Lecture 1-1

Week 6

A presentation on Partnerships and alliances and supply (chain) networks

M.Tariq YousafzaiMS Innovation and Business

Creation/ILSCMibc208tamu@gmail.com

Some Conceptualities

Cost leadership is generally described as a lean strategy

It achieves this by remorselessly eliminating waste from supply chains

Lean and agile

The alternative strategy of product differentiation is normally described in logistics as an agile strategy

Bottlenecks

Classification of stocks

Types of stocks

Raw materials – the materials, parts and components that have been delivered to an organisation, but are not yet being used

Work-in-process – materials that have started, but not yet finished their journey through the organisation’s operations

Finished goods – goods that have finished the process and are waiting to be shipped out to customers

Spare parts -for machinery, equipment, etc. Consumables - such as oil, fuel, paper, etc.

For individual firms an important point is value density

This is the ratio of a product’s value to its weight or size

Lecture 1-8

Why Alliances?• For mutual benefit of

partnerso Complementary

capability & IP

• Because nobody can do it alone

• However, Watch for…o Inadequate Returns!o Strategic Roadblocks!

Pyramid of AlliancesAcquisition/

Merger

Vendor

Licensing/OEM/Private Label

Joint Selling/Distribution

Joint Marketing

Supplier

R&D Collaboration/Tech Transfer

Joint Venture

Partnership Matrix

Partner A Partner B

Contribution

Benefit

Lecture 1-11

Some changesinfluencing the need of alliances

Internationalization and globalisation International competition Outsourcing and reduction in

suppliers R&D and shorter product life cycles Time to market

Lecture 1-12

Give me examples of alliances!

?

Lecture 1-13

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

Lecture 1-14

Basic motives of alliances

Transaction costs - bargaining

Enhance competitive positioning and market power

Quest for organisational knowledge and learning

Lecture 1-15

Classification of alliances

1. Degree of commitment and integration

2. Function based-i.e. product development, distribution, production, purchasing

3. Formal- informal4. Symmetry-assymmetry ( including

the power issue)5. Type of actors involved

(competitors,buyer-seller, distributors )

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

Lecture 1-16

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 for Paper

Typical supply chain around manufacturer

Lecture 1-20

Alliancessimplication

• Firm - Firm

• Net - Firm

• Net -Net

Lecture 1-21

Alliances as dyads

Alliance definition

”A long term relationship where participants cooperate and willingly modify their

business practices to

improve joint performance”

Lecture 1-22

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

Lecture 1-23

Alliances from different perspectives

Supply Chain Management Industrial Marketing Purchasing Marketing Service marketing Relationship marketing Social networks Organisational and management literature

Lecture 1-24

Supply chain networkconsisting of a a number of relationships

Single relationship

Part II

Focal firmDownstreamUpstream

Supply chain length

– the number of tiers that materials flow through from initial suppliers through to final customers

Supply chain breadth – the number of parallel routes that materials flow through, or the number of organisations in each tier

Other factors - such as:

Lecture 1-28

Interacting dimensions of relationship

LegalSocial

TechnicalEconomic

Physical

Communication/IT

Part II

Knowledge

Lecture 1-29

Relationship life cycle

Pre-relationshipor awareness stage

closer cooperationexpansion

Formation

Enlargement/Commitmentstable stageInstitutionalization

Prerelationshipstage

Disintegrationdissatisfaction

DissolutionTermination

dissolutiontermination?

Formation

How?

Revival

Part II

Lecture 1-30

Individual alliances will not easily break- Why?

Investments Costs of breaking Trust Knowledge

This creates inertia

Lecture 1-31

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

Lecture 1-32

When and why to switch

Marketing forces Internal conflicts Acquisitions and

mergers New

opportunities

Lecture 1-33

Different roads to dissolution

Who is breaking Direct or indirect Dissolution quality ( intracomp. exit, aftermath) Task related, actor related

or network related

Lecture 1-34

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

Lecture 1-35

Alliances as networks

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

Lecture 1-36

Firm network

The firm

Part III

Lecture 1-37

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?

Lecture 1-38

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

Lecture 1-39

Joining of networks

Lecture 1-40

Closing up

Lecture 1-41

Horizontal and vertical alliance networks

Horizontal networkTransport firms representing each other in different countries

Vertical networksinclude customers and suppliers

Spectrum of cooperation

Levels of Integration

Lecture 1-44

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?

Lecture 1-45

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

Lecture 1-46

Overlapping supply chainsand firm networks

Firms are part of several supply chainsMovement between supply chains in firm

network

Once you are in, you have a bigger chance

Lecture 1-47

Overlapping supply chain networks

a) increaseb) decrease

a) Decreaseb) increase

Supply chain network 1

Supply chain network 2

a) Decreaseb) increase

Effects of overlap

Lecture 1-48

Domino effects

C1B1

AB2

C2

D2

E2

Lecture 1-49

A radical break

often a result of strategic changeat network level

Exemple of strategic changestrategic alliances, mergers and acquisitions

Lecture 1-50

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

Lecture 1-51

Management of alliances as dyads and networks

Lecture 1-52

Management of alliances

Performance Development Positioning Handling effects

Lecture 1-53

Problems to be handled

Missions and domains Job division Expectations Cultural differences Power distribution

Lecture 1-54

Cultural fit?

Main stream culture Organisational culture

Managerial style ( autocratic,democratic Individualistic-collectivistic Trust)

Lecture 1-55

From management to leadership

FinancingProjectsMeasurementScienceToolsConsulting

etc

CommunicationCommitmentBehaviorsCreativityOvercoming resistanceSelf leadership

etc

Part IV Performance

Lecture 1-56

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 welfareLudvigsen, 2001

Lecture 1-57

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?

Lecture 1-58

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

Lecture 1-59

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

Lecture 1-60

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

Lecture 1-61

Category of alliances?Prerequisites?

Lecture 1-62

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

Individual excellence

Importance Interdependence Investment

Information Integration Institutionalisati

on Integretity

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

Part VI

Lecture 1-63

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?

Lecture 1-64

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?

ASG and Danza

1.Strategic alliances are inherently unstable due to overlapping processes in the network

context (related to the processes listed above) that change the structural fit and the sign of connectedness between the actors.

2. The higher the interdependence between actors, involved in collective competition, the

more influential will the domino effect be on strategic actions.

ASG and Danza

3.Actors, involved in the development of an existing alliance need to concurrently plan for its

potential dissolution by preparing for alternatives. 4. Actors´ network theories are important

determinants of the timing and speed of strategic actions. 5. Dyadic alliances should be regarded as multiple

firm alliances due to the strategic action potential of subsidiaries.

Integration is difficult, with specific problems including

Finding a sponsor Changing practices Organisation Cultural changes Rewards Information systems Hoarding of resources

Lecture 1-68

Because of the difficulties, integration is usually approached in stages

Separate logistics activities are not given much attention

Recognition that the separate activities of logistics are important to the success of the organisationMaking improvements to the separate functions,

ensuring that each is as efficient as possibleRealising the benefits of internal integration that

combines the separate activitiesDeveloping a logistics strategy for an integrated

functionBenchmarking to compare logistics’ performance

Continuous improvement of logistics

Implementing a strategy almost invariably involves change to the

organisation

Denial - where people deny that there is a need for change

Defence – defending the current way of doing things and criticising new proposals

Discarding – beginning to move away from the old ways and towards the new ones

Adoption – using the new ways and accepting that they bring benefits

Integration – assuming the new ways are normal and using them naturally

.

THANKS