The Alliance Framework

Agenda The Definition of Success in Alliance Planning and Negotiating Three Fundamental Requirements of Success 1.Linking the Alliance to the Business Strategic Plan o Long-Term Impact of Alliance Formation o The “Three Alliances in One” problem 2.Revealing the Business Strategic Plan Clearly and Honestly to the Other Party 3.Agreeing on Alliance Intentions, Commitments, Rights, and Limitations that satisfy the strategic plan of both firms The Alliance Framework: What is it? o Alliance Framework Elements o Alliance Framework Process Three Fundamental Requirements of Success The Alliance Framework

Success Mutually acceptable alliance contract Part as friends and redirect their efforts The Definition of Success in Alliance Planning and Negotiating

Fundamental Requirements of Success 1.Linking the Alliance to the Business Strategic Plan Linking the goals and objectives of the alliance to the strategy of both organizations  What is the core need of the businesses?  Why?: If environment changes, it will affect all the partners in the same direction!  E.g. Tire manufacture Goals and objectives of the alliance Firm B Strategy Firm A Strategy

Path Dependence Contractual Constraints Exclusivity Provision Prevent firm from working with other attractive partners Termination Provision Difficult to escape the alliance Marketplace Reactions Foreclose future opportunities Companies lose control of their long-term strategy due to previous decisions Long-Term Impact of Alliance Formation Positive Side of Path Dependence: Unanticipated opportunities Fundamental Requirements of Success

The effectiveness of every alliance depends on the ability of both firms to plan and execute all three alliances simultaneously. Company ACompany B Marketing Manufacturing R&D Marketing Manufacturing R&D Alliance# 1 Alliance# 3 Alliance# 2 Fundamental Requirements of Success The “ Three Alliances in One ” Problem

2.Revealing the Business Strategic Plan Clearly and Honestly to the Other Party Issue: Overexposure o Agree on an appropriate level of openness o Ability to strike a balance between sharing sensitive information and protecting both firms 3.Agreeing on Alliance Intentions, Commitments, Rights, and Limitations that satisfy the strategic plan of both firms Fundamental Requirements of Success

The Alliance Framework: What is it? The Alliance Framework Alliance Framework Elements Alliance Framework Process

The Alliance Framework Elements : Business Plan Summary Objectives Roles Overall Resources Boundaries Market Model Strategic Exclusivity Intersections Detailed Objectives Detailed Resources Financial Pie-Split locates financial rewards and risks Intellectual Property Working Process and Governance Term and Termination specify how parties can exit the alliance

Process: The Alliance Framework Step1 Appointing the Planning and Negotiating Team Step2 Achieving Internal Consensus Step3 Approaching Potential Partners: Strategic Fit Assessment Step4 Conducting Resource Fit Assessment Step5 Selecting the Partner Step6 Negotiating an Agreement