SOCIAL STRUCTURE AND ALLIANCE FORMATION PATTERNS: A LONGITUDINAL ANALYSIS. (Gulati, 1995) Group: Baglieri Luana Fiore Valentina Rossi Annamaria

Why just these partners? Two firms with high strategic interdependence are more likely to form an alliance than are other, non-interdependent firms. The higher the number of past alliances companies formed, the more likely they are to form new alliances. In the absence of prior direct ties between two firms, the larger the number of their common third-party ties, the more likely they are to form new alliances with each other.

A firm’s position in the network is the result of both its own past alliances and those of other firms in the network.

Strategic alliances in air-transport sector

Star Alliance case

Founded in 1997 by Lufthansa, United Airline, Air Canada and Thai Airways. The Star Alliance in 2008, it was the first airline alliance to land the Market Leadership Award from Air Transport World. In 2007, it was voted alliance of the year, three times. It has been singled out as “best alliance” eight times since 2002.

Lufthansa and Star Alliance Lufthansa is a German airline which stipulated a series of alliances. Its shareholding is composed by the Federal Government, Postal Services, State of North Rhine-Westphalia, Railways Authority and by the Agency for National Reconstruction of Germany. As a result of the European deregulation the company lost its monopoly in the air transport sector; so Lufthansa needed to adapt to new conditions. Request for State funding but not timely intervention by the State. Competition especially from the competitor company British Airways.

Hypothesis 1 Two firms with high strategic interdependence are more likely to form an alliance. Development of a network of alliances with regional low cost companies.

Reconstruction of the subsidiary (Lufthansa Express) to contrast the regional subsidiary of British Airways created after the deregulation.

Hypothesis 2 The higher the number of past alliances companies formed, the more likely they are to form new alliances. 2005: SWISS is integrated as an independent airline in the Lufthansa Group. Its integration consolidates Lufthansa‘s position among Europe‘s leading network carriers. 2009: Swiss International Air Lines AG becomes part of the Lufthansa Group.

Bilateral cooperation accords augment the route Lufthansa network, additionally to Star Alliance and Lufthansa Regional. Code-sharing is one benefit of the accords; another is mutual recognition by partner airlines of each other‘s frequent flyer program.

Partner Airlines are: Jet Airways, Air India, Luxair and Air Malta.

Joint Ventures: Lufthansa has participated in two strategically and commercially important joint ventures for several years. The A++ transatlantic joint venture with United Airlines and Air Canada The J+ bilateral Europe/Japan joint venture with All Nippon Airways (ANA).

Hypothesis 3 The larger the number of common third-party ties are, the more likely companies are to form new alliances with each other. Acquisition of 38% of a small Scottish vector (Business Air) with a good presence at the airport of Manchester.

The role of airports in alliances The airports play a major role within the business between airlines, even if their importance has been reduced when the national company entered a partnership. Indeed: They have modified their structures consequently the evolution of the industry scenario. Airports have lost some of their negotiating power, since now they have to negotiate with a set of coordinates airlines. Of course, once reached, an agreement becomes more binding because both the airport and the individual companies invest to reach a synergic and harmonious growth.

Basic conditions Availability of space for operations Compatibility with network Structural features Support in marketing Type and quality of facilities Easy transfer connections Maintenance Positioning in the context of reference.

In practice… To make air travel even easier, the member airlines have coordinated their schedules, which often shortens the overall journey time for passengers switching from one Star Alliance airline to another on connecting flights. Moreover, customers receive a boarding pass for onwards flights, even if they fly on with a different Star Alliance member. The common objective of each partnership is to offer to customers harmonized and coordinated services with uniform product and service standards.

In conclusion….. Alliances formation is stimulated by social structures. Air transport sector is significantly affected by deregulation (Europe and United Sates) and social, political, economic variables.

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Sources Gulati R., Social structure and alliance formation patterns: a longitudinal analysis, 1995. http://www.lufthansagroup.com http://tesi.eprints.luiss.it