MGT 5391

1
MGT 5391 Session 10 Cooperative Strategies for
Alliances and Formal Partnerships
2
A Firms Internal and External Growth Strategies
External Market and Other Forces
Market/Customer Insights
Commercial
Organizational
Corporate And Business Strategies
Value Chain Core Competencies Identification
Increased Capabilities (Internal Growth)
Increased Performance
Outsourcing (Non- Core Competencies)
Team/Individuals
Technological
MA/JVs (External Growth)
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
3
Strategic Alliance Model The Five Most Frequent
Types of Alliances
Competitors
Key Suppliers
Retail Store Or Large Organizational
Consumers Customer Accounts
Firm
Supply Chain
Demand Chain
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
4
The Drivers of Inter-organizational Relationships

• Value-enhancing opportunities (i.e., Compaq and
  Sprint in
• Radio Shack stores)
• Environmental Turbulence and Diversity (Benetton,
  Casio,
• Dell all have networks of participating
  organizations)
• Skill and Resource Gaps
• Technology Complexity (pharmaceutical companies
  with smaller, specialized partners)
• Financial Constraints (next generation of
  long-range aircraft)
• Access to Markets (strategic alliances in
  commercial air travel)
• Information Technology

5
Types of Organizational Relationships

• Customer-supplier relationships
• Distribution channel relationships (VMSs)
• End-user customer relationships
• Strategic alliances
• Joint ventures
• Internal partnering

6
Strategic Alliances

• Definition an agreement between two
  organizations to cooperate to achieve one or more
  common strategic objectives.
• A HORIZONTAL AGREEMENT (between two firms at the
  same level in the value chain).
• Not a merger! Instead, a commitment to
  participate on a common strategic project or
  program.

7
Reasons for Strategic Alliance Formation

• Market entry and market position motives
• Product motives
• Product/market motives
• Market structure motives
• Market entry timing motives
• Resource use efficiency motives
• Resource risk reduction motives
• Skill enhancement motives

8
Model of Interfirm Rivalry Likelihood of Attack
and Response
Competitor Analysis
Market Commonality
Resource Similarity
Do competitors possess similar types or amounts
of resources?
9
Strategic Alliances
Firm A
Firm B
Partnerships between firms
10
Strategic Alliance Model The Five Most Frequent
Types of Alliances
Competitors
Key Suppliers
Retail Store Or Large Organizational
Consumers Customer Accounts
Firm
Supply Chain
Demand Chain
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
11
Types of Strategic Alliances
Example Dow Corning from Dow Chemical and
Corning Inc.
Example Chrysler and Mitsubishi Automotive
Example Chryslers supplier network
12
Reasons for Alliances by Market Type
13
Reasons for Alliances by Market Type
14
Reasons for Alliances by Market Type
15
Types of Strategic Alliances
Business-Level
16
Types of Strategic Alliances
Corporate-Level
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Five Kinds of Organization Capital

• The new economy is an innovation based company.
  Many theoreticians and
• practitioners are recommending that
  organizations need to re-invent or
• transform themselves. Transformation according
  to D. Tapscott (Digital
• Capital, 2000) takes advantage of five types of
  capital transformation
• Companies can have access to Human Capital by
  owing it.
• Customer Capital is the wealth contained in an
  organizations partnership with
• its customers (brand equity, depth/penetration,
  breath/coverage, trust from
• customers, customers reluctant to
  switch/medium and long-term approach for
• the Creation of Wealth)
• Companies can develop Relationship Capital via
  partnerships in which customers
• and suppliers become partners in Joint
  innovation (medium and long-term
• approaches to the creation of Value)
• Companies can build Structural Capital through
  continuously re-inventing them-
• selves via new business models (resides in the
  organizations codified knowledge,
• structures, systems and business processes
  not in individual talent)

?
?
?
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Types of Business-Level Strategic Alliances
Complementary Strategic Alliances
Partnerships that build on the complementarities
among firms that make each more competitive
Include distribution, supplier or outsourcing
alliances where firms rely on upstream or
downstream partners to build competitive advantage
Example Japanese manufacturers rely on close
relationships among suppliers to implement
Just-In-Time inventory systems
19
Types of Business-Level Strategic Alliances
Complementary Strategic Alliances
Used to increase the strategic competitiveness of
the partners
Example Product development agreements between
Microsoft and Dreamworks SKG
or Joint ventures between BMG Entertainment and
Universal Music
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Types of Business-Level Strategic Alliances
Example OPEC petroleum cartel
Example DirecTV has agreement with Time Warner
for exclusive programming
Example ATT acquires Teleport, a provider of
telecommunications services to business customers
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Types of Corporate-Level Strategic Alliances
Example Samsung Group joins with Nissan to build
new autos
Example Sony shares development with many small
firms
Example McDonalds or Century 21
22
International Cooperative Strategies
However....
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Why Strategic Alliances Fail?

• LOGIC FAILURES
• Environment changed
• Insufficient information about partner
• Wrong partner
• Overestimated market
• Not near core competencies
• Never developed product

• PROCESS FAILURES
• Poor leadership
• Different cultures
• Poor integration
• Leadership unclear
• Merged too few activities
• Merged too many activities
• Lack of Trust
• Their Core Values are incompatible

24
Joint Ventures

• Definition An agreement between two or more
  firms to establish a separate entity.
• Could be to develop a new market opportunity,
  access an international market, share
  costs/risks, gain local manufacturing profits,
  acquire knowledge or technology for core business.

25
Power and Dependence in Organizational
Relationships

• Cooperative research more successful for projects
  requiring applied (not basic) research.
• RD costs reduced and success likelihood
  increased if partners have complementary skills
  and resources.
• Large firms have greatest incentive to cooperate
  would prefer smaller partners to limit loss of
  revenues from venture.
• Smaller firms with the requisite skills and
  resources conduct their own RD.
• Because of this, relationships more likely among
  larger firms.

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Guidelines for Effective Relationship Management

• Trust
• Planning
• Resolving Conflict
• Leadership
• Flexibility
• Technology Transfer
• Learning
• Core Values, Philosophies, and Principles
• Win-Win!!

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Archetypal Organizational Forms

• Bureaucratic Form (internal/centralized)
• Organic Form (internal/decentralized)
• Transactional Form (external/centralized)
• Relational Form (external/decentralized)

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The Bureaucratic Form

• Used when
• Conditions of market failure
• Low environmental uncertainty
• Repetitive tasks needing specialized assets
• Characteristics
• Effective and efficient
• Not adaptive
• Examples
• Functional organization
• Company sales force
• Corporate research staffs

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The Organic Form

• Used when
• Conditions of market failure
• High environmental uncertainty
• Infrequent tasks, highly specialized investment
• Characteristics
• Less efficient
• Highly adaptive
• Examples
• Product management organization
• Specialized sales force
• Research staffs organized by product groups

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The Transactional Form

• Used when
• Competitive market conditions
• Low environmental uncertainty
• Repetitive tasks, highly specialized assets
• Characteristics
• Most effective and efficient
• Less adaptive
• Examples
• Contract purchase of advertising space
• Contract purchase of transportation of product
• Contract purchase of research field work

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The Relational Form (Enterprise Teams)

• Used when
• Competitive market conditions
• High environmental uncertainty
• Nonroutine tasks, little specialized investment
• Characteristics
• Effective and adaptive
• Not efficient
• Examples
• Long-term retainer with ad agency
• Long-term relationship with consulting firm

32
An Example of a Strategic, Formal Customer
Alliance/Partnership 1990 - present
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Five Kinds of Organization Capital

• The new economy is an innovation based company.
  Many theoreticians and
• practitioners are recommending that
  organizations need to re-invent or
• transform themselves. Transformation according
  to D. Tapscott (Digital
• Capital, 2000) takes advantage of five types of
  capital transformation
• Companies can have access to Human Capital by
  owing it.
• Customer Capital is the wealth contained in an
  organizations partnership with
• its customers (brand equity, depth/penetration,
  breath/coverage, trust from
• customers, customers reluctant to
  switch/medium and long-term approach for
• the Creation of Wealth)
• Companies can develop Relationship Capital via
  partnerships in which customers
• and suppliers become partners in Joint
  innovation (medium and long-term
• approaches to the creation of Value)
• Companies can build Structural Capital through
  continuously re-inventing them-
• selves via new business models (resides in the
  organizations codified knowledge,
• structures, systems and business processes
  not in individual talent)

?
?
?
34
Value Chain
Back of the Shop Org.
Front Org.
Core Technologies
Market (Customer)
Develop
Design
Conceive
Support
Sales
Market
Procedure
Distribute
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
35
The Typical Five Different Types Organization
Structures in Exemplar Organizations (N102
North America Organizations)
Corporate Office
1.
Macro Business Level
S.B.U.s/GBUs
2.
Value-Chain Design
Business Teams
3.
1, 2, 3, 4, 5
Product Teams
4.
Supply Side
Demand Side
Multi-functional Account Teams (Enterprise Teams)
5.
e. Products
a. Key Customers
b. Key Suppliers
d. Channels
c. Key Value Chain Processes
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
36

• Some 1993 Sales and Marketing
• Survey Data
• 79 indicated more specialization /
• customization of selling resources.
• 79 indicated more Value added
• resources in the field

_______________________ Source Colletti and
Tubridy, Reinventing the Sales Organization,
Alexander Group, Scottsdale, AZ, 1993.
37
Six Common Factors as to Why Organizations are
Successful Global Competitors

• Close ties/direct and formalized partnerships
  with customers
• (internal and external).

• Close ties/direct and formalized partnerships
  with vendors/suppliers
• (reduction in number and certification).
• Integrated and simultaneous efforts to improve
  quality, cost, delivery and
• speed (product development) to the
  marketplace.
• Greater functional (staff and support units)
  integration (decentralization)
• and less stratification (centralization).
• Integration of technology into manufacturing and
  marketing strategies
• linked to continuous organizational
  improvements that promotes
• teamwork (teams), training and continuous
  learning.
• Create a broad learning environment that
  emphasizes training and
• re-training, coaching and development
  (job, team, pass-offs,
• internal customer and supply-chain
  linkages) an Organizational
• University.

_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
38
Horizontal Organization Critical Design Elements
Competitors
Suppliers
Consumers
The Firms Value Chain
Preferred Customers
Supply Chain
Demand Chain
Strategic Alliances and Partnerships
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
39
The Horizontal Organization
Global Sales Organization
Retail Sales/ Preferred Customers
Demand Organization
Supply/ Fulfillment Organization
Consumers
Source B.A. Macy,Successful Strategic Change,
San Francisco, CA Berrett-Koehler Publishers
(forthcoming).
40
THE THREE TYPES OF BUSINESS STRATEGIES TO MEET
MARKET DEMANDS

• PRODUCT LEADERSHIP
• BEST PRODUCT
• OPTIMISED FOR INNOVATION SPEED
• PRODUCT FEATURES THAT DELIVER RESULTS

CHOICE

• CUSTOMER INTIMACY
• BEST TOTAL SOLUTION
• OPTIMIZED FOR SPEED AND RESPONSIVENESS
• VALUED ADVICE
• CUSTOM - TAILORED SERVICE

• OPERATIONAL EXCELLENCE
• BEST TOTAL COST
• OPTIMIZED EFFICIENCE
• LOW LOWEST PRICE
• HASSLE-FREE, RELIABLE

Source Adopted from M. Porter, Competitive
Advantage, The Free Press, 1985
41
Some Degree of Horizontally Designed Organizations
16.) Solutions Chemical Company Fibers
Group 17.) Motorola -- Govt. Electronics 18.)
Procter Gamble 19.) Xerox -- Europe some in
U.S.A. 20.) Rohm and Haas Chemical North
America 21.) Ryder Systems, Inc. 22.) Volvo --
Europe 23.) Weyerhaeuser Corp. 24.) Dow
Chemical 25.) Shell International (Royal Dutch
Shell) 26.) Dell 27. Bayer Chemical
1.) ABB 2.) Astra / Merek Group-
Sweden 3.) Allied Signal 4.) Lucent Network
Services 5.) Boeing 6.) British
Telecommunications 7.) C.N.A. Corp. 8.) Du
Pont 9.) Eastman Chemical Company 10.) General
Electric-Lighting Business Group 11.)
Hewlett-Packard Company 12.) Celanese - Technical
Fibers Group 13.) Levis Strauss 14.) Lexmark
International 15.) Modicon, Inc.
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
42
Enterprise Teams A Competitive Advantage

• Bayer 14 Customer Business Teams
• Lucent Network Systems Product Teams (2,000)
• Procter Gamble Customer Teams (7 global and
  130 regional)
• Xerox CATs (Most successful teams in Europe -
  100 Modified P/L Centers)
• ABB 5,000 Teams (Avg. 40 people/team)
• (Modified P/L Centers)

_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
43
One Texas Center Study of Customer Business
Teams RESULTS
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TTU Exemplar Study ...
Purpose The exemplar analysis was a project
for the Year 2000 plan designed to identify the
best in class practices which have the greatest
impact on ABCs business and people outcomes and
financial results.
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ABCs SALES STRUCTURE
OLDPRIOR TO 1991 20 SELLING TEAMS 80
GEOGRAPHIC
NEW1991. 20 ENTERPRISE TEAMS 80 GEOGRAPHIC
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ABC Company Before Enterprise Teams -

• Multiple Contact Points with Customer
• Selling Teams
• Customer Service Teams
• National Account Managers
• None to little Multi-functionality on
• Selling Team (90 Sales)
• Growth Rate inadequate to reach goals

47
Sales Team Design Before Redesign
Sales / Customer Buyer
Corporate Support Finance Systems Product Supply
Category Management
Corporate Support Finance Systems Product Supply
Category Management
Company (Supplier)
Key Customer
_____ National Account Manager
____________________________ Source B.A. Macy,
Successful Strategic Change, Berrett-Koehler
Publishers, San Francisco, CA (forthcoming)
48
Customer Business/ Enterprise Teams The
Application
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National Account Team, Selling Team, Category
Team, and Business Team Continuum 1960s to the
21st Century
Customer Business/ Enterprise Team
Category Management Team
National Account Manager
National Account Team
Selling Center Team
Vertical Ventures
?
1950s 1960s 1970s
1980s 1990s- Future

2001
Transaction Long-term
Formal Partnership/ Vertical
Relationships Mirror
Teams Integration/ Formal
Alliance
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
50
1960s 1980s Example Selling Teams
Example 1 Example 2
Example 3

• Field Sales Rep
• Sales Engineer
• Product Sales Manager
• Product Commercial Mgr.
• Product Mktg. Mgr.
• Production Engin. Mgr.
• Technical Manager

• Field Sales Rep.
• Product Mktg. Rep.
• Customer Order Admin.
• Materials Control
• Materials Coordinator
• Purchasing Agent
• Shop Supervisor
• MRP Administrator
• Shipping Supervisor

• Field Sales Rep
• Sales Engineer
• Mktg. Support Coor.
• Product Engineer

Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
51
The Value Chain
Key Suppliers
Key Customers
DEMAND Fulfillment Organization (each with
own resources experts)
DEMAND CREATION Organization (each with
own resources experts)
The Mirror Concept
The Mirror Concept
Suppliers Mirror Teams
Firms Enterprise Teams
Firms Enterprise Teams
Customer Mirror Teams
Source B.A.Macy, Successful Strategic Change
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
52
Enterprise Team Design After Redesign
/Key Customer Contacts
Enterprise Team Leader
The Mirror
Corporate Support
Corporate Support
Finance Systems Product Supply Category
Management Eng./Technology
Finance Systems Product Supply Category
Management Eng./Technology
Key Customer (Mirror Team)
Firms Enterprise Team
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
53
Illustrative Enterprise Teams Full-time
Multi-Functional Members (with Modified P/L
Responsibility)
Engineering Technology
Team Leader
4-6 Sales Reps.
Finance
Multi-Functional Enterprise Team
Product Supply
Future Business Development
Logistics
MKT. Research
Operations

IS/IT
Marketing
HR
___________________ Might be shared across
Multiple Enterprise Teams
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
54
Enterprise Teams What Is It?

• IS NOT
• Manufacturing Teams
• Hourly / Wage Teams
• Project Teams (limited life)
• Matrix Teams
• National Accounts
• Management Teams
• Sales and Engineering Teams
• Selling Teams
• IS
• Professional - White Collar - Office Teams
  Dedicated to Key Customers, Products, Processes,
  Channels
• Multi-functional Skills into an Enterprise Team
• Aligned to Key Customer(s) - Products, Channels,
  Processes or Key Suppliers 100 of Time
• A Competitive Advantage

_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
55
Enterprise Teams The Mirror Design Concept
The Mirror One Contact Point
Key Customers/ Retail Stores
The Various Global SBUs
Enterprise Units/ Team(s)
Corporate Office
Consumers
1 2 3 4 5 6 7 etc.
(feedback)
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
56
Range of Typical Mirror Enterprise Team
Activities

• Top to Top Strategic Planning
• and Joint Goals
• Joint Advertising/Marketing
• Linked E-Systems
• Linked Financial and Logistical
• Systems
• Linked RD and Eng./Technology
• Human Resources (sometimes)
• Co-location or near proximity
• Product/Service Co-development

• Volume and Profit
• Price
• Growth/Market Share
• TRUST and Excellent
• Relationships
• Interdependence and
• Cooperation
• Compatible Core Values and
• Philosophies
• Dedicated Teams with Authority
• to make Decisions

_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
57
Typical Team Configuration for Different Types of
Customers
Customer Type Team Type
Tier 1 (Mega)x Fully integrated
multi-functional Enterprise
Teams Tier 2
(Major)x Somewhat dedicated (multiple
customers) (1-2) integrated multi-functional
Enterprise Teams Tier 3 (Medium)x National
Account Team Tier 4 (Mini)x Sales Team
(representing many to all of S.B.U.s) Tier
5 (Micro)x Sales Team (standard sales
organization)
______ X By volume, growth and profit by supplier
firm
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
58
The Choices for Enterprise Teams Non-mutually
Exclusive
Customer Teams
Product Teams
Process Teams
Other?
Option Dimensions

• Product Development
• Service
• Growth/Profitability
• Life Cycle
• Uncertainty/Variance

_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
59
ABC Key Findings Relationships

• Customer satisfaction builds share
• Team effectiveness, demographics and
• structure drive volume, share, employee
• commitment and trust
• The design of Leadership roles has a
• varied impact on results
• Customer Business team capability drives
• customer satisfaction, share and volume

_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
60
ABC Firm Current Structure Sept. 2001
Consumer Teams (30) External
Relations Teams (6)
7 Global Teams Customer Business Teams (130)
GBU
Corporate
Key Customers/ Trade
Consumers
GBS
Office
Top Management
Govt.
Core Functions
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
61
Figure 2 Results of PLS Analysis
Numbers in parentheses are standard errors.
All path coefficients are standardized. Source
D. Arnett, B. Macy and J. Wilcox, The Roles of
Core Selling Teams in Supplier-Buyer
Relationships Increasing Relationship
Commitment and Sales Performance,
submitted to the Journal of Marketing, Jan., 2003.