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Powerful Forces are driving the formation of strategic alliances between firms in the world economy. The movement toward globalization has opened many new opportunities to companies, triggering a desperate race for the world by major global suppliers of everything from credit cards to telecommunications. Once they are in the game, many find themselves eyeball-to-eyeball with ambitious global players as well as local competitors whose friendly home governments restrict market access to a chosen few. Countries like China, for example, select key investors and partners and give them privileged market access while excluding others. In this game, companies cannot play without partners both local and global.
As we saw in the 1970s, when Western car makers struggled to close the quality gap with their Japanese competitors, in global competition, gaps in skills between competitors have become both more painfully apparent and very much less tolerated. Who develops the best products fastest? Who achieves the highest quality at the lowest cost? Which company has the resources and know-how to install a world-class phone or cable system in a short time? In the intensely competitive global arena, companies must identify their skill and competency gaps and fill them rapidly. Very often they find that the fastest way to fill them is with the capabilities of strategic allies.
The globalization movement is paralleled by a new industrial revolution: an information and communication age driven by technological breakthroughs that have spawned entirely new industries, such as mobile communications and interactive multimedia. As this new age takes form, itis dramatically altering existing markets and reconfiguring established industries, triggering a race for the future among the world's fleetest competitors.
Three features of the race for the future make alliances essential. First, many of the great opportunities of the information age call for the melding of skills and resources that few individual companies now possess entirely. Second, this revolution isn't being built on vertically integrated structures of single corporations, as was the industrial revolution that preceded it. More and more, it is being built on 11 seamless" networks that must be standardized across vast expanses and complementary applications. Digital cash and global payment systems are the archetypes of these new service networks. The value of a good or service to each customer depends on how many others use the same good or service. Whoever is first with a strong network solution enjoys lasting first-mover advantages, as there is room only for a very few successful competitors. Third, the uncertainty inherent to the information economy, with its myriad of new markets to create and emerging technologies to define, calls for alliances not only to serve the usual purpose of bringing together complementary strengths but also that of combining insight and understanding to reduce uncertainties and accelerate learning.
The races for the world and the future require the development of insight, capabilities, and infrastructure at an ever faster pace that few companies can master, and yet they must be swifter and swifter if strategic advantage is to be gained. If a company cannot position itself quickly, it misses important opportunities, whether they are in China or cyberspace. It may also find itself in a precarious competitive position. In most cases, in-house developments and new "green field" investments are simply too slow and problematic for rapid positioning. By contrast, well-chosen alliances make it possible to bypass slow and costly efforts to build one's capabilities and to access new opportunities.
In principle, acquisitions are an alternative to strategic alliances. But an acquisition is a blunt tool, often leading one to acquire more, for a higher price, than one needs. And some of the very resources one hopes to gain through acquisition-such as the close government relationship that in many countries confers insider status or the commitment of key scientists to do their best-may not survive the transaction. Further, as companies refocus around core competencies, it makes less and less sense to acquire only part of a business; disconnected from its supporting competencies, the part loses some of its value; yet acquiring the whole company might not be feasible nor desirable. The value of an acquisition, in any case, is often difficult to establish in advance, particularly in the context of underdeveloped markets and uncertain technologies. Alliances have therefore emerged as the vehicle of choice for many companies in both the race for the world and the race for the future.
Consider the case of Iridium., a broad alliance initiated by Motorola in the early 1990s to develop and build a global satellite-based mobile communications network. By ringing the earth with sixty-six low-orbit satellites, Motorola planned to overcome the limitations of ground-based cellular phone networks and leapfrog its competitors. Unlike current cellular systems, Iridium's would use its satellites to beam signals directly to and from small phone handsets. Iridium. was Motorola's bet both on the complete globalization of wireless telecommunications and on its concentration in a few global networks.
To implement its ambitious project, Motorola needed funds, traffic rights, and complementary capabilities (particularly for space technologies). To secure these, it brought together an exceptional coalition of seventeen equity-holding partners, including local national telecommunications companies, whose concerns over the bypassing of their infrastructures (and their traffic fee collection process) had to be placated, and an array of industrial partners, including Raytheon, Lockheed Martin, Krunichev Enterprise (the Russian launch rocket supplier), China Great Wall, and Nippon Iridium (itself an alliance of eighteen Japanese partners). The inclusion of these industrial partners had a clear purpose: to provide the technologies that Motorola needed but could not (or did not wish to) master, from ground communication to the whole range of very demanding technologies inherent to space-based communications. And it needed them fast. Other consortia, notably Globalstar, led by Loral, a specialist in space communications and defense technologies, were racing for the same opportunity.
The first Iridium satellite launches took place in 1997, with wireless global telecommunication services slated to begin in late 1998. The $3.4 billion investment is intended to capture most of the demand from "high-end" travelers around the world and to bolster Motorola's leadership in cellular communications. For Motorola and its partners, Iridium was (and remains) a formidable bet....
|1||The New Alliance Game||1|
|2||Discovering Value in Alliances||33|
|3||Conceiving the Alliance for Value Creation||57|
|4||Securing Strategic Compatibility||93|
|5||Designing for Cooperation||119|
|7||Managing Learning and Adjustment over Time||169|
|8||Managing the Balance of Power and Dependence||195|
|9||Managing Multiple Alliances||221|
|10||Building Collaborative Advantage||251|
|App||Assessing a Strategic Alliance||263|
|About the Authors||315|
Posted July 9, 2001
The goal of the book is to help managers and companies to become more successful in creating and guiding strategic alliances. It offers conceptual and practical tools for analysing alliances, whereby the authors use a several examples of successful and unsuccessful partnerships. The authors describe the purposes of alliances (co-option, cospecialisation, learning and internalisation), compare modern alliances with traditional joint-ventures, value creation in partnerships, and the management (of a web) of alliances. This book provides a good, solid framework for management of partnerships, which is supported by numerous, clear examples.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.