A presentation for subject MGMT90148 (Consulting Fundamentals) at Melbourne Business School. Designed as an engaging look at strategic alliances as a tool in business. Highlights its application, effectiveness and a guide for what successful strategic alliances entail in the corporate world.

2. 02
Tool Time:
Strategic Alliance
Au | Chandra | Dahdoule |Kermeci| Ruparel

3. Key Takeaways
If managed well, strategic alliances can lead to success
03
Benefits
Draws upon
complementary core
competencies and
provides solutions beyond
a single entity’s scope.
Relationships
Effective communication
and understanding of roles
and responsibilities
between parties
Risks
Does the partner make a
suitable and an
appropriate alliance
partner?

4. 04
What we see
What's the real
problem
The Iceberg
What is a strategic alliance?
An agreement between firms to do business
together in ways that go beyond normal
company-to- company dealings, but fall
short of a merger or a full partnership
- Despite the rise of strategic alliances, we
have limited definitive knowledge about
how individual alliances develop over time
- Researchers have typically discussed
distinct stages of alliance development:
initiation, operation and evaluation
Alliances move through
several phases as they
develop and evolve, and
are initiated to meet a
variety of needs.

5. 05
The Iceberg
The Initiation
Phase
- Informal crystallisation of issues and
participants develop the purpose for the
alliance.
- Characterised by partners bringing their
own unique strengths to bear on a
problem.
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The Operation
Challenge2
The Evaluation
Phase3
Lifecycle of a strategic alliance
- Formal meetings occur and an internal
structure under which the alliance
functions develops.
- The full range of impacts - both positive
and negative - of the strategic alliance is
realised.
- Summative evaluation is used to make
overall judgment to determine if the
a l l i a n c e s h o u l d b e c o n t i n u e d ,
restructured or terminated.
We can only visualise the immediate
product of alliances, but the specifics
of a successful strategic alliance lie
deep below the surface

6. Strategic alliance organisation is
put together, focussed on
implementation of plans worked
out in previous stages.
Formation
Most critical stage. Beginning
informally, the discussions,
details and agreements of the
alliance are brought into written
form and accepted by all parties.
Dialogue/
Negotiation
Overall guiding principles are
formed.
Strategy
Lifecycle of a Strategic Alliance
The process in moving towards a mutual outcome
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Taking direction provided the
strategy stage, initial screening
for potential partners is
conducted.
Search
Strategic alliance carries out its
intended actions. Longest stage,
where benefits of actions in
previous stages are realised.
Operation Final stage where the strategic
alliance is taken over by one of
the partners, spunoff, or
liquidated.
Evaluation

7. It’s Been a Long
Journey
Historical Development of Strategic
Alliances
Pre-1970s:
- Evidence of partnerships from the earliest traces
of business
- Little research in the strategic motives at this point
1970s:
- Explanatory theories began to develop
- Transaction cost economics whereby cultivating
alliances minimises hidden costs
- Resource dependency theory where firm wants to
minimise uncertainty, this had major implications
for partnership with buyers and suppliers
- Economies of scope
PRE
1970s
70s
Enterprise partnerships
Vertical integration
alliance

8. Resource
monopoly
alliances
- Consolidation of research including an increased scope of
research from a variety of disciplines
- Focus on the resource (RBV) and how to leverage VRIO resources,
both tangible and intangible
- Economies of scale
90s
Alliances for competing in globalised sphere
- Significant growth in the number of strategic
alliances between firms during this period
- Fall in trade barriers and emergence in technology
led to an internationally competitive marketplace
- This called for ‘alliances for survival’
80s

9. How the Phenomena has
Changed Over Time
Innovation inspired alliances
- Model of the single, independent, autonomous firm no
longer practical
- Alliances with international firms allow entry into
developing markets with the benefit of local knowledge
but without financial and reputational risks
POST
2000

10. Your task is to work with your
ally to construct a visually
attractive paper plane.
Your plane will be judged on
quality of construction and
branding.
You have 5 minutes. Your
time starts now.
Activity

11. Organic growth
Strategic alliances
Mergers or acquisitions
Joint ventures
Greenfield investments
Franchising
Other 1.2%
7.8%
16.1%
33.1%
40%
60.9%
62.7%
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The Economist Intelligence Unit (2005) survey on the kinds of business models
executives would rely on going forward, revealed most inclination towards
Strategic Alliances, to increase market share.
Motivation
Why should we undertake strategic alliances?
The business landscape has moved beyond from the “make versus buy”
decisions, and expanded to the “make versus buy versus partner” decisions.
Firms turn to strategic alliances for:
- Acquiring the critical skills, knowledge, capabilities and internalizing those
from external sources.
- Pooling financial, technological, human and other resources.
- Reducing uncertainty or sharing risky research and development.
- Capitalise on growth withot risky equity stake.
- Gaining market power and/or expansion to new markets, or overcoming
or creating barriers to entry .
- Leveraging on the already established systems, expertise and skills.
Source: Global Business Model Survey EIU/KPMG International 2005

12. “Strategic
alliances
are
the
favored
method
of
enabling
organisations
to
penetrate
new
markets
quickly
and
there
is
subsequently
a
trend
towards
looser,
more
:lexible
and
shorter-­‐term
alliances,
in
some
cases
with
competitors.”
Mike Rake, Chairman - KPMG International
Fluid alliance and the motivation behind it:
Such an alliance is mostly project based and amongst companies that were traditionally viewed as competitors, became partners in the pursuit of new markets and
opportunities. More common in telecommunications, media and entertainment industries, where convergence around digital platforms is forcing companies to create and
disband new alliances at a rapid pace.
How is this beneficial?
- Product Expansion, where each firm has strong brand presence/reputation and/or especially when the project is complex requiring massive resources
- Market expansion to gain competitive advantage.
- Increased innovation within same industry, technical and commercial capital
- Establishes institutional legitimacy: improves reputation, signals creditworthiness, increases attractiveness as worthy alliance partners
The Trend

13. While Alliances Seem Lucrative
Careful research and scrutiny is imperative for success
What is the potential partner contributing to the arrangement?
Does the potential partner share the same strategic vision for the alliance?
Is the potential partner financial stable?
What is their industry experience?
What is their reputation among clients and vendors?
Is the company or individual ready for a commitment?
Do we trust the potential partner?
Would company gain access to new products, expertise and technology?
Would my company be able to enter related or new markets, particularly new
geographic markets?
A check-list: Some questions to consider,
when choosing an alliance partner:
13

14. ““A
McKinsey
study
found
that
50%
of
alliance
failures
are
due
to
poor
management.”
An Overview of Strategic Alliances 2001
- Poorly received by the public (Public Perception Test)
- Damaged reputation and brand image
- Legal issues
- Clash between corporate cultures
- Lack of trust (Hidden agendas for e.g larger partner taking advantage of smaller partner)
- Profit drop due to Costs increase/Hidden costs
- Possible financial failure on partners behalf
- Loss of control
- Inefficient management
The Risks
Both parties share risks and rewards but risks can be critical!

15. What We’ve Seen
Common mistakes that undermine alliance success
- Weak alignment of objectives
- Low commitment (No champion and low support from
management)
- Poor understanding of ‘performance’ metrics
- Poor planning and integration
- Contract incompleteness
- Strategic weakness (Unclear strategies, underdeveloped
value add proposition)
- Rigid/fail to adapt
- Overdependence
- Non-realistic timeframes (Lack of preparation)
- Unrealistic or unclear expectations
- Internal alliance issues focused on more so than the
customer value
- Poor understanding
- Complexities are underestimated
- Reactive rather than proactive
- Poor choice of partner
15

16. Microsoft and HP Global Strategic Alliance
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17. Do’s
Success factors
within the organisation
- Support from senior management
- Partner capabilities/compatibility
- Trust
- Clear objectives understood by both
parties
- Ability to meet ‘performance’ expectations
- Commitment to long-term success
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Develop and Nurture
Relationship
- Effectively match capabilities of
one party in effect filling the gap
of the other
- Effective communication and
understanding of roles and
responsibilities between parties
Be Constructive and Proactive
- Stakeholders effectively managed
- Understand cultural differences
- Benefits/trade-off are fully understood
by both parties and acceptable
- Agree on an exit plan
Foster an Alliance mindset
- Ensure both parties possess
alliance champions
- Three way value proposition
(Partner, customer, own
organisation)

18. Don’ts
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Rush into an Alliance
- Poor choice of partner
- Poor planning and integration
- Contract incompleteness
- Weak alignment of objectives
Have Unfeasible goals
- Unrealistic or unclear expectations
- Non-realistic timeframes (Lack of
preparation)
- Complexities are underestimated
Lack of Flexibility
- Rigid/fail to adapt
- Overdependence
Allow Problems to Build Up
- Strategic weakness (Unclear
strategies, underdeveloped value
add proposition)
- Reactive rather than proactive
- More focus on internal alliance
issues than the customer value
Use the right personnel
- Low commitment (No champion
and low support from management)

19. Origins of
Ambiguity
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- Partner opportunism
- Cultural clashes
- Inadequate managerial
mechanisms
- Fairness
- Presence or absence of prior
history
Alliance
Developmental
Stage:
Initiation
- Top management support
- Task partitioning
- Relationship building
- Use of external frameworks such
as structures, protocols
- Does the partner make a
suitable and an appropriate
alliance partner?
Alliance
Developmental
Stage:
Operation
Managing
Ambiguity
Interactional
Ambiguity
- Information sharing
- Cultural gap
- Fairness
- Governance mechanisms
- Detecting unfavourable process
discrepancies in a timely way
- Emotional management
- Collaborative problem solving
through the establishment of
routines
- Is the alliance experiencing
unfavourable process
discrepancies; i.e. the alliance
partners do not interact
effectively with each other?
What are the origins of
unfavourable process
discrepancies?
- Unresolved outcome
discrepancies
- Unrealistic expectations for the
alliance
- Environmental volatility
- Adopting multiple and flexible
criteria for assessing alliance
performance
- Changing the alliance’s time
horizon
- Enhanced effort and/or shift in
alliance governance
- Should the alliance decision
makers persist with the alliance
when it is experiencing an
unfavourable outcome
discrepancy; i.e. the alliance is
not meeting its expected goals?
Alliance
Developmental
Stage:
Evaluation

20. Want to Know More?
Further Reading
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Rethinking the Business Model - KPMG International
http://us.kpmg.com/microsite/FSLibraryDotCom/docs/
Rethinking_the_business_model.pdf
The Collaboration Advantage: Customer: Focused Partnerships in a Global
Market - The Economist
http://graphics.eiu.com/upload/SAP_Collaboration%20advantage.pdf
5 Keys to Creating Successful Strategic Alliances - Forbes
http://www.forbes.com/2002/07/01/0701alliances.html
Why Strategic Alliances Don’t Work - Forbes
http://www.forbes.com/2002/07/01/0701alliances.html
Developing Strategic Alliances to Build Your Business - Big Bold Business
Advice
http://sempreavanti.org/wp-content/uploads/2013/05/
BBBNJ_Ch_8_Imbriano_WP2012_REPRINT_12-6-13.pdf
Alliances Are Often Said to be Like Marriages - The Economist
http://www.economist.com/node/14301470
A Marketplace Without Boundaries
- PwC
http://www.pwc.com/gx/en/ceo-
survey/2015/assets/pwc-18th-
annual-global-ceo-survey-
jan-2015.pdf
Making Healthy Breakfasts Easier
(Case) - Nestle
http://www.nestle.com/asset-
library/documents/media/news-
and-features/2011-february/cpw-
brochure.pdf

21. References
All images courtesy of: www.gettyimages.com.au
Cravens, D., & Piercy, N. F. (2008). Strategic marketing. McGraw-Hill Irwin.
Koza, M., & Lewin, A. (2000). Managing partnerships and strategic alliances: raising the odds of success. European Management Journal, 18(2), 146-151.
Garrette, B., Castañer, X., & Dussauge, P. (2009). Horizontal alliances as an alternative to autonomous production: Product expansion mode choice in
the worldwide aircraft industry 1945–2000. Strategic Management Journal, 30(8), 885-894.
Garrette, B., Castaner, X., & Dussauge, P. (2008). A resource need and availability view of the make or ally choice: evidence from the worldwide aircraft
industry 1945-2000 (No. 907). HEC Paris.
Judge, W. Q., & Dooley, R. (2006). Strategic alliance outcomes: a transaction-cost economics perspective. British Journal of Management, 17(1), 23-37.
Wohlstetter, P., Smith, J., & Malloy, C. L. (2005). Strategic alliances in action: Toward a theory of evolution. Policy Studies Journal, 33(3), 419-442.
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22. Thank you

23. MGMT90148 - Consulting Fundamentals
Tool Time Presentation: Strategic Alliances
Melbourne Business School
Semester One, 2015
Robert AU (329510)
Saakshi CHANDRA (667203)
Abrahim DAHDOULE (639008)
Jessica KERMECI (356045)
Vatsal RUPAREL (350372)
Designed by: Robert Au
For: Austin Chia
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