Chapter 8: Strategic Alliances8-1
8-1 Chapter 8: Strategic Alliances
8.1IntroductionComplexityinbusinessenvironmentsincreasingResourcesrequiredto managearebecomingincreasinglyscarceMany functionsneed to be outsourcedFirmsneedtoensurethatfunctions areperformedbytheotherfirms8-2
8-2 8.1 Introduction ⚫ Complexity in business environments increasing ⚫ Resources required to manage are becoming increasingly scarce ⚫ Many functions need to be outsourced ⚫ Firms need to ensure that functions are performed by the other firms
Four Basic Ways to Ensure TasksAre CompletedInternalactivitiesActivities that are corestrengthsmay bethebest waytoperform the activityAcguisitionsGives the acquiring firm full control over the way the particularbusinessfunctionisperformedCanbedifficultandexpensive.(Culture/Competitors)Arm's-lengthtransactionsMost business transactions are of thistypeShort-term arrangement that fulfills a particular business needbutdoesn't leadtolong-term strategic advantagesStrategic alliancesMultifaceted,goal-oriented,long-term partnershipsbetweentwocompaniesBothrisksandrewards aresharedTypicallyleadtolong-termstrategicbenefits forbothpartners8-3
8-3 Four Basic Ways to Ensure Tasks Are Completed ⚫ Internal activities ⚫ Activities that are core strengths may be the best way to perform the activity. ⚫ Acquisitions ⚫ Gives the acquiring firm full control over the way the particular business function is performed ⚫ Can be difficult and expensive. (Culture/Competitors) ⚫ Arm’s-length transactions ⚫ Most business transactions are of this type. ⚫ Short-term arrangement that fulfills a particular business need but doesn’t lead to long-term strategic advantages. ⚫ Strategic alliances ⚫ Multifaceted, goal-oriented, long-term partnerships between two companies ⚫ Both risks and rewards are shared. ⚫ Typically lead to long-term strategic benefits for both partners
8.2 Framework for Strategic Alliances:When to Go for a Strategic Alliance?AddingvaluetoproductsImprovingmarketaccessStrengtheningoperationsAddingtechnologicalstrengthEnhancingstrategic growthEnhancingorganizational skillsBuilding financial strength8-4
8-4 8.2 Framework for Strategic Alliances: When to Go for a Strategic Alliance? ⚫ Adding value to products ⚫ Improving market access ⚫ Strengthening operations ⚫ Adding technological strength ⚫ Enhancing strategic growth ⚫ Enhancing organizational skills ⚫ Building financial strength
DownsidesCorecompetenciesshouldnotbecompromisedCompetitiveadvantagesshouldnotbecompromised8-5
8-5 Downsides ⚫ Core competencies should not be compromised ⚫ Competitive advantages should not be compromised
Three Types of StrategicAlliancesThird Party Logistics (3PL)Retailer-SupplierPartnerships(RSP）DistributorIntegration (Dl)8-6
8-6 Three Types of Strategic Alliances ⚫ Third Party Logistics (3PL) ⚫ Retailer–Supplier Partnerships (RSP) ⚫ Distributor Integration (DI)
8.3 Third Party Logistics (3PL)Useof3PLproviderstotakeoveracompany'slogisticsfunctionsAlmosta $85billionindustryby20048%ofall logisticscostsattributedto3PL8-7
8-7 8.3 Third Party Logistics (3PL) ⚫ Use of 3PL providers to take over a company’s logistics functions ⚫ Almost a $85billion industry by 2004 ⚫ 8% of all logistics costs attributed to 3PL
WhatIs 3PL?StrategicpartnershipLongtermcommitmentMulti-functionarrangementProcessintegrationLargerangeof3PLcompaniesNon-assetowning3PLcompaniescalled4PL·Provide services butnottrucks,warehousesPrevalentusagewithlargercompanies8-8
8-8 What Is 3PL? ⚫ Strategic partnership ⚫ Long term commitment ⚫ Multi-function arrangement ⚫ Process integration ⚫ Large range of 3PL companies ⚫ Non-asset owning 3PL companies called 4PL ⚫ Provide services but not trucks, warehouses ⚫ Prevalent usage with larger companies
3PLAdvantagesFocusonCoreStrengthsAllowsacompanytofocusonits corecompetencies·Logistics expertise left to the logistics experts8-9
8-9 3PL Advantages ⚫ Focus on Core Strengths ⚫ Allows a company to focus on its core competencies ⚫ Logistics expertise left to the logistics experts
3PLAdvantages·ProvidesTechnologicalFlexibilityTechnologyadvancesadoptedbybetter3PLprovidersAdoptionpossibleby3PLsinaquicker,morecost-effective way3PLsmay have the capability to meet theneeds of a firm's potential customers8-10
8-10 3PL Advantages ⚫ Provides Technological Flexibility ⚫ Technology advances adopted by better 3PL providers ⚫ Adoption possible by 3PLs in a quicker, more cost-effective way ⚫ 3PLs may have the capability to meet the needs of a firm’s potential customers