Strategic Alliances in Distribution

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Strategic Alliances in Distribution

• Chapter 11 with Duane Weaver

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What is a Strategic Distribution Alliance?

• when two or more organizations have a
  connection that cause them to function according
  to a perception of a single interest whereby the
  connections that bind the organizations are
• Enduring
• Substantial
• Cut across numerous aspects of each business

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Establishing Strategic AlliancesThree Areas of
Consideration FIT

• Chemistry Fit
• Operations Fit
• Strategic Fit
• Reference
• Lynch, Robert P., 1993. Business Alliances
  Guide The Hidden Competitive Weapon -- How to
  plan, negotiate, and manage strategic
  partnerships for increased corporate profits.

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Establishing Strategic Alliances Corporate FIT

• CHEMISTRY FIT
• A measure of the quality of the relationships
  among the people involved in operating the
  alliance
• A fool may be known by six things
• Anger without good cause
• Speech without profit or direction
• Change without progress
• Inquiry without object
• Putting trust in a stranger
• Mistaking foes for friends.
• -- Arabian Proverb

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Establishing Strategic Alliances Corporate FIT

• OPERATIONS FIT
• Some executives fall into their own trap by
  assuming that a good strategic fit implies a
  good operational fit.E.g. Olivetti and ATT

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Establishing Strategic Alliances Corporate FIT

• STRATEGIC FIT
• Looks at STROI to build strategic synergy whereby
  the weaknesses of one company are offset by
  complementary strengths of the other.Thus,
  strategic direction is similar while operational
  strength and weaknesses are dissimilar.
• STROI Strategic Return On Investment
• measures Market Strength, Innovative Capacity,
  Financial Gain, Organizational Capability, and
  Competitive Advantage.

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Styles of Alliance Operations
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Motives for creating distribution alliances

• Upstream Motives
• Respect downstream, motivate to represent us,
  coordinate marketing, small players to giants
  (mergers) trend, erect barriers to entry,
  logistics cost reduction
• Downstream Motives
• Assure stable supply, make marketing efforts more
  successful, cut costs, differentiate from other
  distributors,
• Alliances as out performers of ordinary channels
• Discuss in your groupswhat do you think?

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Building Alliance Commitmentvia incorporating
mutual vulnerability

• Expectations of Continuity
• Necessity of Mutuality
• Gauging Commitment
• Actions Binding Distributors to Suppliers
• Actions Binding Suppliers to Distributors

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Building Commitment bymanaging daily interactions

• Manufacturing Trust
• Relative to your confidence in each others
  integrity and concern for mutual well-being
• Economic Satisfaction
• Positive affective response to economic rewards
  from the union
• Non-economic Satisfaction
• Psychosocial affect relationship valued
• Choosing Partner and Setting
• Need complementary capabilities that can be
  exploited for competitive advantage
• Decision Making Process
• Centralization hurts trust

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Life of a Marketing Channel PartnershipRelations
hip Stages

• See Figure 11.3, p. 339
• Marketing Channel Relationship Stages
• Awareness
• Exploration
• Expansion
• Commitment
• Decline and Dissolution

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Conditions of potential success

• One side has special needs
• The other side has the capability to meet the
  needs
• Each side faces barriers to exiting the
  relationship
• The FIT is good across all three areas of fit

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Thank You!

• Have a great day
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