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StrategicAllianceManagement Strategicalliances–partnershipsbetweenseparateorganizationstoshareresourcescollaborativelytoward mutuallybeneficialgoals–areanimportantmanagementinstrument,butonethatisdifficultforfirmsto manage.Amongmanydesirableoutcomes,alliancescanreducecosts,provideaccesstonewtechnology,and improveresearchanddevelopmentendeavoursThisrenewedandre-workedtextconnectstheorytopractice tohelpunderstandthisimportantbusinesspractice
StrategicAllianceManagementpresentsanacademicallygroundedalliancedevelopmentframework,detailing eightstagesofalliancedevelopmentwithconsiderationforspecificmanagementchallenges.Foreachstage, readersarepresentedwithstate-of-the-arttheoreticalinsights,evidence-basedmanagerialguidelinesanda businesscaseillustrationAdditionalchaptersdetailoncontemporaryalliancemanagementchallenges, includingco-opetitionandbusinessecosystems.Otherchaptershighlighttheroleofallianceprofessionals, alliancecapabilitiesandparadoxicalissuesinalliancerelationships
Thissecondeditionretainsablendofacademicknowledgeandpracticalexamples,whileupdatingcase examplesandaddingfivenewchaptersonemergingalliancetopics.Thisbookremainsvitalreadingfor businessstudentsandprofessionalsinterestedinstrategicmanagement
BrianTjemkesisAssociateProfessorofStrategyandOrganizationatVUUniversityAmsterdam,the Netherlands
PepijnVosisresearcherandconsultantinthefieldofinnovationandalliancemanagementatTNO,the Netherlands
KoenBurgersisaPhDCandidateatNyenrodeUniversity,theNetherlands
StrategicAllianceManagement BrianTjemkes,PepijnVosandKoenBurgers
Secondeditionpublished2018 byRoutledge
2ParkSquare,MiltonPark,Abingdon,Oxon,OX144RN andbyRoutledge
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RoutledgeisanimprintoftheTaylor&FrancisGroup,aninformabusiness
©2018BrianTjemkes,PepijnVosandKoenBurgers
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FirsteditionpublishedbyRoutledge2012
BritishLibraryCataloguing-in-PublicationData
AcataloguerecordforthisbookisavailablefromtheBritishLibrary LibraryofCongressCataloging-in-PublicationData
Names:Tjemkes,Brian,1973–author|Vos,Pepijn,author| Burgers,Koen,author
Title:Strategicalliancemanagement/BrianTjemkes,PepijnVosand KoenBurgers
Description:SecondEdition|NewYork:Routledge,2017| Revisededitionoftheauthors’Strategicalliancemanagement,2012| Includesbibliographicalreferencesandindex
Identifiers:LCCN2017017483|ISBN9781138684669|ISBN9781138684676| ISBN9781315543673(eISBN)
Subjects:LCSH:Strategicalliances(Business)
Classification:LCCHD69S8T592017|DDC658/046dc23 LCrecordavailableathttps://lccnlocgov/2017017483
ISBN:978-1-138-68466-9(hbk)
ISBN:978-1-138-68467-6(pbk)
ISBN:978-1-315-54367-3(ebk)
TypesetinBembo
byFlorenceProductionLtd,Stoodleigh,Devon,UK
Contents Listoffigures
Listoftables
Listofboxes
Preface
1Strategicalliancemanagement
Themeaningofanalliance
Allianceactivity
Alliancefailure
Anacademicallygroundedalliancedevelopmentframework
2Alliancestrategyformulation
Threeprototypicalgovernancemodes Governancemoderationales
Overview
Alliancestrategyformulation:decision-makingsteps
Summary
Case:AstraZeneca–EliLillyandCompany
3Alliancepartnerselection
Typesofpartnerfit
Alliancepartnerselection:decision-makingsteps
Summary
Case:Grolsch
4Alliancenegotiation
Negotiationbehaviour
Valuation
Alliancenegotiation:decision-makingsteps
Summary
Case:Renault–Nissan
5Alliancedesign
Governanceform
Alliancecontracts
Managementcontrol
Structuralconfiguration
Alliancedesign:decision-makingsteps
Summary
Case:L’Oreal–Organovo
6Alliancelaunch
Alliancelaunchobjectivesandchallenges
Alliancelaunchattributes
Alliancelaunch:decision-makingsteps
Summary
Case:Capgemini–Eneco
7Alliancemanagement
Alliancemanagementapproaches
Alliancedesignandmanagement
Alliancemanagement:decision-makingsteps
Summary
Case:TNO–Hoogendoorn
8Allianceevaluation
Issueswithallianceperformanceandmetrics
Performancemetricapproaches
Allianceevaluation:decision-makingsteps
Summary
Case:The3
9Alliancetermination
Allianceterminationtypes,trajectoriesandmotives
Planningalliancetermination
Alliancetermination:decision-makingsteps
Summary
Case:Nokia–Microsoft
10Supplieralliances
Thesupplieralliancechallenge
Managingsupplieralliances
Supplieralliances:decision-makingsteps
Summary
Case:NAM–GLTPlus
11Learningalliances
Thelearningalliancechallenge
Managinglearningalliances
Learningalliance:decision-makingsteps
Summary
Case:HolstCentre
12Co-brandingalliances
Theco-brandingalliancechallenge
Managingco-brandingalliances
Co-brandingalliances:decision-makingsteps
Summary
Case:Spectre–Heineken
13Internationalalliances
Theinternationalalliancechallenge
Thenatureofnationalculture Managinginternationalalliances
Internationalalliances:decision-makingsteps
Summary
Case:DamenShipyards
14Asymmetricalalliances
Theasymmetricalalliancechallenge
Managingasymmetricalalliances
Asymmetricalalliances:decision-makingsteps
Summary
Case:Disney–Pixar
15Cross-sectoralliances
Thecross-sectoralliancechallenge
Managingcross-sectoralliances
Cross-sectoralliances:decision-makingsteps
Summary
Case:Marks&Spencer–Oxfam
16Coopetitionalliances
Thecoopetitionalliancechallenge
Managingcoopetitionalliances
Coopetitionalliances:decision-makingsteps
Summary
Case:ReckittBenckiser
17Multi-partneralliances
Themulti-partneralliancechallenge
Managingmulti-partneralliances
Multi-partneralliances:decision-makingsteps
Summary
Case:SkyTeam
18Allianceportfolios
Themeaningofanallianceportfolio
Allianceportfoliogovernance
Allianceportfolio:decision-makingsteps
Summary Case:GeneralElectric
19Alliancenetworks
Themeaningofanalliancenetwork
Alliancenetworkgovernance
Alliancenetwork:decision-makingsteps
Summary Case:IBM
20Businessecosystems
Thebusinessecosystemchallenge
Businessecosystemattributes
Managingbusinessecosystems
Businessecosystems:decision-makingsteps
Summary
Case:ApplevsAmazon
21Allianceco-evolution
Aco-evolutionaryview
Driversofallianceco-evolution
Allianceco-evolution:decision-makingsteps
Summary
Case:Oralcareappliances
22Allianceprofessionals
Allianceprofessionals:auniquejob
Hierarchicalpositionsandallianceroles
Alliancemanager:attributesandcompetences
Allianceprofessionals:decision-makingsteps
Summary
Case:eVision
23Allianceteams
Theallianceteamchallenge
Allianceteamtypes
Managingallianceteams
Allianceteams:decision-makingsteps
Summary
Case:DutchOpticsCentre
24Alliancecapabilities
Themeaningofalliancecapabilities
Buildinganddeployingalliancecapabilities
Alliancecapabilities:decision-makingsteps
Summary
Case:Philips
25Strategicalliancemanagement:scienceandart
Thescienceofstrategicalliancemanagement
Theartofstrategicalliancemanagement
Thefutureofstrategicalliancemanagement
Appendix Notes
References Index
Figures 11Alliancedevelopmentstages
12Structureofthebook
2.1Decision-makingsteps:Alliancestrategyformulation
31Decision-makingsteps:Alliancepartnerselection
41Decision-makingsteps:Alliancenegotiation
5.1Alliancemirrordesign
52Decision-makingsteps:Alliancedesign
61Decision-makingsteps:Alliancelaunch
71Decision-makingsteps:Alliancemanagement
8.1Decision-makingsteps:Allianceevaluation
82Performancemetricdashboard
91Decision-makingsteps:Alliancetermination
10.1Alliancedevelopmentframework:Supplieralliances
111Alliancedevelopmentframework:Learningalliances
121Alliancedevelopmentframework:Co-brandingalliances
13.1Alliancedevelopmentframework:Internationalalliances
141Alliancedevelopmentframework:Asymmetricalalliances
151Alliancedevelopmentframework:Cross-sectoralliances
16.1Alliancedevelopmentframework:Coopetitionalliances
171Alliancedevelopmentframework:Multi-partneralliances
181Genericallianceportfolioconfigurations
18.2Alliancedevelopmentframework:Allianceportfolios
191Alliancenetworkconfigurations
192Alliancedevelopmentframework:Alliancenetworks
20.1Alliancedevelopmentframework:Businessecosystems
211Alliancesystem
212Alliancedevelopmentframework:Allianceco-evolution
22.1Decision-makingsteps:Allianceprofessionals
231Alliancemulti-teamsystem
232Decision-makingsteps:Allianceteams
241Decision-makingsteps:Alliancecapabilities
251Strategicalliancemanagement
Tables 11Examplesofalliances
12Advantagesanddisadvantagesofalliances
2.1Prototypicalgovernancemodes:make,buy,andally
22Theoreticalperspectives:allianceformation
31Partnerfittypes
4.1Negotiationstrategiesandtactics
51Non-equityandequity-basedarrangements
52Contractualclauses
61Alliancelaunchmisconceptions
6.2Alliancelaunchattributes
71Fouralliancemanagementapproaches
81Issueswithperformancemetrics
8.2Fiveperformancemetricsapproaches
91Theoreticalperspectivesandalliancetermination
101Twoviewsonbuyer-supplierexchanges
10.2Examplesofsupplieralliances
103Managingsupplieralliances
111Examplesoflearningalliances
11.2Managinglearningalliances
121Examplesofco-brandingalliances
122Managingco-brandingalliances
13.1Examplesofinternationalalliances
132Hofstede’sfiveculturaldimensions
141Examplesofasymmetricalalliances
14.2Managingasymmetricalalliances
151Examplesofcross-sectoralliances
152Cross-sectoralliancepartners
16.1Examplesofcoopetitionalliances
162Managingcoopetitionalliances
171Examplesofmulti-partneralliances
172Managingmulti-partneralliances
181Examplesofallianceportfolios
182Allianceportfoliogovernance
191Examplesofalliancenetworks
19.2Alliancenetworkgovernance
201Examplesofbusinessecosystems
202Whatisabusinessecosystem,andnot?
20.3Businessecosystemmanagement
211Drivingandinhibitingforcesofallianceadaptation
212Fourco-evolutionarytrajectories
22.1Allianceprofessionalsjobadvertisements(excerpts)
222Examplesofallianceprofessionals’roles
231Examplesofallianceteamtypes
23.2Allianceteammanagement
241Alliancecapabilityinstruments
Boxes 11Alliancesegmentation
21Someothertheoreticalperspectives
5.1Jointventures:aseparatestreamofresearch
52Alliancemirrordesign
61Alliancerelaunch
7.1Typesoftrust
72Organizationaljustice
81Developmentandimplementationmetrics
82BalancedperformancemetricsintheDutchshipbuildingindustry
11.1Openinnovation
121Alternativeformsofco-branding
131Highandlowcontextcultures
14.1Smallfirmsandalliances
161Competitionlaw
181Toyota’ssuppliers’portfolio
21.1Nexia’sco-evolution
221ASAPcertification
241Designinganallianceoffice
25.1Suggestionsforempiricalallianceresearch
Preface Strategicallianceshavebecomecornerstonesforthecompetitivestrategyofmanyfirmsand(non-profit) organizations,enablingthemtoachieveobjectivesthatotherwisewouldbedifficulttorealizeUnsurprisingly, theincreaseinallianceactivityoverthelastfewdecadeshasoccurredinparalleltoenormousgrowthin academicandmanagerialattentioninthesubjectParadoxically,however,firms’increasedfocusonanduseof alliancesisparalleledbymoderate-to-highalliancefailureratesoverthesameperiodWithafewexceptions, firmsappearunabletomanagetheiralliancessuccessfully.
Thisbookattemptstosynthesizeacademicinsightswithmanagerialexperienceviaa‘guidedtour’of variousaspectsofstrategicalliancemanagementBuildingonanacademicallygroundedalliancedevelopment framework,thebookelaboratesonuniquedecision-makingsituationstiedtoalliancedevelopmentstagesIn recognitionofthefactthatdistinctallianceobjectives,alliancepartnersandallianceenvironmentsconstitute uniquemanagementchallenges,thebookalsoelaboratesonthesespecificconditionsFurthermore,theability tocreatesuccessfulalliances,whichreflectslearningaboutalliancemanagementandleveragingalliance knowledgeinsidethecompany,isanalliancecompetence.Toprovideunderstandingaboutsuchcompetences, thebooklooksindetailatallianceprofessionals,allianceteamsandalliancecapabilities,whichallcontribute tosuccessfulstrategicalliancemanagementTheconclusionbuildsontheseinsightsbydiscussingthree allianceparadoxesthatareinherentlytiedtostrategicalliances.Theintendedresultisamorecomprehensive bookthanhaspreviouslybeenavailable,whichacknowledgesthatdecision-makingconstitutesacritical successcondition
Withregardtothissecondedition,severalamendmentstothefirsteditionhavebeenmade.First,thesecond editioncontainsfivenewchaptersdetailingemergingalliancetopicsSpecifically,thealliancedevelopment frameworkhasbeenextendedwithachapteronalliancelaunch:theprocessofexecutionoftheallianceonceit hasbeenformalizedbythepartners.Inaddition,twochaptershavebeenaddedtothepartofthebookfocusing onalliancecontext,onechapterdetailingalliancesbetweencompetitorsandoneonbusinessecosystemsInan attempttoprovidemoreinsightonhowfirmsmanagealliances,chaptersonallianceprofessionalsandalliance teamshavebeenincorporated.Second,inadditiontonewchapters,theacademicliteraturehasbeenupdated, newexampleshavebeenadded,andrelativelyoldercaseshavebeenreplacedbymorerecentonesThird,ina newappendix,anoverviewofmanagerialdecision-makingsteps(ieachecklist)ispresented
Thebookiswrittenwithaneven-handedappreciationfortheoryandpractice.Readerspossessing managementknowledge,combinedwiththebook’slogic,conceptandimplications,willbeabletoabsorbthe informationReadersareassumedtohaveabasicunderstandingofstrategicmanagementandorganizations, obtainedeitherthroughstudyorexperienceTherefore,studentsparticipatinginadvancedcoursesingraduate andMBAprogrammesinbusinessschoolswillfindthisbookuseful,aswillprofessionalsseekingadeeper understandingofthesubject
Inpreparingthisbook(firstandsecondedition),theauthorshavereceivedconsiderableassistancefrom colleagueswhoprovideddetailedfeedbackonourtreatmentoftheacademicliterature,allianceexpertswho reviewedourdecision-makingsteps,andexecutiveswhoprovideduswithrelevantexamplesWespecifically acknowledgethecompaniesandalliancemanagersthathaveprovidedinsights,examplesandfeedbackonthe casematerial.ThanksareduetoStevenTwait(AstraZeneca),HansdeRoos(KLM),FritsZegeling(Grolsch), RoseVerdurmen(TNT),JaapLombaers(HolstCentre),MichielJansen,TakoKejaandAlfredVrieling(NAM), BerryVetjens,NathalievanSchie,andErikHam(TNO),RonvanVianenandPetervanDuijn(Hoogendoorn), IvanVogels(eVision),EnriLeufkens(CapGemini),MichaelKaschke(ReckittBenckiser),AnoopNathwani (ConsortioConsulting),HenkRaven(HabrakenRuttenAdvocaten),JustinPhilippens(The3),andBruce Dönszelmann(KLM)
WealsoappreciatethesupportofstaffoftheVUUniversity,NyenrodeUniversity,TNOandKirkman Company,whooffereduscriticalreflectionsonearlierdraftsofthebookWealsothankPeterSimoons,and
membersoftheallianceroundtablefortheirinputtothesecondeditionWealsoacknowledgeElisabeth CaswellandJamesMorrison,whosetexteditinghasbeeninvaluable,aswellasTerryClague,Alexander Krause,IzzyFitzharrisandManonLutewhoprovidededitorialassistanceinthepreparationofthefinal manuscriptAlthoughwereceivedmuch-appreciatedsupportinwritingthebook,anyerrorsremainthe responsibilityoftheauthorsEnjoyreading
BrianTjemkes,Amsterdam PepijnVos,TheHague KoenBurgers,Baarn
StrategicAllianceManagement Intheearlyindustrialage,firmscreatedvaluebytransformingrawmaterialsintofinishedproductsThe economywasbasedprimarilyontangibleresources–inventory,land,factories,equipment–andafirmcould formulateandexecuteitsbusinessstrategybyoperatingautonomouslyandinteractingwithitsenvironment throughmarkettransactionsButtimeshavechangedInthecurrentinformationage,businessesmustcreate anddeployintangibleresources,includingemployeeskills,informationtechnologiesandcorporateculture,to encourageinnovationandimprovetheircompetitivestrengthValuedoesnotresideinanyindividual intangibleresource,howeverRather,itarisesfromtheentiresetofresourcesandthestrategythatlinksthem Valuableresourcescannotbeconsideredseparatelyfromtheorganizationsinwhichtheyareembedded.In turn,todevelopandmaintaincompetitiveadvantages,manyfirmsturnincreasinglytoalliances;insteadofjust acquiringresources,theyenjoythebenefitsofcombiningtheirownresourceswiththeassetsofothers Alliancesthushavebecomecornerstonesofthecompetitivestrategyofmanyfirms,enablingthemto achieveobjectivesthatotherwisewouldbedifficulttorealize1Forexample,alliancesprovidefirmswithan opportunitytoincreasetheirinnovativecapacity,improvetheirmarketresponse,achieveefficiencyandshare investmentriskswithpartnerfirmsYetthisincreasedfocusonanduseofalliancesbyfirmsisparalleledby empiricalresearchthatindicatesmoderatetohighalliancefailureratesExtantacademicandprofessional literatureindicatesthattoreapthebenefitsfromalliances,firmsmustovercomeinternalandexternal adversitiesbyefficientlyandeffectivelymanagingtheiralliancesEvenasallianceliteratureoffersavast amountoftheoreticalandpracticalinsightsthough,itlacksanysystematicframeworkfordecisionmaking Suchaframeworkwouldbeofgreatbenefitto(novice)allianceprofessionalsbyenablingthemtomanage theiralliancessystematicallyandaimtowardsuccess
Accordingly,theobjectiveofthisbookistoconnectexistingtheoreticalandpracticalinsightsandthereby presentamuchneeded,coherentandacademicallygroundeddevelopmentframeworkofstrategicalliance managementTheframeworkfocusesonuniquedecision-makingsituationstiedtothemanagementof alliancesastheyprogressfromformationtoterminationOuruniquealliancedevelopmentframeworkisalso groundedintheoreticalperspectives(i.e.know-what),supportedbypractice-orienteddecision-making guidelines(ieknow-how),andillustratedbyreal-lifealliancecasesItalsoincorporatesbothgenericand specificdecision-makingsituationstiedtouniquealliancecontextsBeforeweproceedtointroduceour AllianceDevelopmentFrameworkthough,weestablishafoundationforthisbookinthisopeningchapter.To thisend,wefirstoutlineourbook’sscopeandprovideacleardefinitionofanallianceInthefollowingtwo sections,weelaborateonwhyfirmsincreasinglyusealliancesasinstrumentstodevelopandsustaina competitiveadvantage,aswellasthecausesforalliancefailure.Inthefinalsection,afterexplainingtheneed forabookonstrategicalliancemanagement,wepresentthestructureofthebook
Themeaningofanalliance Anallianceisavoluntary,long-term,contractualrelationshipbetweentwoormoreautonomousand independentorganizations(iefirms),designedtoachievemutualandindividualobjectivesbysharingand/or creatingresources(Ariñoetal.2001,p.110;Gulati1995b).Thisdefinitionencompassesinter-organizational relationships,suchasjointventures,purchasepartnerships,researchanddevelopmentpartnerships,comakerships,co-creationefforts,multi-partneralliances,public–privatepartnershipsandconsortia,butit excludesarrangementssuchassimplemarkettransactions,mergersandacquisitions.InTable1.1,welist examplesofalliancesconsistentwithourdefinition
FourimportantimplicationsderivefromthisdefinitionFirst,anallianceisaninstrumentthatfirmsuseto achievetheirobjectives,ultimatelytodevelopandsustaintheircompetitiveadvantage(Irelandetal.2002). Therefore,alliancemanagementconstitutesastrategicactivitywithinfirmsSecond,thedefinitionindicates thatanallianceconsistsoftwoormorefirms,whichremainindependentorganizationalentitiesbutconnect voluntarilythroughanalliancecontract.Althoughalliancesthusofferfirmsflexibilityinachievingtheir objectives,theyalsorepresentrelativelyunstableorganizationalarrangements,becausethereisanabsenceof hierarchicalgovernance(LitwakandHylton1962)Third,ascriticalresourcesgetexchanged,firmsengagedin alliancesgrowincreasinglydependentoneachothertorealizetheirjointandindividualobjectives.This situationimpliesthatfirmsmustmanagetheiralliancesproactivelytoresolveanytensionbetweencooperative forcesfocusedonvaluecreationandcompetitiveforcesorientedtowardsvalueappropriation(Dyeretal2008) Fourth,ourdefinitionimpliesthatalliancesaretransitionalentities,becausefirmscandissolvethematany convenienttimeThethreatofprematureterminationrequiressystematicmanagementattentiontoresolveany emergingadversities
Comparedwithotherorganizationalentitiessuchasstand-aloneorganizations,alliancesthusrepresent uniquearrangementswithspecificmanagementchallenges(Albersetal2016)Forexample,interdependent partiesinalliancesmustdevelopjointbusinesspropositions,sharecontrolandmanagement,accept overlappingrolesandresponsibilities,engageinadaptationthroughmutualcooperation,installinternaland proactivemonitoringmechanismsanddeveloplong-termincentivesystems.However,paralleltocooperation, competitionbetweenthepartnersexistsbecausepartnerssimultaneouslycompetewithoneanothertoattain individualobjectives,occasionallyattheexpenseoftheircounterpartsInotherwords,ifalliancesare relativelyunstableandcomplexentitiesthough,thequestionemerges:whydofirmsengageinalliance activity?
Company Description
DSM
DSMestablishesanumberofpartnershipsforitsPharmaandBulkChemicalsactivitiesinorderto streamlineandsimplifyitscoreportfolioinNutritionandPerformanceMaterialsIn2011,DSM establisheda50/50jointventurewithSinochemtodevelop,produceandsellpharmaceutical ingredientsandfinisheddosages.In2014,togetherwithJLLPartners,DSMformedPantheontoadd scale,developnewvaluechaincapabilitiesandtechnologies,aswellastoexpanditsend-to-end serviceofferingstothepharmaceuticalindustry.In2015,DSMformedChemicaInvest,anewjoint venture(35%equity)withCVCCapitalPartnersChemicaInvestisagloballeaderintheproduction andsupplyofcaprolactamandtheleadingEuropeansupplierofacrylonitrileandcompositeresins.
IBM IBMforgesanumberofglobalpartnershipstoachieveeconomiesofscaleandscope,enhanceits innovativecapability,andsupportitsglobalfootprintandmarketleadershipIn2014,IBMand Twitterforgedaglobalpartnership,integratingTwitterdatawithIBManalyticsservices,toenrich cloudservicesforclientsacrossbusiness,todeliverasetofenterpriseapplicationstohelpimprove businessdecisionsacrossindustriesandprofessions,andtoenrichconsultingservicesforclients acrossbusinessIn2015,IBMandBoxannouncedaglobalpartnershipthatwouldcombinethebestin-classtechnologiesandresourcesofbothcompaniestocreatesimpleandsecuresolutionsbasedon Box’sindustry-leadingcloudcontentcollaborationplatformwithIBMAnalytics,Content
Table11Examplesofalliances
Walmart
ManagementandSocialsolutions,IBMSecuritytechnologiesandtheglobalfootprintoftheIBM Cloud.In2016,IBMandTevaexpandedtheirexistingglobale-Healthalliancewithafocusontwo keyhealthcarechallenges:thediscoveryofnewtreatmentoptionsandimprovingchronicdisease management.BothprojectswillrunontheIBMWatsonHealthCloud.
Walmarthasrevolutionizedthewayretailcompaniesmanagerelationshipsandpartnershipswithin thesupplychainWalmartsharesitsvasttroveofreal-timesalesdatawiththefirmsthatstockits shelvesandevengoessofarastocreatelargeteamstoworkwithpartnerstostreamlinecostsIn addition,Walmartforgespartnershipstoeffectuateapositivechangewithregardstorisksandsocial issuesinconsumergoodssupplychains.WalmartisafoundingmemberoftheAlliancefor BangladeshWorkerSafety,agroupofbrandsandretailersseekingtodrivesaferworkingconditions forthemenandwomenintheready-madegarmentindustry.In2014,WalmartjoinedtheFairFood programmethroughapartnershipwiththeCoalitionofImmokaleeWorkers(CIW)andFlorida tomatosuppliers.TheGlobalSocialComplianceProgramme(GSCP)isabusiness-drivenprogramme createdtopromotethecontinuousimprovementofworkingandenvironmentconditionsinglobal supplychainsWalmartisoneoffiveleadingcompaniesthathelpedtocreateGSCP
Sources:DSM(2016);IBM(2016);Walmart(2016)
Allianceactivity Alliancesarecriticalweaponsinfirms’competitivearsenals,andinrecentdecades,allianceactivityhas increasedsubstantially(Duystersetal2012;Gomesetal2016)AccordingtoKangandSakai(2001),the numberofalliancesin1999wassixtimeshigherthanadecadebefore.Duystersetal.(1999)reportasimilar exponentialincreaseinstrategictechnologyalliancesduringtheperiod1970–1996,andAnandandKhanna (2000)count,during1990–1993,morethan9,000alliancesjustintheUSmanufacturingsectorOnthebasisof theirresearch,Dyeretal.(2001)concludethatin2001,thetop500globalbusinessesaveraged60major allianceseachDeMan(2005)reportsthenumberofalliancesbyhigh-techcompaniesduringtheperiod1998–2002:IBM(168),Cisco(56),EliLilly(40)andPhilips–EU(61)Furthermore,theimpactofalliancesappearstobe growingsteadily.AsHarbisonandPekar(1998)find,thepercentageoftheannualrevenueofthe1,000largest UScompaniesearnedfromalliancesgrewfromlessthan2percentin1980to19percentby1996andwas expectedtoreach35percentby2002Withrespecttopredictionsforthefuture,surveyresearchindicatesthat managersconsideralliancesprimaryvehiclesforgrowth(Schifrin2001).Banks,forexample,arebecoming moreopentotheideaofpartneringwithstartupstopushtheirgrowthstrategyforwardBetween2013and 2014,a200percentjumpinthevalueofUSfintech(partnership)dealswasobserved(Accenture2016)Results fromtheGlobalCEOSurveyindicatesthat49percentoftheparticipatingCEOswillforgeanalliance/joint ventureagreementin2016,comparedto51percentin2015,and44percentin2014(PWC2016)These illustrationsimplythatfirmscannotcreatevalueonastand-alonebasis;thewaybusinessisconductedtodayis basedonpartnerships(formoreallianceexamplesseeTurieraandCros2013).
Therationalesforengaginginalliancesshiftwitheconomicandindustrydevelopments(DozandHamel 1998)Duringthe1970sforexample,firmsfocusedonproductperformance(ieefficiencyandquality)and engagedinalliancestoobtainaccesstotechnologyandnewdomesticandinternationalmarkets,aswellasto realizemarketstabilityDuringthe1980s,thefocusshiftedtoobtainingflexiblemarketpositions,ascontinuing globalization,increasingcompetitionandmoredemandingcustomersrequiredfirmstobecomeflexibleTheir alliancesprovidedflexibility,deployedtobuildindustrystature,consolidateindustrypositionsandgain economiesofscaleandscope.Thenduringthe1990sand2000s,firmsswitchedtheirattentiontolearningand capabilitydevelopmentforinnovation;theybeganusingalliancestoensureaconstantstreamofprospectsfor advancingtechnology,proactivelymaximizevalue,optimizetheirtotalcostforproductorcustomersegments andgainanabilitytorespondtochanginginternalandexternalconditions.Morerecentupsurgesinalliance activityappeartriggeredbyafocusoncorporatesocialresponsibility:allianceshelpfirmscomplywith institutionalandmarketdemandsforsustainabilityRegardlessoftherationale,though,thestrategicvalueof alliancesisapparent,especiallyinacontemporarycontextofrapidlygrowingandchangingmarkets,global competition,networkorganizationsanddynamic,complex,expensivetechnologies
Todayalliancesrepresentstrategicinstrumentsthatoffervariousadvantages(seeTable12)Firmsenter alliancestoaccessvaluableandcomplementaryresourcestheydonotalreadypossess(DasandTeng2000b), includingcapital,technologyandspecializedknowledgeToexpandproductvolumeandachieveeconomiesof scale,firmsalsoestablishpartnershipsFurthermore,theymightengageinalliancestoreduceoperationaland strategicrisks,
Advantages
–Accesstoresources:firmsformalliancesto gainaccesstocapital,specializedskills, marketandtechnologicalknowledge,or productionfacilities,whichcanhelpthem focusoncorecompetences
Disadvantages
–Lossofproprietaryinformation:proprietary informationcanbelosttoapartnerwhoisa competitororeventuallywillbecomeone
Table12Advantagesanddisadvantagesofalliances
–Economiesofscale:highfixedcostsrequire firmstocollaboratetoexpandproduction volume
–Riskandcostsharing:alliancesenablefirms tosharetheriskandcostofparticular investments.
–Accesstoa(foreign)market:partnering withanotherfirmisoftentheonlywayto obtainaccesstoa(foreign)market
–Learning:alliancesofferfirmsan opportunitytolearnfromtheirpartners;for exampleleanmanufacturing,product development,managementknow-howor technologycapabilities
–Speedtomarket:firmswithcomplementary skillscollaboratetoincreasespeedto marketandcapturefirst-moveradvantages.
–Reputation:firmsformalliancestoincrease their reputation and legitimization
Lobbyingactivitiesandcollectivepressure promptgovernmentstoadoptpoliciesthat favourspecificindustries
–Neutralizingorblockingcompetitors:firms cangaincompetenciesandmarketpower toneutralizeorblockthemovesofa competitor(e.g.entrybarriers).
–Assessingacquisitionpartner:alliancesoffer awaytoknowapotentialacquisition candidatebetteranddecreaseinformation asymmetry
–Flexibility:alliancesprovidemoreflexibility thanhierarchiesandmarketsandare subjecttolessregulationthanmergersand acquisitions
Source:AdaptedfromBarringerandHarrison(2000)
–Managementcomplexities:becausealliances requirethecombinedeffortofmultiplefirms, theyentailcoordinationcomplexities,often resultinginconflicts,frustrationsandcostly delays
– Financial and organizational risks: the opportunistic behaviour of partners can underminethevaluecreationlogicofanalliance Inter-organizationalroutinesalsomaymakeit difficultforafirmtoactindependently
–Riskofbecomingdependent:apowerimbalance arisesifonepartnerbecomesoverlydependent ontheother.Thissituationincreasestheriskof opportunism, exploitation, and (hostile) acquisitions.
–Lossofdecisionautonomy:jointplanningand decisionmakingmayresultinalossofdecisionmakingautonomyandcontrol
–Lossofflexibility:establishinganalliancewith onepartnermaypreventpartnershipswithother potentialfirms
–Antitrustimplications:thebenefitsofalliances disappeariftheyarechallengedonantitrust grounds.Somecountrieshavestrictregulations thatprohibitcertainbusinessrelationships
–Learningbarriers:althoughalliancesprovide accesstoknowledge,learningbarriersmaymake itdifficulttointegrateandexploitnew knowledge
–Long-termviability:despitepredetermined objectivesandenddates,internalandexternal contingenciesoftencauseprematuretermination
accelerateinternalgrowthorincreasespeedtomarketAlliancesalsocanfunctionaslearningvehicles, providingameanstoobtain,exchangeandharvestknowledge(Lubatkinetal.2001).Theycanevenshift externaldependenciestothefirm’sadvantagebyblockingcompetitorsorinducinggroup-to-groupcompetition (Gimeno2004)Ifanallianceofferslegitimacyandreputationeffects(Stuart2000),itcanreinforcethefirm’s corporatesocialresponsibilitypoliciesandlobbyingactivities(Londonetal.2006).Finally,alliancesoffera waytoassesspotentialacquisitionpartners,inthatsharedexperiencesreducethecostsrelatedtointegration Thusalliancesprovidemoreflexibilitythanhierarchiesormarketsandaresubjecttolessregulationthan mergersandacquisitions.
However,allianceactivitycreatesseveraldisadvantagesForexample,firmsmayloseproprietary informationtoacompetitor,whichweakenstheircompetitiveadvantage(Kaleetal2000);themanagerial complexitiesduetoreciprocalandinterdependentrelationshipsmaycreatesubstantialcoordinationcoststhat jeopardizejointvaluecreation(GulatiandSingh1998);theirvoluntarilycollaborationincreasestheriskof opportunisticconduct,whichunderminesvalueappropriationefforts(WathneandHeide2000);firmscan becomelockedintoarelationship,reducingtheirbargainingpower;andthelossofdecisionautonomycould inhibitthefirm’sabilitytosteerthealliancetowarditsownobjectives(Glaisteretal.2003),justasthelossof organizationalflexibilitymayrestrainitsabilitytopursuealternative,potentiallymorevaluablearrangements Furthermore,lawsandregulationsofteninhibitanalliance’spotential(Oxley1999),andinter-firmlearning maybedifficultduetolearningbarriersthatlimitafirm’sabsorptivecapacity(Hamel1991).Finally, unforeseeninternalandexternalcontingenciesconstituteathreattolong-termstability(DasandTeng2000a)
Alliancefailure Paradoxically,evenasfirmsincreasetheirfocusonanduseofalliances,theirfailureratesseemtokeep climbing(HoangandRothaermel2005;PekarandAllio1994)Researchersreportfailureratesashighas70per cent(Harrigan1988),thoughinothersettings,Franko(1971)andKilling(1983)find24and30percent prematurealliancedissolutions,respectivelyPorter(1987)considers33randomlychosenUSfirms,asample thatproducedadissolutionrateof503percentduring1950–1986KokandWildeman(1997)andDacinetal (1997)calculateapproximately60percentfailureratesforalliances,whereasParkandUngson(1997)finda dissolutionrateof43percentduring1979–1995amongaUS–JapanesesampleDeMan(2005)reportsan averagefailurerateof52percentforasampleof140EuropeanandUSfirmsBasedonarepetitivestudy amongallianceprofessionsals(i.e.2002,2007,2009,2011),Duysters(2012)andcolleaguesconcludethatthe alliancefailureratesremainstableatapproximately50percentThesereportsincombinationconfirmthat eveniffirmsconsideralliancesattractivemethodstoachievetheirobjectives,theyaresubjecttowidespread failureandprematuredissolution.
Aplethoraoffactorscontributetoorinhibittheachievementofsuperiorperformance(Hoffmannand Schlosser2001;NemethandNippa2013;Robsonetal2002)Forexample,thesuccessorfailureofalliances mightbeattributedtoenvironmentalcontingencies(KozaandLewin1998),theculturaldistancebetween partners(Barkemaetal1996),broadornarrowalliancescopes(Khanna1998),thealliancecontract (HagedoornandHesen2007),thegovernanceformadopted(Sampson2004a),emergingallianceinstability(Das andTeng2000a),managementcontrol(YanandGray1994),thequalityoftheworkingrelationship(Ariñoet al2001)orlearningprocesses(Laneetal2001)Wepostulatethatwhereasprematuredissolutionresultsfrom mismanagementandadhocdecisionmaking,alliancesuccessstemsfromtheadoptionofasystematic approachtoalliancemanagement
Box11AllianceSegmentation Alliancesegmentationentailsanapproachtodistinguishbetweendifferenttypesofalliance relationships.Segmentationisacademicallyrelevanttoclarifytheobjectofthestudyandorganize theoryandempiricalevidencesystematicallyInthisbookforexampleweusevariousalliance segmentationapproaches,amongwhichalliancedevelopment(egdesignversusmanagement),alliance objectives(e.g.learningversusco-branding),partnercharacteristics(e.g.cross-sectorversuscompetition) andgovernanceforms(egequityversusnon-equity)Whereastheacademicsegmentationsoutlinedin thisbookarecriticaltoallianceprofessionalsasithelpsthemtoorganizeandfocustheirattention,in practiceothersegmenationsdoexist.Forexample,allianceleadershipmayorganizeasetofalliance relationshipsbasedontheextenttowhichapartnerholdspromiseforthefutureandtheextenttowhich thispartnerisstrategicallyimportanttothefirmConsequently,fouralliancetypesaredistinguished First,acorporateallianceisstrategicallyimportantandholdsakeytofuturesuccess.Theserelationships requireextantmanagerialattentionasoftenmultipletiesexistwitha(rival)partner,includingsupplier, learningandcustomerrelationshipsInadditiontoexploitingexistingandjointresourcecombinations, innovationisoftenpartofthelong-termagenda.Second,abusinessallianceentailsasingle-tie relationship,exhibitinglowstrategicimportanceandlowpotentialforfuturesynergiesSucha relationshipextendsbeyondameretransactionalexchange,andalliancemanagementisrelatively straightforwardwithafocusonmonitoringrelationshipprogressandattainingobjectivesThird, relationshipalliancesholdgreatpromiseforthefuture,asforexamplejointresearchanddevelopment effortsmayleadtomarketableinnovationsHowever,thepresentstrategicvalueislow,thusalliance managementshouldprimarilyfocusattentiononunlockingtherelationship’spotentialFourth,strategic alliancesareofcriticalimportancetothefirm,asforexampleapartnermayprovideaccesstoaunique distributionchannelorsupplyacriticalcomponentEveniffuturesynergiesareunlikely,relationship continuationisimperativeDependingonthenatureandobjectivesofthefirmotherpragmatic
segmentationapproaches,forexamplebasedontheextentofintegration,theextentoflearning,orthe extentofequity,maybemoresuitedandmanageriallyeffective
Specifically,weaddressthreekeyreasonsthatencompassthisplethoraofpotentialdealbreakers.First, failurestemsfromalackofunderstandingofthepotentialpitfallsandhazardsthatpertaintothedifferent alliancedevelopmentstagesAlliancestypicallydevelopthroughasequenceofstages,andduringeach,partner firmsdirecttheirattentiontospecificdesignandmanagementdecisions.Forexample,duringthealliance strategyformulationstage,decisionsshouldfocusondevelopingabusinesspropositionandselectingan appropriategovernancemode(iemake,buyorally)Butduringthealliancemanagementstage,decisions insteadmustfocusontheday-to-dayoperations.Second,failurecanbeattributedtoanunawarenessofthe uniquechallengesimposedonthembydifferentallianceobjectives,divergingpartnerfirmcharacteristicsand uniquealliancecontextsForexample,whereaslearningalliancesrequirefirmstofocusonknowledgesharing andprotectionmechanisms,co-brandingalliancesnecessitatethattheydirecttheirattentiontowards reputationmanagementThird,alliancefailureismorelikelywhenfirmsneglecttheinstitutionalizationof theirallianceknow-howandknow-what–whichwerefertoasalliancecapabilitiesForexample,firmsthat possessstrongalliancecapabilities,implyingthattheyhaveinvestedinanalliancefunction,databasesand checklists,tendtooutperformfirmswithoutthesecapabilities
Toreapthebenefitsfromalliances,firmsmustdealsystematicallywiththesethreeissues,whichwillenable themtoachieve,efficientlyandeffectively,agooddesignandmanagementapproachtotheiralliance relationshipsObservingthehighfailureratesinpractice,itseems,however,thatfirmsarenotsufficiently preparedThereforeweneedanacademicallygroundedframeworkthatoffersacoherentunderstandingofthe uniquenatureofstrategicalliancemanagement.
Anacademicallygroundedalliancedevelopmentframework Beforeandduringalliancedevelopment,managersconfrontvaried,uniquedecision-makingsituationsEach situationrequiresthatfirmsconceptualizeitintermsofproblem,solutionsandimplementationThatis,firms musttackleanysituationbydefiningtheproblem,developingasetofsolutions,selectingonesolution,and thenimplementingitefficientlyandeffectivelyTothisend,theyneedtobeawareofdecision-making rationales,thatis,theunderlyingprinciples,guidelinesandtheoriesthatmayinformtheirdecisionAcademic researchisrifewiththeoriesthatattempttoexplainthesedecision-makingrationales;wedrawontheories fromallianceliteraturetodiscussthedecision-makingcontent,thealternatives,andthetheoreticalrationales forthesevariousalternativesInaddition,decisionmakersinfirmsmustunderstandthenecessarystepsfor arrivingatanappropriatesolution,whichwerefertoasdecision-makingsteps.Managementliteratureis informativeinthiscontextBycombiningthesevariedconceptsandresearchstreams,weproposean academicallygroundedframeworkforstrategicalliancemanagementthatconsistsofthreemainparts:(1) alliancedevelopmentstages,(2)alliancecontextand(3)alliancecompetences.
Alliancedevelopmentstages ThefoundationdetailsthedevelopmentstagesthroughwhichalliancesprogressBuildingonprioralliance developmentliterature(D’AunnoandZuckerman1987;DasandTeng2002;Dyeretal2001;Kanter1994),we distinguisheightstages:(1)alliancestrategyformulation,(2)alliancepartnerselection,(3)alliancenegotiation, (4)alliancedesign,(5)alliancelaunch,(6)alliancemanagement,(7)allianceevaluationand(8)alliance termination(seeFigure1.1).Eachdevelopmentstagedepictsaspecificdecision-makingsituationthatrequires uniqueknow-whatandknow-how(seeBox11forothersegmentationapproaches)Analliancetransforms andproceedstothenextstageonlyafterithasachievedtheobjectivesoftheprecedingstageThus,each developmentstageischaracterizedbyspecificissuesandrequiresspecificdecision-makingrationalesand steps
Alliancesare,however,purposefulentitiesthatcanlearnandadapttochangingcircumstancesindicating thatalliancedevelopmentalsoentailsarepetitivesequenceofgoalformulation,implementationand modification,basedonlessonslearnedorchangedintentionsamongthepartnerfirms(AriñoanddelaTorre 1998)Thealliancedevelopmentframeworkincorporatesacyclicalapproach,suchthattheeightstagesremain interlinkedthroughlearningandadaptation.Alldecisionsmadeinonestagehaveeffectsonsubsequentstages, andalliancedevelopmentcanfollowaniterativedevelopmentpath,suchthatstagesmayberevisitedif neededAlliancefailureoftenresultswhenorganizationsskiponeormorestagesand/ormanagersfailto completetheirdecision-makingtasksforeachdevelopmentstage.Managementthusplaysacriticalrole(i.e. decisionmaking)insuccessfulalliances,asorganizationsmustbeactivelymanagedandguidedthrough variousstagestoincreasechancesforsuccess
Figure11Alliancedevelopmentstages
Chapters2to9presentthefoundationofouralliancedevelopmentframeworkanddetails,foreach developmentstage,thecontentandstepsassociatedwithdecision-makingsituations.Beforeengaginginan alliance,afirmmustconductastrategicanalysistodeterminetheappropriategovernancemode(Chapter2)A firmthenconductsapartneranalysistoselectanappropriatepartner(Chapter3)Buildingonthesetwopredesignstages,thefirmstartsalliancenegotiations(Chapter4),withtheresultthattheoutcomesofthe negotiationsareformalizedinanalliancedesign(Chapter5),whichprovidesthefoundationforalliancelaunch (Chapter6)andalliancemanagement(Chapter7)Asthealliancedevelops,performanceassessmentsare requiredtomonitortherelationship’sprogress(Chapter8)andthefirmmustmanagethealliancedissolution too(Chapter9).
Alliancecontext Becauseeachallianceissurroundedbyuniquecircumstances,weaugmentourframeworkbyelaboratingon uniquedecision-makingsituationsoriginatinginanalliance’scontextDistinctallianceobjectives,alliances withdifferenttypesofpartnersandspecificallianceenvironmentsarelikelytorequireidiosyncraticknowwhatandknow-how,sowemustoffermoredetailinourframeworkWefirstfocusonallianceobjectivesand theirmanagementchallenges,asdistinctallianceobjectivesimposeconstraintsondecision-makingwithin eachalliancedevelopmentstageWegivedetailonsupplieralliances(Chapter10),learningalliances(Chapter 11)andco-brandingalliances(Chapter12).Inaddition,theimpactofpartnercharacteristicsondecisionmakingisdiscussed,asdivergingphilosophies,orientationsandbackgroundsbetweenpartnersconstitutea potentialbarriertoeffectivedecisionmakingWedetailinternationalalliances(Chapter13),asymmetrical alliances(Chapter14),cross-sectoralliances(Chapter15),coopetitionalliances(Chapter16)andmulti-partner alliances(Chapter17)Furthermoretheallianceenvironmentiscritical,asconditionsoutsidethealliancetend toobstructoracceleratealliance-decisionmakingTherefore,specificattentionisgiventoallianceportfolios (Chapter18),alliancenetworks(Chapter19),businessecosystems(Chapter20),andallianceco-evolution (Chapter21)Otherallianceobjectives,partnercharacteristicsandallianceenvironmentsmayaffectstrategic alliancemanagementaswell,butwesuggestthattakentogetherthesechapterspresentacoherentoverview coveringawide-rangeoftopics.Allchaptersarerepletewithillustrativecasedescriptions.
Alliancecompetence Theabilitytocreatesuccessfulalliances,whichreflectslearningaboutalliancemanagementandthen leveragingallianceknowledgewithinthecompany,constitutesanalliancecapabilityTobuildalliance capabilities,organizationsmustnotonlylearnandmanagealliancesbutalsoexploittheirownalliance competencesappropriatelyFirmsthatcapitalizeontheirpriorexperiencewithallianceslikelydevelopand deploytheiralliancecapabilities,and,thereforetendtooutperformfirmswithoutallianceexperienceor capabilitiesAnothercriticalelementofafirm’salliancecompetencepertainstotheselection,trainingand managementofpeopleinvolvedinalliancerelationships;thuswedetailtheroleandcompetencesofalliance professionals(Chapter22)andexplicatehowpartnerrepresentativesmayworktogetherinallianceteams (Chapter23),beforewedefinealliancecapabilities,detailwhytheyareimportant,anddescribedecision makingintermsofbuildinganddeployingalliancecapabilities(Chapter24)
Whereastheprecedingchaptersofferknowledgeaboutstrategicalliancemanagement,weacknowledgethat high-performingalliancesrequiremorethanpre-setsolutionsInChapter25,wepostulatethat,inadditionto academicknowledge,amanager’sexperience,expertiseandcreativityarecriticaltoresolvethreeparadoxes inherentlytiedtoalliancerelationships.Thatis,alliancemanagersneedtodealwiththreepairsofcontending forces:cooperativeversuscompetitive,economicversussocialanddeliberateversusemergentWeprovidean understandingofhowmanagerscanresolvetheseallianceparadoxesWeconcludethebookwiththemes likelytobecomesalienttothefutureofstrategicalliancemanagement.Takentogether,anadvanced introductiontothescienceandartofstrategicalliances,thisbooktakesreadersonaguidedtourofstrategic alliancemanagement,aswedepictinFigure12
Structureofthebook
Figure12
AllianceStrategyFormulation Duringthealliancestrategyformulationstage,afirmdecideswhichgovernancemodeisappropriatefor realizingitsobjectives,thatis,howitwillorganizetheprocurementofitsdesiredresources.Wedistinguish threeprototypicaltypes:‘make’,suchthatfirmsgatherresourcesinternallythroughinter-unitexchangesor throughmergersandacquisitions;‘buy’,whichmeansfirmsprocureresourcesthroughdiscretemarket transactionsorganizedbysimplecontracts;and‘ally’,whichreferstoalliancearrangementsorganizedthrough complexcontractswithexternalpartiestoprocureresourcesThischapterisdividedasfollowsToinform theirdecisionsaboutalliancestrategyformulation,managersmustunderstandthedifferencebetween alternativegovernancemodes(firstsection)andcomprehendtherationalesunderpinningeachofthem(second section)Whenafirmadoptstheallygovernancemode,italsomustformulateanalliancestrategytodetailthe requirementsthattheallianceshouldmeetWethereforewindupthischapterwiththreesectionsdescribinga setofdecision-makingsteps,asummaryforalliancestrategyformulationandacaseillustration.
Threeprototypicalgovernancemodes Inthecontextofgovernancemodes,afirm’sboundarypertainstoitsdemarcationfromitsexternal environment,thoughtheseboundariesareconstantlysubjecttochangeasfirmsrearrangetheirportfoliosof activitiestoachievetheirobjectives.Suchrestructuringoccursthroughthreetypesofprototypicalgovernance modesthatdefineexchangesandthatwecompareinTable2.1:make,buy,andally1(GulatiandNickerson 2008)
The‘make’governancemodeindicatesthatfirmsseektorealizetheirobjectivesthroughinternal procurement(GulatiandNickerson2008).Forexample,ininter-unitexchanges,firmsautonomouslyinvestin anddeveloptheirexistingresourcesandcapabilitiestomarkettheirproductsandservicesPriortotheir internalprocurementthough,somefirmsinternalizepreviouslyexternalresourcesbyengaginginmergersand acquisitions.Insuchatransaction,twofirmsagreetointegratetheiroperationsbecausetheypossessresources that,whencombined,createsynergiesThroughinternalprocurement,organizationsobtainpropertyrights andthusacompetitiveadvantage,becausetheycandevelopproductsandservicesoutofsightofcompetitors Inthiscase,theyalsomightattaincontrolovertheirmarginsandmarkets.However,the‘make’decision imposeshazardsonthefirm,inthatitmightincreasethelevelofbureaucracybecausethefirmhasfullcontrol overanactivity(Williamson1991)Italsoreducesflexibility;buildingorintegratingnewresourcesrequires substantialinvestments,whichmaybedifficulttorecoupifthefirmfails
The‘buy’governancemodeinsteadimpliesthatfirmsprocureresourcesthroughdiscretemarket transactions,organizedintheformofasimplecontractMarkettransactionsarewellsuitedtoexchanging commodities,because‘supplyanddemand’governstheexchangeTheexchangeisorganizedbyprice(Powell 1990),sotheleveloforganizationalandfinancialintegrationbetweenthetransactingfirmsislow.Because marketsprocessinformationefficiently,buyersgaingoodaccesstodifferenttypesofrelevantinformation, includingprices,alternativesuppliersandqualityHowever,markettransactionsalsoinvolvepotential hazards.Themaindisadvantageofthe‘buy’governancemodethereforepertainstotheopposingobjectivesof thetransactingorganizations:thebuyingfirmaimstolowercosts,whereasthesellingorganizationhopesto increaserevenuesTheconflictmayinduceopportunisticbehaviourandincreasetransactioncosts Furthermore,marketsmayfailinresponsetotheuncertaintysurroundingthesupplyofresources;information asymmetriesbetweenbuyersandsuppliersmayresultinhigherprices;andsuppliersmayusetheirmarket powertoincreasetheirmargins
Finally,thethirdgovernancemode,‘ally’,suggeststhatfirmsestablishallianceswithexternalpartiesto obtainaccesstodesiredresourcesAlliancesprovideaviablealternativewheninternalandexternalconditions leadthefirmtodesiresomedegreeofcontrolovertheresourcesbutnottointernalizethemForexample, whenmarketsfail,firmsmayuseanalliancetoobtainaccesstoexternalresources.Alliancesofferseveral advantages:analliancegovernancemodeenablesafirmtoaccesscomplementaryresources,withoutobtaining proprietaryrightsItprovidesthefirmwithspeedandflexibilityinobtainingaccessandexploitingdesired resources.Furthermore,throughcollaborations,firmscanshareinvestments,whichmayreducerisk.However, sharingresourcesmayalsoimposetheriskofcreatingincreasedcompetitionFurthermore,itmaybedifficult tointegratelearningintothefirm,andthelong-termviabilityofanallianceisquestionableWhenpartners havereapedthebenefitsfromtherelationship,theyarethenlikelytoterminateit
Thethreegovernancemodesofferalternativestrategicoptionsforbuildingandsustainingacompetitive advantageHowever,itisalsoimportanttonotetheplethoraofintermediategovernanceformsonthemake–buycontinuum(Powell1990)Forexample,alliancesconstituteahybridgovernancemodebetweenhierarchy andmarketexchanges,whereasjointventures(i.e.wheretwofirmsestablishaneworganizationalentity)tend tovergeonhierarchicalgovernanceIncontrast,licenceagreementsaremorecloselyassociatedwithmarket exchangeDespitethesevariedintermediateforms,thelogicforchoosingagovernancemodecanrelymainly onthethreeprototypicaltypes.
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A Disappearing Towel The Weight Draws the Towel into the Case Out of Sight When Not in Use Nothing is more unsightly to a stranger entering a home than a dirty towel in either the bathroom or the kitchenette. To keep the towel out of sight I made a hanger as shown in the illustration. A wire was bent into shape similar to a clothes hanger and a sliding clip made to hold the towel in place. A cabinet was made to accommodate the towel, and the hanger was attached to a cord run over a pulley fastened at the top, through a weight pulley, and then tied to a screw eye at the top. The weight draws the towel into the cabinet. Near the bottom edge a slot was cut and a small panel fitted in it. This small panel is fastened to the lower end of the towel. It is
only necessary to pull out the small panel to get at the towel. When through with the towel, let loose of it and the weight will draw it into the opening.—Contributed by Chas. C. Bradley, W. Toledo, O.
Ammonia-Carrying Case for Insect Bites An old clinical-thermometer case can be easily turned into a vial in which to carry ammonia for insect bites. Fit a small rubber stopper in the case, then push a darning needle into the stopper so that its end will be a little more than midway in the case. Cut or break off the needle end projecting on the outside and attach a small wad of cotton to the inside end. The case is then filled with ammonia. For bee stings this works fine, as the ammonia completely neutralizes the formic acid which the bee deposits.—Contributed by E. Everett Buchanan, Elmira, N. Y.
¶The contact points of a firm-joint caliper should never be struck on hard surfaces to adjust them.
How to Make Combined Kites B C. M. MILLER PART II—A Festooned Kite ore than one kite on the same framework is known as a compound kite. The one illustrated consists of three tailless kites on one long stick, called the spine. The upper one is 3 ft.; the center one, 2 ft., and the lower one, 1 ft. in width. There will be needed for the construction of this kite a stick of light wood—spruce is best, but it may be of pine or bass—7 ft. long by ¹⁄₄ by ¹⁄₂ in. If the wood breaks easily it will be better to increase the width from ¹⁄₂ in. to ³⁄₄ in., or the stick might be made ³⁄₈ in. thick without increasing the width, but with a good spruce stick the dimensions first given will be sufficient. The stick should be straight-grained and without a twist. If the spine is twisted, the kites will not lie flat or in a plane with each other, and if one is out of true, it will cause the kite to be unsteady in the air. The bow sticks are three, the upper one being 4 ft. long by ¹⁄₄ by ¹⁄₂ in.; the center one, 2 ft. long by ¹⁄₄ by ³⁄₈ in., and the lower one, 1 ft. long by ¹⁄₄ by ¹⁄₄ in. About five sheets of tissue paper will be required, but more may be needed for color combinations. The so-called French tissue paper is much better, as it comes in fine colors and is much stronger than the ordinary tissue. It costs a trifle more, but it pays in making a beautiful kite. The Chinese rice paper is the strongest, but it comes only in natural colors.
The Spine with the Bow Sticks Properly Spaced as Shown by the Dimensions
The Kite as It Appears with the Festoons Hung to the Ends of the Sticks
It will be seen that the kites do not extend to the top and bottom of the spine stick. The first bow stick is placed 13 in. from the top end of the spine, and each of its ends extends 6 in. beyond the kite for fastening the festoons. The bow sticks should be lashed to the spine, not nailed. Wind diagonally around the two sticks, both left and right, then wind between the two, around the other windings. This draws all windings up tightly to prevent slipping.
To string up the upper kite, drill a small hole through the spine, 6 in. from the top, at A, and also 6 in. from each end of the bow stick, at B and C. If a small drill is not available, notch the stick with a knife or saw to hold the string. Another hole is made in the spine 29 in. from the upper bow stick, or at D. Tie the outline string at A, then pass through the hole at C, then through D, up through B and back
to the starting point at A. In tying the last point, draw up the string tightly, but not enough to spring the spine or bow. Measure carefully to see if the distance AC is the same as AB, and if CD is equal to BD. If they are not, shift the string until they are equal and wind at all points, as shown at E, to prevent further slipping. Proceed in the same way with the center and lower kite, and it will be ready for the cover.
The cover tissue should be cut about 1 in. larger all around than the surface to be covered, but turn over about half of this allowance. This will give plenty of looseness to the cover For the fringe festoons, cut strips of tissue paper, 2¹⁄₂ in. wide, paste ¹⁄₂ in. of one long edge over a string, and cut slits with scissors at intervals of 1 in. along the loose edge. After the fringe has been made, attach it as shown in the illustration. Do not stretch it tightly, but give sufficient looseness to make each length form a graceful curve and keep the sides well balanced.
To bend the bows of the upper and center kites, attach a string from end to end of each bow on the back side of the kite and spring in short brace sticks in the manner usual for tailless kites.
Attach the upper end of the bridle at A. The length of the bridle string is 87 in. and the kite line is attached to it 30 in. from A, leaving the lower part from this point to F, where it is tied to the spine, 57 in. long.
The kite should fly without a tail, but if it dodges too much, attach extra streamers to the ends of the bow sticks of the lower kite, and to the bottom of the spine.
If good combinations of colors are used a very beautiful kite will be the result, and one that will fly well.
Simple Experiment in Electromagnetism A Small Coil of Wire Mounted on a Cork Floating in Dilute Sulphuric Acid
The following simple experiment, which may be easily performed, will serve to prove the theory that there is a magnetic field produced about a conductor carrying a current, and that there is a definite relation between the direction of the current in the conductor and the direction, or polarity, of the magnetic field produced by the current. The current in the experiment is to be produced by a battery consisting of a small copper and zinc plate fastened to the under side of a large flat cork, as shown in the sketch, the whole being placed in a glass or rubber vessel partly filled with diluted sulphuric acid. A small coil of wire is formed and mounted on top of the cork,
and its terminals are connected to the copper and zinc plates. The electromotive force generated will cause a current to circulate through the coil from the copper plate to the zinc plate. If the poles of a permanent magnet be presented in turn to the same side of the coil it will be found that there is a force of attraction between one pole of the permanent magnet and the coil, and a force of repulsion between the other pole and the coil. If the same operation be performed on the opposite side of the coil, it will be found that the force between the poles of the magnet and the coil are just the reverse of what they were in the first case; that is, the pole that attracted the coil in the first case will now repel it, and the one that repelled it, will now attract it. Applying one of the fundamental laws of magnetism—like poles attract and unlike repel each other—it can be readily seen that the two sides of the coil are of opposite magnetic polarity.
If the direction of the current around the coil be changed, the action between the coil and the magnet will be opposite to what it was originally, and if the plates be placed in clean water, there will be no current and no attraction or repulsion between the coil and the poles of the magnet.
Double Lock for a Shed Four boys using the same shed as their workshop wished to lock it so that any one of them could enter alone. Usually only two keys are supplied with a lock, so two locks were purchased and applied to the staples as shown. Each boy was provided with a key and could enter at his pleasure.—Contributed by George Alfred Moore, Versailles, O.
Ferrules for Tool Handles Discarded metal caps from broken gas-mantle holders should be saved, as they will come in handy for several purposes, such as ferrules on wood handles, and the like. The wire screen is removed from the end, and the cap is fastened to the handle with a nail or screw.—Contributed by James M. Kane, Doylestown, Pa.
Mallet Made from Wagon-Wheel Felly and Spoke A Well-Shaped Mallet Made from a Section of a Wagon-Wheel Felly and Spoke
When in need of a mallet and if an old broken and discarded wagon wheel is at hand, one can be made quickly as follows: Cut through the rim at A and B, and through the spoke at any distance desired, as at C, for instance. The spoke is dressed into the shape of a handle and sandpapered smooth. The section of the felly is used as head and is shaped properly and fastened to the handle with two nails.—Contributed by Mark Gluckman, Jersey City, New Jersey.
A Mystery Sounding Glass Procure a thin, tapering drinking glass, a piece of thin, black thread, about 2 ft. long, and a long lead pencil. Cut a small groove around the pencil near one end. Make a slip noose in each end of the thread and slip one into the notch and place the thin glass in the other with the thread near the top. When the pencil is revolved slowly the thread will be wound on it slightly and it will slip back with a jerk that produces a ring in the glass. This may be kept up indefinitely. The movement necessary is so small that it is imperceptible. The glass can be made to answer questions by two rings for “yes” and one ring for “no.”
¶A lighted match held to the outside of a fish-pole joint causes an expansion of the outer ferrule and allows the pole to be readily pulled apart.
Repairing a Broken Canoe Paddle While paddling a rented canoe one day the paddle struck a rock and snapped in two a little below the center of the handle. The
boatman laughed at the idea of trying to fix it, but after paying his price for the paddle I decided to try mending it. The barrel of an old bicycle pump was procured and I found that it fitted over the paddle at the break a trifle loosely. It was pushed on the handle out of the way. Then with a No. 8 bit I bored a hole 8 in. deep in the end of each broken part. Into these holes, which formed one cavity when the broken ends were brought together, was forced and glued a tight-fitting 16-in. dowel pin. The outside of the handle was then wrapped with tape for about 10 in. each side of the break, and the pump barrel was forced down over this tape until it completely and firmly enveloped the broken ends.—Contributed by Clarence G. Meyers, Waterloo, Iowa
Tightening Lever for Tennis Nets The Upper Rope on a Tennis Net Held Taut with a Lever on the Post
Tennis nets are always sagging and to keep them at the proper height requires considerable attention, especially so where the posts are not solidly set in the ground. A very effective net tightener, and one that is easy to make is the lever shown in the illustration. One end of a piece of hardwood board is shaped into a handle the other end being left large. In the latter a hole is cut to fit loosely over the post for the net. The upper end of the post is notched and a sheave pulley is placed in it so that the groove will be in line with the net. The upper rope on the net is run over the pulley and is attached to the lever handle. A downward pressure on the handle draws the rope taut and locks it on the post. It is easily removed from the post and can be left attached to the rope and rolled up in the net when not in use.
A Desk Watch Holder A watch holder for the desk is a great convenience for the busy worker, and many calendar devices are sold for this purpose, yet they are no more efficient than the one illustrated, which can be made from an ordinary spindle desk file. If the wire is too long it can be cut off and the bend made in it to form a hook for the watch ring.
Cleaning Silverware To clean silverware or anything made of the precious metals, such as jewelry, etc., is very simple with the following method: Place a piece of zinc in a cup, dish, or any glazed ware; put in the articles to be cleaned, and pour over them a hot solution of water and carbonate of soda—washing soda—in proportions of one tablespoonful of soda to ¹⁄₂ gal. of water. This is a solution and method used by many jewelers for cleaning pins, rings, chains, and many other small articles made in gold and silver.
¶A machine should never be stopped in the midst of a fine cut.
An Eight-Pointed Star Kite B CHARLES M. MILLER Nearly every boy can make kites of the several common varieties without special directions. For the boy who wants a kite that is not like those every other boy makes, an eight-pointed star kite, decorated in an original and interesting manner, in various colors, is well worth while, even if it requires more careful work, and extra time. The star kite shown in Fig. 1 is simple in construction, and if carefully made, will fly to a great height. It is balanced by streamers instead of the common type of kite tail. Any regular-shaped kite should be laid out accurately, as otherwise the error appears very prominent, and unbalances the poise of the kite.
The frame for this star kite is made of four sticks, joined, as indicated in Fig. 5, with strings running from one corner to the second corner beyond, as from A to C, from C to E, etc. A little notching of each pair of sticks lessens the thickness of the sticks at the center crossing, and strengthens the frame, The sticks are ¹⁄₄ by ¹⁄₂ in. by 4 ft. long, They are set at right angles to each other in pairs, and lashed together with cord, and also held by a ³⁄₄-in. brad at the center. The strings that form the sides of the squares, A to G, and B
to H, must be equal in length when tied. The points where the strings forming the squares cross each other and the sticks are also tied.
The first cover, which is put on with paste, laying it out on a smooth floor or table as usual in kite making, is plain light-colored paper. The darker decorations are pasted onto this. The outside edges of the cover are turned over the string outline, and pasted down. The colors may be in many combinations, as red and white, purple and gold, green and white, etc. Brilliant and contrasting colors are best. The decoration may proceed from the center out, or the reverse. The outside edge in the design shown has a 1¹⁄₂-in. black stripe. The figures are black. The next octagonal black line binds the design together. The points of the star are dark blue, with a gilt stripe on each. The center design is done in black, dark blue, and gilt.
