Strategic Alliances Guidelines for

Bleackley
es for
success
and Mark
The authors are concerned that a growing number of firms are forming too many ‘bandwagon’ alliances in a vacuum of strategic consideration and, as a consequence, are placing their organizations at a competitive disadvantage. Because of implementation problems associated with differing management styles, cultures, operational practices and degrees of control, not too many firms can point to having positively capitalized on the potential advantages. In fact some researchers believe the failure rate of alliances to be as high as 50per cent or more. The authors believe it is timely to put alliances into a strategic context and provide senior management considering this business route with guidelines for success.
The Driving
Factors
Probably the greatest stimulus to alliance formation has been the emergence of global competitors and those corporations wishing to become global. This is particularly relevant in growth industries like telecommunications where corporations are making alliances in part to overcome the national protection afforded to indigenous suppliers or to share resources to further develop markets and products. Ericsson’s strategic alliance with Telefonica (Spain) reaffirms this trend. The deal between Compagnie G&&ale d’ElectricitP (CGE), the French electrical group, and ITT produced a new manufacturing alliance capable of serving global markets and challenging its existing global competitors.
The rapid pace of technological development and innovation and the increasingly high costs of the associated research and development are also factors. Shorter
The concept of forming alliances, strategic or otherwise. is not new. Toshiba started doing this in 1906. The topic is in vogue and the number and scale of agreements being signed is growing rapidly. If you try to draw a map, you can easily see what a spider’s web it has become. Figure 1 provides an illustrative network of alliances in the telccommunications industry.’ Deals of cvcry conccivablc sort arc being made. They do not appear to bc specific to any particular country, industry or type of organization. They arc occurring at all levels in corporations. Some authors have attcmptcd to put the subject into some form of strategic context.’ For future success, senior management must ensure that this business route is viewed in a true strategic pcrspcctive rather than as an opportunistic ‘quick fix’. Failure to do so may result in putting their organizations’ growth, or even survival, at risk. Renault-AMC is a case in point. Prior to dissolving its arrangcmcnt with AMC, Renault invested S645m in AMC which nevertheless managed to incur losses of 5750m over the period of the agreement. Such investment severely weakened Renault at a time when it was also facing problems in domestic markets.
Strategic
Alliances-Guidelines
for Success
10
Ford Aerospace
Hughes
/
GEC Source:
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Nitsuko SRI International
Figure
1. Alliances
in the telecommunications
industry
Godfrey Devlin IS a Senior Consultant for SRI Northern Europe wrth considerable experience in assisting companies in mergers and acquisitrons, alliance formation and business strategy. Mark Bleackley is a Consultant for SRI Northern Europe. He has a background in banking and specializes in business strategies of the multinational corporation.
Strategic alliances take place in the context sfa company’s lorry-term strategic plan and seek to improve or dramatically charJCqe a company’s competitive position.
What is a Strategic
Alliance?
Co-operative agreements have been common practice in the business community for a long time. Technology swaps; R & D exchanges; distribution, rclationmarketing and manufacturer-supplier ships; and cross licences, to mention a few, arc widely practiscd in most sectors of the economy. Fundamentally many of these relationships are essentially casual in nature and arc unlikely to dramatically change a company’s competitive position. More recently a growing number do not conform to this pattern. These strategic alliances arc specifically concerned with securing, maintaining or enhancing a company’s competitive advantage. Unlike their predecessors they are a central aspect of a company’s future direction and are a key strategic option. Without a doubt they have enabled Glaxo to become one of the world’s most successful companies and a leader in the pharmaceutical industry.