SELECTING THE PARTNER ? HOW TO Group 8

Selecting the Partners Agenda: Overview of partner selecting Strategic fit reconciliation map Resource fit reconciliation map Self-selection Multiple partner option

Alliances are often compared to marriages There is no recovery from choosing the wrong spouse Alliance Framework: STEP5 Partner Selection Three issues of selecting partners 1) Which partners shows the least trouble for some disagreement ? 2) Which partners give the best match required resource? 3) Which partners agree with the deal?

In an ideal world  the best partner in step 3 and 4. In the real world  difficult to narrow down the partners who fit with all the needs completely. So our presentation will come up with how the firms can use the framework to make best choice of potential partners!!!!

Looping Back to Step2, Achieving Internal Consensus Strategic fit+ Resource fit Assessments  provide the information for each partner More importantly  see the strategic interest of the firm whether both firms come together or difference The planning and negotiation team  understand the quality and quantity of each partner’s resources If having problems, go back step2 to resolve it

STRATEGIC AND RESOURCE FIT RECONCILIATION MAP? WHAT IS

Three possibilities in dealing with SAE disagreements: Agree with the partner’s position Convince the partner to agree with your position Develop a compromise between the two positions Purpose : “ To help company see and evaluate the potential partner’s strategy whether it will fit with company’s strategy or not” Strategic fit reconciliation map

Example of Strategic Fit Reconciliation Map Strategic Assessment Elements (SAE) Our firmPartner 1Partner2 Objective Roles Market Models Strategic fit reconciliation map

Get to know some symbols:SymbolMeaning OKThe partner accepts our position in the SAE OK+The partner’s resources are outstanding and complementary to ours ? We have disagreement, and are unsure about the resolution We have disagreement, but the partner is likely to accept our position We have disagreement, but the partner’s position is acceptable to us ~ A compromise can probably be negotiated that meets both firms’ strategic needs x A probable deal-killer. We have disagreement and cannot accept partner’s position. An acceptable compromise is unlikely A partner has a weakness that can be overcome through the use of third- party resource in a financially viable manner Strategic fit reconciliation map

A Sample Case Background: -Large pet food company wants to do the alliance with a biological firm to come up with the new nutrition ingredients for its pet foods. The goal of the alliance project is to jointly develop series of new product lines with a biological firm. The pet food company will distribute the improved products through its distribution network.

A Sample Case (cont) Problem: Two candidates (company A and B) to ally with the pet food company Both firms tend to have conflict with the pet food company The pet food company decided to go on the process of strategic assessment Pet food’s strategy To establish and maintain reputation for innovation though sole- branding The customers would see the pet food company brand only, not biotechnology brand Intended to do the alliance to achieve long-lasting advantage over competitors

A Sample Case (cont) Conflict: Company A Wanted its name associated with the new pet food Any jointly developed product will be cobranded Company B Gave a pet food firm a one-year exclusively right to use the nutrients, after which Company B would be free to provide licenses to others

A Sample Case (cont) Putting it in the Strategic Map….SAE Pet food company Company A Company B Our objectiveSole brand? [cobranded]OK Market ModelSole brand? [cobranded]OK Strategic ExclusivityExclusive rightsOK? [one-year head start]

A Sample Case (cont) Resolving disagreements Reconsidered whether is sole branding necessary? If they joined with company A, will this help them to achieve their marketplace objective. Updating the strategic mapSAE Pet food company Company A Company B Our objectiveSole brand  OK Market ModelSole brand  OK Strategic ExclusivityExclusive rights OKX

Resource Fit Reconciliation Map Purposes To summarize the resources that potential partners provide whether which one is best fitted to the company in order to develop a successful joint venture To test the quality and quantity of the potential partners’ resources Example Key ResourceCompany ACompany B Resource 1 Resource 2

Company A: Outstanding research commitment and development Satisfactory level of technical support provision Satisfactory ability to work closer with the pet food company’s staff to jointly develop new products Company B: Outstanding research commitment and development Satisfactory level of technical support provision High ability to work closer with the pet food company’s staff to jointly develop new products Key ResourceCompany ACompany B Research capabilityOK+ Technical supportOK Contribution to joint development of product based on preexisting nutrients OKOK+ A Sample Case (cont)

Final Decision Pet food company wants to build a last long relationship rather than short-term one Pet food company agrees the co-branding Therefore, “Company A is chosen” A Sample Case (cont)

Other Examples:

Self-Selection: The Intangible Factor in Partner Selection Strategic fit and resource fit do not guarantee the successful alliance Without The sense of MOTIVATION made by partners toward the project

The Multiple Partners Option In the best case, one potential partner stands out above the other and is clear choice for step 6 negotiation. However, sometimes, the strategic fit, resource fit, and commitment level show that two or more candidates are highly qualified. In this case, The best course of action is to move forward to step 6 negotiations with multiple firms. Final partner selection depends on the results of other Alliance framework elements such as Financial Pie-split. There is another situation where multiple step 6 negotiation is required. Sometimes, step 2, 3, and 4 show that the alliance should be a multiparty relationship

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