Chapter 9

Strategic Alliances: Teaming

and Allying for Advantage
by Robert Pitts
& David Lei
Slides prepared by
John P. Orr
Cameron University
Copyright 2003 by South-Western, a division of

Slide 9-1

What you will learn

Slide 1 of 2

The characteristics of a strategic

alliance
Why companies around the world are
forming strategic alliances
The different broad types of strategic
alliances, including:
Licensing
Joint ventures
Multipartner consortia
Copyright 2003 by South-Western, a division of

Slide 9-2

What you will learn

Slide 2 of 2

The benefits and costs of entering into

strategic alliances
How to balance the need for
cooperation with
competition

Copyright 2003 by South-Western, a division of

Slide 9-3

IBMs Global Alliances

Slide 1 of 2

Early Alliances: Responding to Japan

IBMs Initiatives During the 1990s:
Rebuilding Competitiveness
Motorola
Apple Computer
Perkins-Elmer, Silicon Valley Group, and Elite
Systems
Toshiba
Siemens
Phillips
Copyright 2003 by South-Western, a division of

Slide 9-4

IBMs Global Alliances

Slide 2 of 2

Current Strategic Alliance Initiatives

Electronic commerce
Telecommunications
Smart technologies
Health care
Ongoing relationships

Copyright 2003 by South-Western, a division of

Slide 9-5

Ex. 9-1. IBMs Alliance Strategy

(Selected Categories)
Personal Computers

Factory Automation

Matsushita (low-end
PCs)
Ricoh (hand-held PCs)

Texas Instruments
Sumitomo Metal
Nippon Kokan
Nissan Motor

Telecommunications
NTT (value-added
networks)
Motorola (mobile data
pets)

Health Care
Pfizer
Microsoft

Copyright 2003 by South-Western, a division of

Slide 9-6

The Global Airline Industry

Airline industry consolidation of 1990s
From code sharing to combined
operations
Network versus network

Northwest KLM
American Airlines British Airways
Lufthansa United Airlines
Delta Sky Team alliance
Oneworld alliance

Copyright 2003 by South-Western, a division of

Slide 9-7

Ex. 9-2: Global Airline Alliances

Slide 1 of 4

Trans-Atlantic Linkages/Relationships
Airlines

Type of Alliance

Northwest Airlines
KLM Royal Dutch

Full partnership (antitrust immunity)

Wings alliance

United Airlines
Lufthansa

Full partnership (antitrust immunity)

Part of Star Alliance

Delta Air Lines

Swissair
Sabena
Austrian Airlines

Full partnership (antitrust immunity)

Relationship unwound in 1998-1999

Copyright 2003 by South-Western, a division of

Slide 9-8

Ex. 9-2: Global Airline Alliances

Slide 2 of 4

Trans-Atlantic Linkages/Relationships
Airlines

Type of Alliance

Continental Airlines
Alitalia

Code sharing, joint marketing (antitrust

issues pending)

American Airlines
British Airways

Code sharing, joint marketing (antitrust

request withdrawn)

Delta Airlines
Air France
CSA Czech Airlines
Alitalia
Aero Mexico

Full partnership (antitrust immunity)

Sky Team alliance

Copyright 2003 by South-Western, a division of

Slide 9-9

Ex. 9-2: Global Airline Alliances

Slide 3 of 4

Globe-Spanning Linkages/Relationships
Airlines

Type of Alliance

United Airlines
Star Alliance: Code sharing, joint
marketing; includes up to 17 partners in
Lufthansa
Scandinavian Airline 2002
System (SAS)
Thai International
Varig Brazilian

Copyright 2003 by South-Western, a division of

Slide 9-10

Ex. 9-2: Global Airline Alliances

Slide 4 of 4

Globe-Spanning Linkages/Relationships
Airlines

Type of Alliance

American Airlines
British Airways
Cathay Pacific
Qantas Airways
Aer Lingus
Lan Chile
Finn Air
Iberia

Code sharing, joint marketing,

arrangement for global flights. New
alliance known as ONEworld.

Northwest Airlines
Continental Airlines
Japan Air System

Code sharing for Trans-Pacific flights

Copyright 2003 by South-Western, a division of

Slide 9-11

Factors Promoting Alliances

New market entry
Shaping of industry evolution
Learning and applying new
technologies
Rounding out a product line
Copyright 2003 by South-Western, a division of

Slide 9-12

Types of Strategic Alliances

Licensing Arrangements
The least sophisticated and easiest-tomanage type of alliance

Joint Ventures
The creation of a third entity representing
the interests and capital of the partners

Consortia and Networks

Highly complex linkages
among groups of
companies
Copyright 2003 by South-Western, a division of

Slide 9-13

Licensing Arrangements
Primary reasons for entry
A need for help in commercializing a
new technology
Global expansion of a brand franchise
or marketing image

Copyright 2003 by South-Western, a division of

Slide 9-14

Ex. 9-6. Sun Microsystems Licensing

Strategy in the Early 1990s
Slide 1 of 2

Bipolar
Bipolar
Integrated
Integrated
Technology
Technology

Texas
Texas
Instruments
Instruments

Sun
Sun
Microsystems
Microsystems

Philips
Philips
N.V.
N.V.

LSI
LSI

Logic
Logic

Copyright 2003 by South-Western, a division of

Fujitsu
Fujitsu

Cypress
Cypress
SemiSemiconductor
conductor

Slide 9-15

Ex. 9-6. Sun Microsystems Licensing

Strategy in the Early 1990s
Slide 2 of 2

Company

Benefit of Linkage

Philips N.V.

Gives Sun access to European

market.
Phillips will specialize in RISC chips for
consumer and telecommunications products.

Texas
Instruments

Gives domestic credibility to new

product design

Fujitsu

Gives access to low-cost production

LSI Logic, other Provides for cross-licensing and

small firms
exchange of ideas
Copyright 2003 by South-Western, a division of

Slide 9-16

Joint Ventures
Primary reasons for entry

Vertical integration
Learning a partners skills
Upgrading and improving skills
Shaping industry evolution

Copyright 2003 by South-Western, a division of

Slide 9-17

Consortia and Networks

Multipartner Consortia
Multipartner alliances designed to share an
underlying technology

Cross-Holding Consortia
Formal groups of companies that own large
cross-holdings and equity stakes in each
other

Industry-Spanning Alliance Networks

Firms sharing knowledge, costs, and risks
Copyright 2003 by South-Western, a division of

Slide 9-18

Risks and Costs of Alliances

Rising incompatibility
Risk of knowledge or skill
leakage
Risk of dependence
Strategic control
costs
Copyright 2003 by South-Western, a division of

Slide 9-19

Automotive Joint Venture Fades

Ford
Ford

Volkswagen
Volkswagen

Autolatina

Impasse on strategy to face General Motors

Reluctance to share design, marketing ideas
Copyright 2003 by South-Western, a division of

Slide 9-20

Ex. 9-7. Deepening Dependence on

Alliance Partner
Sourcingfor
for
Sourcing
components
components

Sustained
Sustained
lossesinduce
induce
losses
resignation,
resignation,
exit
exit

Lowprice
price
Low
detersfuture
future
deters
investment
investment

Domesticfirm
firm
Domestic
feelsprice
price
feels
pressurein
in
pressure
everymarket
market
every
based
based
oncore
core
on
technology
technology

Sourcing
Sourcing
extendsto
to
extends
jointventure
venture
joint

Alliance partner
partner
Alliance
becomingstronger,
stronger,
becoming
attacksfirms
firmsother
other
attacks
markets
markets

Copyright 2003 by South-Western, a division of

Ventureincludes
includes
Venture
sharedtechnology
technology
shared
development
development
aroundcore
core
around

Domesticfirm
firm
Domestic
losesits
itscore
core
loses
competence
competence
base
base

Slide 9-21

Balancing Cooperation and

Competition
Understand the firms knowledge and
skill base
Choose complementary partners
Keep alliance personnel long-term

Copyright 2003 by South-Western, a division of

Slide 9-22

Alliances and Ethics

Two Critical Issues
Balancing
collaboration and
competition within
the alliance

The issue of loyalty

among personnel
assigned to the
alliance

Copyright 2003 by South-Western, a division of

Slide 9-23