1. External Strategic Development: Strategic Alliances
Lecture Eighteen

2. Aims of the Lecture Introduce the idea of Strategic Alliances.
Explore the reasons for developing Strategic Alliances.
Consider the pros & cons of Alliances.

3. Reminder of the Potential External Strategic Options
Mergers
Acquisition
Alliances

4. Strategic Alliances
Based on 2 or more organisations sharing resources and activities.
An effective means of responding to complex environments, e.g. Globalisation.
Productive in a public sector context, though views on Private Finance Initiatives (PFIs) are mixed.
Develop the Social Capital and Knowledge flow of an organisation.

5. Social Capital - What Is It?
“Goodwill available to individuals or groups”
Adler & Kwon, 2002
“the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalised relationships of mutual acquaintance or recognition.”
Pierre Bourdieu, 1986

6. What Enables Social Capital?
Structure – Extended number & density of connections to external knowledge providers
Network members must satisfy the necessary condition…
Opportunity
Motivation & expectation of Value
Ability
…in order for the exchange and combination of intellectual resources to occur
Cognitive – Develop a collective basis for communication through shared language narrative and common etiquette
Relationship – Build ties through social interactions that increase trust, demonstrate reciprocity and encourage identification with norms
McKenzie & van Winkelen, 2004

7. Network Relationships
The organisation at the centre of the network gets faster access to knowledge.
An organisation at the centre of the network gains influence when other players are not connected to each other.
The organisation with a similar network to that of the major competitor reduces the risk of confrontation.
Knowledge flows more quickly and efficiently in dense networks.
McKenzie & van Winkelen, 2004

8. Why Alliances? Market access Share technological expertise
Share knowledge and core competencies
Spread risk and R&D costs
More effective management of innovation

9. Types of Alliances Joint Ventures Consortia Networks Franchising
A newly created company jointly owned by Parent bodies.
Can be effective in entering new markets, e.g. China.
Consortia
A number of partners focused on specific venture or project.
Networks
Organisations work in collaboration without formal relationships.
Franchising
McDonalds, etc. Both parties agree to specific activities.

10. How to get it Right
Alliances need to be managed for a partnership to develop.
Clear strategic purpose is required
Compatibility across the companies, not just at senior management.
Expectations v Flexibility
Trust
The Value Chain can be a way of aiding the identification of alliance opportunities.