Alliances and joint-

joint ventures The way forward in relationship marketing by written Bernard, Lucia,

Chiedza and Admire

Cont...

1,With reference to MSU Zim apply the

six markets framework

The “six markets” was developed by Christopher, Payne and Ballantyne as an instrument for helping managers identify strategically important stakeholders. The Customer Markets are placed in the center of this model to emphasize the idea that „organizations can only optimize relationships with customers if they understand and manage relationships with other relevant stakeholders”[Payne et al., 2005, 859]. The other five markets, described below, have a supporting role:

· referral markets (satisfied customers that become advocates of the company and recommend it to other potential customers);

· influence markets (unions, business press, regulatory bodies, financial analysts, competitors,the government, consumer groups etc.);

· recruitment markets (potential employees and the channels used to access them;

· supplier and alliance markets (suppliers that the company has partnership relationshipswith, and other organizations with which the company shares capabilities andknowledge);

· internal markets (the organization and its employees).

Six markets model

MSU and six markets model

Customers- always the primary focus ie students

Referral markets

eg.independent financial advisors, satisfied customers students that become

advocates of the company and recommend it to other potential customers

Supplier markets

Win- win sitaution rather than adversarial. suppliers that the university has

partnership relationships with, and other organizations with which the company

shares capabilities and knowledge;

Internal markets

Rationale that by treating employees as customers , levels of customer service

and quality can be improved. employees as internal customers

Buy in leads to motivation

Influencer markets :

unions, business press, regulatory bodies, financial analysts, competitors, the

government, consumer groups etc.);

recruitment markets

Potential employees and the channels used to access them ie employment

agency ,other universities

2. Using local and global examples

distinguish a joint venture from a strategic

alliance(20) Joint venture is a separate business entity, it is an agreement by two or more parties to form a single entity

to undertake a certain project. Each of the businesses has an equity tstake in the individual business and share revenues, expenses and profits.

“Joint Ventures are agreements between parties or firms for a particular purpose or venture

Participants continue as separate firms

May be organized as partnership, corporation, or any other form of business

Formal long-term contract of 8 to 12 years duration

Examples of JV’s include: Microsoft and NBC (MSNBC); Sony-Ericsson, Nokia Siemens Networks

Strategic alliances are informal or formal decisions or agreements to cooperate in some form of relationship between two or more firms

Created out of uncertainty and ambiguity in nature of industries

Rapid advances in technology

Globalization of markets

Deregulation

Examples of SA’s include: Oracle and Unisys; Star Alliance in the Airline industry.

The Global Airline Industry

Airline industry consolidation of 1990s

From code sharing, joint marketing

activities to combining operations.

Examples of Alliances

Star Alliance

ONE world Alliance

Airlines Type of Alliance

United Airlines

Lufthansa

Scandinavian

Thai International

Varig Brazilian

Air Canada

Air New Zealand

Mexicana

Star Alliance: Code sharing, joint

marketing; includes up to 15 partners in

2002

Global Airline Alliances

Characteristics of joint ventures

Limited scope and duration

Generally involve only two firms

Involve only small fraction of participants' total activities

Each participant offers something of value

Joint production of single products

No sharing of assets/information beyond venture

Need not affect competitive relationships

Characteristics of joint ventures

Limited scope and duration

Generally involve only two firms

Involve only small fraction of participants' total activities

Each participant offers something of value

Joint production of single products

No sharing of assets/information beyond venture

Need not affect competitive relationships

Characteristics of joint ventures Characteristics of strategic alliances

Limited scope and duration

Generally involve only two firms

Involve only small fraction of

participants' total activities

Each participant offers

something of value

Joint production of single

products

No sharing of assets/information

beyond venture

Need not affect competitive

relationships

Need not create new entity

Contract need not be specified

Relative size may be highly

unequal

Less clear contributions and

benefits

Difficult to anticipate

consequences

Allow firms to focus on fewer

core competencies

Often small resource

commitments

Limited time duration

Characteristics of strategic alliances

Characteristics of strategic alliances

Need not create new entity

Contract need not be specified

Relative size may be highly unequal

Less clear contributions and benefits

Difficult to anticipate consequences

Allow firms to focus on fewer core competencies

Often small resource commitments

Limited time duration

Characteristics of strategic alliances

cont

May involve relations with competitors and complementory firms

Synergistic value creation from combining different resources

Learning and internalizing new knowledge and capabilities

Can add more value to partnering firms by creating organizational mechanism that

better aligns decision authority with decision knowledge

Can add value to partnering firms through organizational flexibility

Move to other alliances as attractive possibilities emerge

Access to people who would not work directly for them

IBM’s Global Alliances

Early Alliances: Responding to Japan

IBM’s Initiatives During the 1990s: Rebuilding

Competitiveness

3.With reference to the universities in Zimbabwe discuss

ant 5 benefits five risks that can be associated with

strategic alliances(20)

Benefits

Share fixed costs

Bring together skills and assets that neither institution has or can develop

High cost of technology development shared

Reduce costs through economies of scale or increased knowledge

Increase access to new technology

Inhibit competitors

Enter new markets

Reduce cycle time

Improve research and development efforts

Improve quality

Advantages/Benefits

cont

Risk sharing

Each participant diversifies risk

Reduces investment cost of entering risky new research area

Realizes benefits of economies of scale, critical mass, learning curve effects sooner

Knowledge acquisition — learning experience for all partners

Shared technology

Shared managerial skills in organization, planning, and control

Augments financial or technical capabilities

Advantages benefits cont

Financing — to raise capital

Share investment expense

Small institutions has product idea but no cash

Joint venture with large company that has cash to develop product

bring together complementary skills and assets that neither partner could

easily develop on its own

Economies of scale.

Risk and cost sharing

Risks/Disadvantages:

Competitors institutions get low cost route to technology and markets

Inflexibility

Cultural misalignments

Variations in Market and customer orientation

Co-ordination difficulties due to informal cooperation settings and highly

costly dispute resolution.

High Influence costs because of the absence of a formal hierarchy and

administration within the strategic alliance.

Risks cont

Inflexibility problems similar to other long-term contracts

Refusal to share knowledge with counterparts in venture — institutions wants to learn as

much as possible but not to convey too much

Inability of universities to share control or compromise on difficult issues

Implementation requires substantial commitments of managerial resources

alliances do not last as long as planned

About 70% are disbanded before scheduled maturity

On average they do not last as long as one-half the term of years stated in agreement

Other Risks cont

Lack of skills and technology swaps with equitable gains

risk of opportunism by a partner

difficult to transfer technology not meant to be transferred

Loss of proprietary information.

Management complexities.

Financial and organizational risks.

Risk becoming depending on a partner.

Partial loss of decision autonomy.

Partners’ cultures may clash.

Loss of organizational flexibility

4.State and outline at least 7 Types of

strategic alliances giving local and

international examplesJoint Ventures

A joint venture is an agreement by two or more parties to form a single entity

to undertake a certain project. Each of the businesses has an equitystake in

the individual business and share revenues, expenses and profits.

“Joint Ventures are agreements between parties or firms for a particular

purpose or venture. Their formation may be very informal, suchas a

handshake and an agreement for two firms to share a booth at a trade show.

Other arrangements can be extremely complex, such asthe consortium of

major U.S. electronics firms to develop new microchips,” says Charles P.

Lickson in A Legal Guide for SmallBusiness.

Joint ventures between small firms are very rare, primarily because of the

required commitment and costs involved

There are two types of joint ventures:

Project-based Joint Venture: This type of alliance may commonly be

used on a project by project basis. In other words, the creation of a

separate entity through the alliance of two or more organizations for

the purpose of carrying out a specific project.

Full-blown Joint Venture: This type of alliance requires significant

resource input. It is expected to remain a viable entity for a significant

length of time, certainly spanning multiple projects.

Advantages

Advantages

Allows for sharing of risk (both financial and political)

Provides opportunity to learn new environment

Provides opportunity to achieve synergy by combining strengths of partners

May be the only way to enter market given barriers to entry

Disadvantages

Requires more investment than a licensing agreement

Must share rewards as well as risks

Requires strong coordination

Potential for conflict among partners

Partner may become a competitor

Outsourcing

The 1980s was the decade where outsourcing really rose to prominence, and

this trend continued throughout the 1990s to today, although to a slightly

lesser extent.

The early forecasts, such as the one from American Journalist Larry Elder,

have been shown to not always be true:

“Outsourcing and globalization of manufacturing allows companies to reduce

costs, benefits consumers with lower cost goods and

services, causes economic expansion that reduces unemployment, and

increases productivity and job creation

Outsourcing

Involves farming out value chain activities to outside vendors.

Outsource an activity if it:

Can be performed better or more cheaply by outside specialists.

Is not crucial to achieving sustainable competitive advantage.

Improves organizational flexibility and speeds time to market.

Reduces risks due to new technology and/or buyer preferences.

Assembles diverse kinds of expertise speedily and efficiently.

Allows the firm to concentrate on its core business, leverage key

resources, and do even better what it does best.

Disadvantages

Hollowing out resources and capabilities that the firm needs to be a master of

its own destiny.

Loss of control when monitoring, controlling, and coordinating activities of

outside parties by means of contracts and arm’s-length transactions.

Lack of incentives for outside parties to make investments specific to the

needs of the outsourcing firm’s value chain

Affiliate Marketing

Affiliate marketing has exploded over recent years, with the most successful

online retailers using it to great effect. The nature of the internet means

thatreferrals can be accurately tracked right through the order process.

Amazon was the pioneer of affiliate marketing, and now has tens of thousands

of websites promoting its products on a performance-based basis.

Licensing

A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation

Patent

Trade secret

Brand name

Product formulations

This is a contractual arrangement whereby trade marks, intellectual property and trade secrets are licensed to an external firm. It’s used mainly as a

low cost way to enter foreign markets. The main downside of licensing is the loss of control over the technology – as soon as itenters other hands the

possibility of exploitation arises.

Advantages of licensing

Provides additional profitability with little initial investment

Provides method of circumventing tariffs, quotas, and other export barriers

Attractive ROI

Low costs to implement to Licensing

Disadvantages to Licensing

Limited participation

Returns may be lost

Lack of control

Licensee may become competitor

Licensee may exploit company resources

Product Licensing

This is similar to technology licensing except that the license provided is only

to manufacture and sell a certain product. Usually each licensee will be

given an exclusive geographic area to which they can sell to. It’s a lower-risk

way of expanding the reach of your product compared to building your

manufacturing base and distribution reach.

The two companies made a cross-licensing alliance. Motorola ceded part

of its microprocessor technology, in exchange Toshiba allowed Motorola

part of its memory chip technology. Therefore, the risk of ceding

technology was shared.

Franchising

Franchising is an excellent way of quickly rolling out a successful concept

nationwide. Franchisees pay a set-up fee and agree to ongoing payments so

the process is financially risk-free for the company. However, downsides do

exist, particularly with the loss of control over how franchisees run their

Franchise

The most notable examples for franchising is

Coca Cola and McDonald’s.

R&D alliances

Strategic alliances based around R&D tend to fall into the joint venture

category, where two or more businesses decide to embark on a research

venture through forming a new entity

Distributors alliances/Distribution

Relationships

Distributors

If you have a product one of the best ways to market it is to recruit distributors, where each one has its own geographical area or type of product.

This ensures that each distributor’s success can be easily measured against other distributors

This is perhaps the most common form of alliance. Strategic alliances are usually formed because the businesses involved want more customers.

The result is that cross-promotion agreements are established.

Consider the case of a bank. They send out bank statements every month. A home insurance company may approach the bank and offer to make an

.

Distributors/Distribution Relationships

cont

exclusive available to their customers if they can include it along with the

next bank statement that is sent out.

It’s a win-win agreement – the bank gains through offering a great deal to

their customers, the insurance company benefits through increased customer

numbers, and customers gain through receiving an exclusive offer