S

Alliances and Networkfirst week of April

M. Tariq Yousafzai

Partnerships and alliances and supply (chain) networks

WhyWhatWhenWhereIn what form

Intro

The content1. Background and purpose Trends and motives Benefits of alliances

3.Alliances as networks and supply chain Types of networks Network changes Network effects

2.Alliances as dyads Type of alliances Different perspectives Dimensions Changes of alliances

4. Managing alliances as dyads and networks Performance Positioning Development Handling effects

Intro

• Internationalization and globalisation

• International competition

• Outsourcing and reduction in suppliers

• R&D and shorter product life cycles

• Time to market

Some changesinfluencing the need of alliances

Part I

Give me examples of alliances!

Susanne Hertz, SSE,2000

Global logic of alliances

• To compete on the global arena you have to incur fixed costs

• With enough time, money and luck, you can do everything yourself. But who has enough?

• Having control does not necessarily mean better management

K. Omae, HBR, March-April,1989

Basic motives of alliances

• Transaction costs - bargaining

• Enhance competitive positioning and market power

• Quest for organisational knowledge and learning

Gulati, 1998

Part I

Classification of alliances

1. Degree of commitment and integrationlow, medium, high

2. Function basedi.e. product development, distribution, production, purchasing

3. Formal- informal

4.Symmetry-assymmetry ( including the power issue)

5. Type of actors involved (competitors,buyer-seller, distributors )

6. Geographical spread ( local, national, regional, global)

Part I

Alliancessimplication

• Firm - Firm

• Net - Firm

• Net -Net

Hertz, 2000

Alliances as dyads

Alliance definition

”A long term relationship where participants cooperate and

willingly modify their business practices

to improve joint performance”

Whipple and Frankel, JSCM, Summer 2000

What is an alliance/partnership?Based how it is mostly used in literature

Transaction

Partnership

Strategic. Alliance include. J/V and part-

ownership

Degree of commitment

Part II

Relationships

alliance

Relationships/ alliances

Degree of commitment

Economic exchangeFrequency of exchange

Type of interactionAdaptation

Trust

Part II

Alliances from different perspectives

• Supply Chain Management • Industrial Marketing• Purchasing• Marketing

• Service marketing • Relationship marketing • Social networks• Organisational and management literature

Supply chain networkconsisting of a a number of relationships

Single relationship

Part II

Focal firmDownstreamUpstream

Interacting dimensions of relationship

LegalSocial

TechnicalEconomic

Physical

Communication/IT

Part II

Knowledge

Relationship life cycle

Pre-relationshipor awareness stage

closer cooperationexpansion

Formation

Enlargement/Commitmentstable stageInstitutionalization

Prerelationshipstage

Disintegrationdissatisfaction

DissolutionTermination

dissolutiontermination?

Formation

How?

Revival

Part II

Individual alliances will not easily break- Why?

• Investments

• Costs of breaking

• Trust

• Knowledge

• This creates inertia

Global logic of alliances(K. Omae)

• Nine times out of ten you will want to stay in the alliance if you can

• The way to wreck an alliance is to become a check casher, a coupon clipper

Part II

When and why to switch

• Marketing forces

• Internal conflicts

• Acquisitions and mergers

• New opportunities

Part II

Different roads to dissolution

• Who is breaking

• Direct or indirect

• Dissolution quality ( intracomp. exit, aftermath)

• Task related, actor related or network related

Gradual way - the most common wayThree different ways

• relationship of lower importance - less volumes• break but stay in the supply chain• break but stay in the firm network• leave the network

Part II

Alliances as networks

Definition of a network

• A network is a set of connected exchange relations between actors.

• Exchange relations are defined as connected if exchange in one of relation is contingent upon exchange in other relations

Part III

Firm network

The firm

Part III

Relationships and supply chain networksimplified

A B

CustomersC1= consumer

C2= org. customer

Distributoror agentD=distributor

A= agent

PartnersP= partner

Supplier 1 tierS1=supplier 1tier

Supplier 2 tierS2= supplier 2 tier

Other suppliersS3= Other supplier

C1C1 C1 C2

DD

DA

DP

P

S1 S1S1

S2S2 S3

S3

C1C1 C1

C2C2

D DA

P

S1S1

S1

S2 S2

S2

S3 S3

What could this alliance mean to downstream and upstream partners?

Supply chain network change patterns

• Supply chain network formation/ joining• Supply chain development include closer

cooperation and enlargement

• Supply chain closing up

• Supply chain splitting- leaving

• Supply chains drifting closer/away

Part III

Joining of networks

Closing up

Horizontal and vertical alliance networks

Horizontal networkTransport firms representing each other in different countries

Vertical networksinclude customers and suppliers

Alliance network developmenta study from J. Ludvigsen, 2001 doctoral dissertation

• E1 a network formed of transport alliances • To meet European transport MNEs• In order to reach operational and strategic fit• Developing from smaller networks to a joint

network• Development from close cooperation to closing up• Solving crises together cause of higher integration• Institutionalisation in EEIG common grouping

Overlap or complementarity?in alliances of supply chain networks

Geographicalcoverage

Type of products/services

Fully complementary

Full overlapComplementary/overlap

Same

Different

SameDifferent

Overlap/ complementary

What?

Network effects

• Externalisation effects (ex.telecom)

• Forrester or bullwhip effects amplication

of demand changes ( dynamic performance -info and physical systems -

small disurbance large effects

• Domino effects

Part III

Overlapping supply chainsand firm networks

Firms are part of several supply chains

Movement between supply chains in firm network

Once you are in, you have a bigger chance

Overlapping supply chain networks

a) increaseb) decrease

a) Decreaseb) increase

Supply chain network 1

Supply chain network 2

a) Decreaseb) increase

Effects of overlap

Domino effects

C1B1

AB2

C2

D2

E2

A radical break

often a result of strategic changeat network level

Exemple of strategic changestrategic alliances, mergers and acquisitions

Customers Network processes

Internal developm. focal alliance

Hertz& MattssonSJM 2006

Competitor alliance processes

Relationship processesCustomer- focal firm

Processesbreaking/dissolvingrelationships

Dynamics of alliances and market restructuring

Management of alliances as dyads and networks

Management of alliances

• Performance

• Development

• Positioning

• Handling effects

Part VI

Problems to be handled

• Missions and domains

• Job division

• Expectations

• Cultural differences

• Power distribution

Part IV

( Ludvigssen, 2001 ” The international networking between European Logistics Operators” Doct dissertation, SSE

Performance

Cultural fit?• Main stream culture

• Organisational culture

• Managerial style• ( autocratic,democratic

• Individualistic-collectivistic

• Trust)

Performance

From management to leadership

FinancingProjectsMeasurementScienceToolsConsulting

etc

CommunicationCommitmentBehaviorsCreativityOvercoming resistanceSelf leadership

etc

Part IV Performance

Dissatisfied? Intra-alliance fit?

Inhibitors Stimulators• Disparate benefit of

alliances

• Lack of willingness to accept unpopular decisions

• Lack of propensity to reach consensus

• Lack of willingness to contribute to resources and alliance missions

• Types of tasks performed in concert

• Relational bonds and functional co-dependency

• High level of mutual control due to standardisation

• Trust and commitment to alliance welfare

Ludvigsen, 2001

Inter- alliance fit?Before forming alliance?

• Degree of overlap or complementarity?• Corporate cultural differences and management

practices?• Power balance?• Differences in strategic interests?• Development - speed and direction?• Access to network partners?• Effects and costs of a change?

Part IV performance

Different types of strategiesdyads and / networks

• Dyad - establish, develop, break or switch

• Supply chain network - changing your position• Increasing/ decreasing integration• Conflict/ cooperation- group work• Changing direct and indirect relationship • Leave/ enter

• Industry network• Overlapping/ complementary• Moving in or out or supply chains

Making use of relationship lifecycle pattern

Positioning ?

• Your firm´s position in the alliance- Related to actors-resources and activities

• Your position in the network -horizontal or vertical (supply chain network)

• Your network in comparison to others

Handling the effects?

• How to prepare for the domino effects?• Where can we expect large acquisitions or mergers

• How would such an alliances influence us? Directly -indirectly?

• What can we do to prepare? Alternative solutions?

• How to make use of the externalisation effects?

• Extension of the number of actors in the network

• Interaction between actors

Category of alliances?Prerequisites?

Success factors expressed as ”8 i´s for successful alliances”

• Individual excellence

• Importance

• Interdependence

• Investment

• Information

• Integration

• Institutionalisation

• Integretity

(Rosabeth Moss-Kanter” Collaborative advantage- The art of alliances HBR 2:4 July Aug 1994)

Part VI

What have you learnt?

When and why do you need alliances?

Alliances of different types?

How do partnerships or alliances change?

Network of relationships - a supply chain network

Strategies for alliances

The industry networks and alliances dynamics

Management and implicationsNewKnowledge?

The ASG- Danzas caseQuestions

• What are the main objectives of the alliance• What were the strengths and weaknesses

before when forming the alliance ?• How have these strength and weaknesses

changed?• How would you as a new CEO cope with

the situation? What different problems have you solved with your suggested solutions?