1. Strategic Alliances: Teaming and Allying for Advantage
Chapter 9
Strategic Alliances: Teaming and Allying for Advantage
by Robert Pitts
& David Lei
Slides prepared by
John P. Orr
Cameron University
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

2. What you will learn… The characteristics of a strategic alliance
Slide 1 of 2
The characteristics of a strategic alliance
Why companies around the world are forming strategic alliances
The different broad types of strategic alliances, including:
Licensing
Joint ventures
Multipartner consortia
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3. What you will learn…
Slide 2 of 2
The benefits and costs of entering into strategic alliances
How to balance the need for cooperation with competition
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4. IBM’s Global Alliances Slide 1 of 2
Early Alliances: Responding to Japan
IBM’s Initiatives During the 1990s: Rebuilding Competitiveness
Motorola
Apple Computer
Perkins-Elmer, Silicon Valley Group, and Elite Systems
Toshiba
Siemens
Phillips
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5. IBM’s Global Alliances Slide 2 of 2
Current Strategic Alliance Initiatives
Electronic commerce
Telecommunications
Smart technologies
Health care
Ongoing relationships
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

6. Ex. 9-1. IBM’s Alliance Strategy (Selected Categories)
Personal Computers
Matsushita (low-end PCs)
Ricoh (hand-held PCs)
Telecommunications
NTT (value-added networks)
Motorola (mobile data pets)
Factory Automation
Texas Instruments
Sumitomo Metal
Nippon Kokan
Nissan Motor
Health Care
Pfizer
Microsoft
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7. The Global Airline Industry
Airline industry consolidation of 1990s
From code sharing to combined operations
Network versus network
Northwest – KLM
American Airlines – British Airways
Lufthansa – United Airlines
Delta “Sky Team” alliance
“Oneworld” alliance
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8. Ex. 9-2: Global Airline Alliances Slide 1 of 4
Trans-Atlantic Linkages/Relationships
Airlines
Type of Alliance
Northwest Airlines
KLM Royal Dutch
Full partnership (antitrust immunity)
Wings alliance
United Airlines
Lufthansa
Part of Star Alliance
Delta Air Lines
Swissair
Sabena
Austrian Airlines
Relationship unwound in
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9. Ex. 9-2: Global Airline Alliances Slide 2 of 4
Trans-Atlantic Linkages/Relationships
Airlines
Type of Alliance
Continental Airlines
Alitalia
Code sharing, joint marketing (antitrust issues pending)
American Airlines
British Airways
Code sharing, joint marketing (antitrust request withdrawn)
Delta Airlines
Air France
CSA Czech Airlines
Aero Mexico
Full partnership (antitrust immunity)
Sky Team alliance
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

10. Ex. 9-2: Global Airline Alliances Slide 3 of 4
Globe-Spanning Linkages/Relationships
Airlines
Type of Alliance
United Airlines
Lufthansa
Scandinavian Airline
System (SAS)
Thai International
Varig Brazilian
Star Alliance: Code sharing, joint marketing; includes up to 17 partners in 2002
Copyright ©2003 by South-Western, a division of Thomson Learning. All rights reserved.

11. Ex. 9-2: Global Airline Alliances Slide 4 of 4
Globe-Spanning Linkages/Relationships
Airlines
Type of Alliance
American Airlines
British Airways
Cathay Pacific
Qantas Airways
Aer Lingus
Lan Chile
Finn Air
Iberia
Code sharing, joint marketing, arrangement for global flights. New alliance known as ONEworld.
Northwest Airlines
Continental Airlines
Japan Air System
Code sharing for Trans-Pacific flights
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12. Factors Promoting Alliances
New market entry
Shaping of industry evolution
Learning and applying new technologies
Rounding out a product line
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13. Types of Strategic Alliances
Licensing Arrangements
The least sophisticated and easiest-to-manage type of alliance
Joint Ventures
The creation of a third entity representing the interests and capital of the partners
Consortia and Networks
Highly complex linkages among groups of companies
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14. Licensing Arrangements
Primary reasons for entry
A need for help in commercializing a new technology
Global expansion of a brand franchise or marketing image
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15. Ex. 9-6. Sun Microsystems’ Licensing Strategy in the Early 1990s Slide 1 of 2
Bipolar
Integrated
Technology
Fujitsu
Texas
Instruments
Philips
N.V.
LSI
Logic
Cypress
Semi-
conductor
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16. Ex. 9-6. Sun Microsystems’ Licensing Strategy in the Early 1990s Slide 2 of 2
Company
Benefit of Linkage
Philips N.V.
Gives Sun access to European market.
Phillips will specialize in RISC chips for consumer and telecommunications products.
Texas Instruments
Gives domestic credibility to new product design
Fujitsu
Gives access to low-cost production
LSI Logic, other small firms
Provides for cross-licensing and exchange of ideas
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17. Joint Ventures Primary reasons for entry Vertical integration
Learning a partner’s skills
Upgrading and improving skills
Shaping industry evolution
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18. Consortia and Networks
Multipartner Consortia
Multipartner alliances designed to share an underlying technology
Cross-Holding Consortia
Formal groups of companies that own large cross-holdings and equity stakes in each other
Industry-Spanning Alliance Networks
Firms sharing knowledge, costs, and risks
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19. Risks and Costs of Alliances
Rising incompatibility
Risk of knowledge or skill leakage
Risk of dependence
Strategic control costs
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20. Automotive Joint Venture Fades
Ford
Volkswagen
Autolatina
Impasse on strategy to face General Motors
Reluctance to share design, marketing ideas
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21. Ex. 9-7. Deepening Dependence on Alliance Partner
Sourcing for
components
Low price
deters future
investment
Sourcing
extends to
joint venture
Venture includes
shared technology
development
around core
Sustained
losses induce
resignation,
exit
Domestic firm
feels price
pressure in
every market
based
on core
technology
Alliance partner
becoming stronger,
attacks firm’s other
markets
Domestic firm
loses its core
competence
base
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22. Balancing Cooperation and Competition
Understand the firm’s knowledge and skill base
Choose complementary partners
Keep alliance personnel long-term
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23. Alliances and Ethics Two Critical Issues
Balancing collaboration and competition within the alliance
The issue of loyalty among personnel assigned to the alliance
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