseas market Increase service availability Better research and development Add financial resources Gain knowledge from the alliances Less competition Provide new marketing channel A better distribution of products and services

These guidelines provide a useful framework for the establishment of strategic alliances identify potential partners identify strategies and define strategic needs explore ways or conditions under which strategic alliances might help to meet these needs

Establishing strategic Alliances (1/3) Identify strategies and define strategic needs. –analyze and evaluate the key activities of the value chain involved in implementing the firm’s stated enterprise-wide strategy

Explore ways or conditions under which strategic alliances might help to meet these needs. –determine which of the activities might be done either separately by different joint-ventures and which of them can be separated over time –specify which activities can be done by alliances while protecting core competencies and technologies that are competitive advantage –analyze ways that maximize each partner’s strengths –do not only focus on potential synergies but also on the strategic fit Establishing strategic Alliances (2/3)

Identify potential partners. –keep lawyers informed and consult them –prepare contingency plans that allow for forming new alliances –the alliance must add value to each of the partners Establishing strategic Alliances (3/3)

Group 4 By: Michael W Pornpatchara T Suchada V Taksaorn S Nick