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0019-8501/00/$–see front matter PII S0019-8501(00)00110-3 Industrial Marketing Management 29, 327–338 (2000) © 2000 Elsevier Science Inc. All rights reserved 655 Avenue of the Americas, New York, NY 10010 Strategic Alliances: Partner as Customer Helen Perks Geoff Easton This paper analyzes a number of different inter-organizational exchange relationships, ranging from simple exchange transac- tions to complex competitor strategic alliances in terms of the exchangeability, value influence, and consumption/creation processes of the resources being exchanged. Many common features between exchange relationships and strategic alliances are identified and are used to suggest ways in which relational marketing concepts and skills have the potential to help in the successful creation and management of exchange-based strategic alliances. © Elsevier Science Inc. All rights reserved INTRODUCTION Organizations exhibit a large variety of ways of work- ing with other organizations. In this paper we suggest that a number of different exchange forms exist among organizations and that these forms are mutually deter- mined by the nature of the resources that are involved in the exchange and the processes through and by which those exchanges are conducted. The general rationale for inter-organizational exchange is that the organizations involved need the resources that can be provided by other organizations in order to meet the goals of the organization’s stakeholders. Organiza- tions have at least some choice in the ways in which they decide to exchange, but these choices are constrained by various contextual factors of which the nature of the re- sources concerned is particularly important. In industrial, or more generally, organizational market- ing, the resources exchanged and the processes involved are predominantly the domain of the marketing function. However, more and more frequently strategic alliances between and among firms are being used as means by which strategic objectives can be met and such alliances can have a major impact on organizational markets. We argue in this paper that strategic alliances can be consid- ered to involve extended exchange relationships, admit- tedly of a somewhat different kind than that which occurs in traditional organizational markets. As a result it can be helpful to consider what organizational marketing con- cepts can be used to help manage such alliances. Address correspondence to Helen Perks, The Graduate School of Management, University of Salford, Salford M5 4WT, UK. Tel 1161-295- 5530, Fax 1 161-295-5022. e-mail: [email protected]

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Page 1: Strategic Alliances: Partner as Customer

0019-8501/00/$–see front matterPII S0019-8501(00)00110-3

Industrial Marketing Management

29

, 327–338 (2000)© 2000 Elsevier Science Inc. All rights reserved655 Avenue of the Americas, New York, NY 10010

Strategic Alliances: Partner as Customer

Helen PerksGeoff Easton

This paper analyzes a number of different inter-organizationalexchange relationships, ranging from simple exchange transac-tions to complex competitor strategic alliances in terms of theexchangeability, value influence, and consumption/creationprocesses of the resources being exchanged. Many commonfeatures between exchange relationships and strategic alliancesare identified and are used to suggest ways in which relationalmarketing concepts and skills have the potential to help in thesuccessful creation and management of exchange-based strategicalliances. © Elsevier Science Inc. All rights reserved

INTRODUCTION

Organizations exhibit a large variety of ways of work-ing with other organizations. In this paper we suggestthat a number of different exchange forms exist amongorganizations and that these forms are mutually deter-mined by the nature of the resources that are involved in

the exchange and the processes through and by whichthose exchanges are conducted.

The general rationale for inter-organizational exchangeis that the organizations involved need the resources thatcan be provided by other organizations in order to meetthe goals of the organization’s stakeholders. Organiza-tions have at least some choice in the ways in which theydecide to exchange, but these choices are constrained byvarious contextual factors of which the nature of the re-sources concerned is particularly important.

In industrial, or more generally, organizational market-ing, the resources exchanged and the processes involvedare predominantly the domain of the marketing function.However, more and more frequently strategic alliancesbetween and among firms are being used as means bywhich strategic objectives can be met and such alliancescan have a major impact on organizational markets. Weargue in this paper that strategic alliances can be consid-ered to involve extended exchange relationships, admit-tedly of a somewhat different kind than that which occursin traditional organizational markets. As a result it can behelpful to consider what organizational marketing con-cepts can be used to help manage such alliances.

Address correspondence to Helen Perks, The Graduate School ofManagement, University of Salford, Salford M5 4WT, UK. Tel

1

161-295-5530, Fax

1

161-295-5022. e-mail: [email protected]

Page 2: Strategic Alliances: Partner as Customer

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We propose a model that focuses on three characteris-tics of resource exchange: exchangeability;

consumption/creation processes; and value influence. We then use thismodel to examine market exchanges as well as strategicalliances of two types, resource exchange and competi-tor-based. The characteristics of the resources that aretypically involved and the processes by which the ex-changes are carried out are then explored in each case.Findings from a continuing study of strategic alliancesare used in the discussion of strategic alliance exchanges.The paper concludes with some implications for the man-agement of such processes.

A MODEL OF ORGANIZATIONALRESOURCE EXCHANGE

Resources

The definition of resources that will be used here isthat due to Easton and Araujo [1] “...any organizationalentity capable of continuing independent existence and,as a result, having futurity and which, in turn, can or maymeet an economic need.” Resources are distinguishedfrom activities that comprise current actions and have nofuturity. Despite this distinction, resources and activitiesare intimately related.

Resources are created, maintained and consumedthrough and by activities, and activities require resourcesin order to exist.

Traditional systems theory [2] suggests that organiza-tions exist because they exchange resources with differ-ent parts of the environment, act upon these resourcesand then exchange these “changed” resources with otherparts of the environment. So at any time organizations

have stocks of, or in the process of creating exchangeableresources.

Exchangeability Dimension

Resources available for exchange have different levelsof exchangeability. At one end of the continuum there areexchangeable resources that have the most universallyaccepted value (money being a typical example). Suchresources can be exchanged easily for any other resource.At the other end of the spectrum, we have situationscloser to barter. For example, information can be bar-tered; organizations can enter into know-how agreementsor their employees can simply gossip and exchange infor-mation in a less formal way.

A crucial form of exchangeable resource for the pur-poses of this analysis is that which can be exchanged formoney or its equivalent. For the sake of simplicity, thesewill be referred to as product offerings though this labeldoes not fully capture the nature of this form of ex-changeable resource. Product offerings can be character-ized in a number of ways. Perhaps their most importantfeature is their value; in particular, the value that any po-tential exchange partners may place on the resource of-fering. Such value is highly contextual; similar actorsmay place quite different values on the same product of-fering. Value is also influenced by the other factors.

Ex-changeability is a major determinant of value. If a re-source cannot be transferred for some reason its valuecannot be realized.

However, product offerings are made up of complexconfigurations of resources with affect on their ex-changeability. A product offering may combine physicalmaterial resources, a service element and intangible ele-ments (such as brand, time and place utilities, companyreputation or even product and quality performance).Such uncertainties make product offerings more difficultto assess; in short, they reduce their exchangeability.Moreover, it is useful to be reminded that resources onlyhave meaning and value in relationship to the particularcontext in which they exist.

Consumption / Creation Dimension

The consumption/creation dimension explains howorganizations create exchangeable resources. In otherwords, how are resources involved in this creation pro-cess and how are they deployed? At one end of the con-tinuum, resources may be consumed in direct relation tothe process of creating end product offering. Raw materi-

HELEN PERKS is a Lecturer in International Marketing and New Product Development and Director of the MBA program at the University of Salford, United Kingdom. She has wide consulting and industrial experience in the information technology sector and has research interests and publications in the area of joint ventures and strategic alliances.

GEOFF EASTON is a Professor of Marketing in the Management School at Lancaster University. He has been researching industrial markets for over 25 years and has published numerous papers on the subject. His special interest is industrial networks and he was co-editor of Industrial Networks: A New View of Reality, one of the seminal works in

the field.

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als, components and product constituent transformers [3],such as energy or drilling mud, are good examples here.However, these three resources can also be differentiatedin terms of how they are involved in the process. Rawmaterials and components are incorporated in the productbut product constituent transformers are not. Some re-sources (such as product constituent transformers) maybe destroyed in the process while others may be trans-formed to a higher or lesser degree. For example, rawmaterials are transformed more than components. Incor-poration in the product brings with it the potential to af-fect the future performance and image of the product andhence its reliability and quality and places the emphasison the supplier rather than the transformation process.

Some resources are consumed more slowly or evennever actually consumed (e.g., land, and information).They may be bought less frequently (e.g., office build-ings). Such resources have the characteristic of low de-preciability [1] and could be described as the “transform-ing” resources of the organization. They will usuallyrepresent its major strategic assets; either physical, suchas manufacturing plant, or people-based (the skills,knowledge and capabilities embedded in people in an ad-vertising agency, for example). The study of these typesof resources has been the raison d’être of the resource-based view of the firm school of strategy [4]. Such re-sources, of course, need constant maintenance.

Finally, there are resources that can be created (or atleast maintained) as a by-product of the creation of ex-changeable resources. The most obvious of these involvehuman resources. Human and social capital [5] can beoccasioned by repetition of particular activities throughlearning and experience. As a result, individuals increasetheir knowledge and skills and in groups learn to operatetogether, trust each other and develop routines that areboth efficient and flexible.

Value Influence Dimension

Resources are combined and structured in such a way asto achieve specific goals. They can be conceived of as orga-

nized in “means ends chains” together with their associatedactivities. In this way they contribute to the end value of thefinal product offering. For example, the creation of a brandmay very well be a function of the marketing communica-tions carried out by the marketing department which buysservices of advertising and market research agencies.

Porter [6] suggests that the value that customers per-ceive in a product offering derives from specific sets ofactivities within the organization. Crucially, different setsof activities are held to contribute to the perceived valueto different degrees. For example, product availabilitymight be important to customers and this might resultfrom excellent distribution performance, production sched-uling or flexibility in manufacturing. However, it is clearthat activities alone cannot deliver value. It is the combi-nation of resources and activities that do so. Indeed thereis a strong argument for the primacy of resources in stra-tegic analysis since activities are current and ephemeraland represent current decisions while resources, are bydefinition, enduring.

The value influence, then, is the impact of a particularset of resources upon the perceived value of the productoffering. Some resources will have more influence thanothers. The human and social capital in an organizationwill, in many cases, comprise the firm’s transforming re-sources and have a key influence on the end value. Bycontrast, there are a whole series of resources (land,stocks of photocopier paper, environmental legislationknowledge) that do influence the final value but to amuch lesser degree.

FORMS OF RESOURCE EXCHANGE RELATIONSHIP

We will now use these key resource characteristics tointerpret various forms of exchange between organiza-tions, from the simple transaction to the most complexstrategic alliance. In each case, the impact of the resourcedimensions on the process of exchange will be examinedand implications drawn for management of this process.

Product value is influenced by the

exchangeability of resources.

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Exchange Transactions

Exchange transactions between organizations providethe simplest form of exchange and one beloved of econo-mists. The term transaction implies an isolated one-offform of exchange, complete in its own right and with nosignificant history or future.

The resources that are exchanged in this way tend to besimple, complete, standardized, easy to specify and easy toverify, infrequent or low volume purchases and inessential.In other words, they have high “exchangeability.” They aretangible and there is relatively little uncertainty involved inthe purchase. Moreover, they have relatively little influ-ence on the “value” being created in the buying organiza-tion and the less frequent their purchases the truer this is.

In principle, the “process” of exchange is straightfor-ward. The transaction involves an exchange of resources,one of which will usually be in the form of money equiv-alent, “at arm’s length” between autonomous and inde-pendent actors. While the transactions may be repeatedover long periods, each takes place as if there were littleor no history. Low levels of consumption mean exchangeepisodes are infrequent. There is little incentive to investin or learn from the relationship and no by-product interms of the creation of transforming resources.

The actors remain separate from one another becausethey believe, often correctly, that market forces providethe most effective way to acquire resources. To do so, cer-tain conditions, those approximating economists’ visionof pure competition, need to exist. These include, as wellas a highly exchangeable resource, many sellers and manybuyers and good, if not perfect, information about mar-kets’ conditions. Even where these conditions do not fullypertain, buyers can play one supplier off against anotherto make the market perform better. The emphasis is onchoice and potential alternatives with no long-term com-mitment that might render the market less effective. Eco-nomic power is a crucial determinant of the balance of theexchange. Power is, in turn, largely determined by the op-tions that each actor has in the market place and hencemarkets’ structure. Market structure is itself a function ofa whole series of factors including number and relativesizes of market actors, the distribution of demand andsupply among and between these actors and the extent ofany differentiation of the forms of supply and demand.

Complex Exchange Transactions

Somewhere between an exchange transaction and ex-change relationship lie complex exchange transactions. The

resources involved are complex and transforming in nature,such as a part of a physical plant or machinery. They arenon-standard, difficult to specify and verify and are essen-tial. As a result, the exchangeability will tend to be lowerthan for simple transactions. Essentiality is a function ofboth of the impact that the resource has on the value of theend product but also the long-term commitment and sunkinvestment that such a resource implies for the organization.

As a result, the exchange process is likely to be charac-terized by infrequent yet protracted episodes with a focuson risk reduction, e.g., watertight contracts, in order tosharpen the required performance. Once completed, therelationship ceases apart from contractually based servicing.Alternatively, where the context permits, a more relationalapproach can be taken and the exchange is seen as one,admittedly large, event in a stream of long-term exchangesmany of which will be “non economic” in nature.

In this case, too, exchange partners are likely to betreated at arm’s length. Critical skills will lie in the ma-nipulation of the marketing mix. Market competitiveforces prevail and price will inevitably be the main cur-rency of the exchange, along with conformity to definedproduct specifications. Firms are, however, likely to de-velop routines to carry out such transactions effectivelyand this may generate a rather valuable set of resources.The danger is they are likely to be relatively specializedand highly focused and less transferable within one’sown organization or exchangeable with other firms.

Exchange Relationships

Exchange relationships differ from transactions in thatthey are characterized by a long-term relationship be-tween buying and selling firms. Firms commit to one an-other both formally and informally, make adaptationsand trust one another to some degree.

In this case, exchanged resources possess lower ex-changeability. They are likely to be frequent and/or highvolume purchases, complex, intangible, difficult to spec-ify and difficult to verify, difficult to produce, tailormade and essential to the success of the buying organiza-tion. They are highly valued

since they form the core ofwhat a firm buys to transform. Note that the product of-ferings being discussed here are broadly defined. Com-plexity, for example, may appear not as a result of theproduct itself, but in its timely and effective delivery(e.g., cement). Such products would tend to be con-sumed, incorporated and transformed (car door seals,chemical monomers) but could also be transforming

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(mainframe computer with major service agreement,long-term management consultancy). In the latter casethe supplier maintains a long-term commitment to ser-vice the transforming resources of the organization.

Exchange relationships offer a different process of ex-change that contrasts markedly with exchange transac-tions. Central to the rationale for relationships of this kindis the notion of investment in the long term. Both partnerschoose to invest in the relationship with the belief thatdoing so will provide a good, albeit difficult to measure,return on that investment. The investment is made par-tially in terms of the transforming resources. Put anotherway, any resources that may affect the exchangeable re-sources may be adapted and specialized to fit the partner.

In order for the investment to be made, the partnersmust be assured that there is to be a long term to the rela-tionship or the return will not be achieved. While long-term relationships can, under the right circumstances,create resources as a result of greater efficiency as com-pared with exchange transaction, they can also do so as aresult of greater effectiveness. Efficiency refers to doingthe same things better. Effectiveness is concerned withdoing things differently but to achieve the same goals.There are a number of ways in which this can be done.High frequency of exchange episodes increases the abil-ity of firms to learn from one another. They can providethe bases for trying out new forms of exchange and theycan be the cradle for new product ideas and development.Relationships can blur the boundaries between organiza-tions and allow access to new kinds of resources.

Another aspect of long-term relationships is that theythemselves can become an important resource for eitherpartner. They can offer a source for more efficient and ef-fective exchange and hence resource acquisition. Butthey can also provide a means to access other resourcesvia their partners. Information is, perhaps, the primary re-source involved in this case but, in principle, anythingthat can be done directly with a partner can also be doneindirectly through that partner.

Entering a long-term relationship means that the part-ners forsake all (or perhaps just most) others and refrain

from the traditional market mechanisms. As a result com-petition is, to some extent, transferred from betweencompetitors to between partners. Since the relationshipcreates resources, there will always be competition be-tween the partners to see which one gets the largest share.The resulting bargaining is strongly influenced by the rel-ative power of the partners, which is, in turn, influencedby the options available to both. For example, if one part-ner is more dependent upon the resources acquiredthrough the relationship than the other then they will bein a poor bargaining position.

Managing this process requires commitment and is anincremental process. The frequency of interaction allowsgradual adjustments as firms get to know their partners. Italso enables firms to test out changes before committingfurther; hence it is an iterative process. However, the pro-cess is made less straightforward by the inability of orga-nizations in these circumstances to measure or even un-derstand the nature of resource creation going on and toplace a value on it. In particular, information asymme-tries are likely to be present and can make the resolutionof conflicts very difficult. Relationship managementskills play a vital role in nurturing the evolution of theprocess. Moreover, feedback loops must be built into theprocess in order to review performance and achievementof objectives. The gradual, step-by-step build-up ofknowledge should increase the certainty of the environ-ment between partners. In particular, it reduces the risksassociated with specializing and adapting resources to fitthe partner. Investment in such transforming resources isa precursor to the development of new resources (such asjoint initiatives) and is a critical feature underpinningsuch relationships.

Strategic Alliances

The term strategic alliance is used here to describe anexchange relationship between two organizations wherethe goal is the creation or acquisition of transforming andstrategic resources. An exchange relationship can achievesomewhat similar ends as a strategic alliance but as a

Incremental exchange relationships

encourage resource adaptation.

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by-product of the continuing exchanges of resources thatare used in the cycles of transformation that lead to fur-ther resource exchanges. An example of this process oc-curred in the UK car supply industry where being in-volved in a long-term relationship with Japanese carassemblers not only changed the way in which the suppli-ers marketed but also manufactured their products. It iswhen the main goals of the relationship become strategicresource acquisition rather than buyer–seller exchangethat the situation becomes one that is described here as astrategic alliance.

Four forms of strategic alliance can be recognized: re-source exchange; resource creation; competitor strategicalliances; and joint ventures, but only resource exchangeand competitor strategic alliances will be considered here.Insight into the management of the processes examined isdrawn from on-going research into a number of major in-ter-firm collaborative ventures that fall into this category.

Resource Exchange Strategic Alliances

In a resource exchange strategic alliance, each partnerhas a strategic resource that the other needs and so theyare prepared to develop some form of extended exchangemechanism in order to expedite the process. For example,it could involve the transfer of technology in exchangefor knowledge and understanding of a market. The re-source

s

involved are, by definition, strategic in nature.They are the long term, relatively stable bases uponwhich the organizations create value in the product offer-ings that they exchange. In terms of “consumption/cre-ation processes,” they are acquired in order to be inte-grated into the core of the receiving organization, not theproduct offering. In addition the value to the organizationof their acquisition will be very high and firms will oftenbe prepared to take major risks and pay a high price to do so.

Core-transforming resources are, however, intangibleby definition. They are not designed to be exchangeable.Indeed, it is argued that one of the bases for sustainingcompetitive advantage is that the resources involved areinimitable. As Hladik [7] suggests, complications arisewhere collaboration occurs that involves the basis foreach firm’s competitive advantage. Transforming re-sources typically evolve through complex combinationsof resource structures and activities. Knowledge transferprovides one clear example. Some kinds of knowledgeare easy to transfer since they can be codified in the formof manuals or patents. However, it is often implicitknowledge that is crucial, i.e., knowledge in the heads of

key individuals who, in some cases, don’t even recognizethat knowledge as being important.

It follows from the previous arguments that the pro-cesses of exchange will not be straightforward. The firststep will usually involve an agreement of some kind.Strategic alliances involve huge commitments of re-sources and are not entered into lightly. However, the ob-vious difficulty here is specifying accurately what it isthat each of the partners wishes to get out of the alliance.Complexity and intangibility make this difficult and ex-changeability is low. What makes it worse is that sinceeach partner is looking for something it hasn’t got, nei-ther is going to find it easy to recognize, in advance, whatthey require even when they receive it. As a result thereis a tendency to negotiate in terms of tangible deliver-ables (so many visits to the partner’s plant) that can bemeasured but which may have no real relationship towhat is actually wanted. An added problem is that theprocess is usually one of barter. As a result, both partnerswill find it difficult to know the value of what they aregetting and receiving which leads to the very real possi-bility that one or both partners will be disappointed. Theresult of these difficulties is that many more strategic alli-ances are mooted and agreed than are actually enteredinto and completed.

When a strategic alliance of this kind goes ahead, theprocess resembles an attenuated exchange. With buyer–seller exchanges, even within relationships, the process isgoverned by clearly defined exchange episodes or bysome other measurable benchmarks. This is not the casewith strategic alliances where progress in both giving andgetting is not easy to assess. The temptation is, onceagain, to judge on the basis of the measurable rather thanthe important. As a result, there are numerous opportuni-ties for misapprehensions, misjudgements and conflictsas firms have difficulties understanding each other’s be-havior and distilling important resources embedded inunfamiliar structures and routines.

The collaborative process itself may vary in terms ofadaptive practices. Firm adherence to initial conditionsmay lead to fixed processes, impeding flexibility and ad-aptation of routines [8]. Alliances experience cycles ofactivities where resources are exchanged and combinedand which put the relationship on a different footing forthe next stage. Firms may then need to evaluate and adaptexisting processes to such new conditions. The process iscomplex and iterative. Management of such processestends to be cautious. There is a natural tendency to beguarded about, for example, information transfer. Reluc-

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tance to communicate may act as a distancing barrier andimpede access to vital resources. A sense of frustrationmay then ensue from the partnering firm.

Uncertainty and fear of disclosure can also lead to ef-forts to specify and delineate boundaries around re-sources being exchanged. Complex resources, such asknowledge and processes, are passed over as neat blackboxes without the transfer of accompanying messy rou-tines that are necessary to effective use of the resources.Another mechanism to reduce risk is to confine resourcetransfer to specific projects. This limits dissemination toother projects. Firms may experience difficulties adapt-ing their usual routines without the partner’s direct input.The result is ad-hoc and contained benefits (and ulti-mately performance) and a failure to adapt company-wide routines for the future.

Such measures serve to limit wider exploitation of re-sources being exchanged. A longer-term benefit of re-source exchange requires the adjustment of company-wide beliefs, norms and resource combinations. Lyles [9]terms this “higher level learning” and it entails adaptationof routines and structures in order to facilitate resourceexchange. Such adaptations may be further delayed orimpeded by the inability of firms to evaluate the benefitsaccruing from the relationship. This can occur at both anorganizational and individual level. The latter may arisethrough a lack of understanding of the value of the alli-ance, even a sense of pride that individuals feel they havenothing to learn from their partner!

This raises the general issue of the ability of the partiesto both “send and receive” resources. Resources mayonly be valuable in certain contextual conditions, such asparticular organizational structures and cultures. Partnerswill often have difficulty evaluating such conditions inthe partnering firm. The development of abilities to eval-uate the contextual conditions of transferred resource us-age may be critical. Too often firms impose their ownroutines upon their partners, such as manufacturing pro-cesses or even suppliers, because of uncertainties abouttheir partners’ abilities and practices.

Where the ability of the partners to exchange is prob-lematic and there is difficulty in valuing what is beingachieved, there inevitably is desire to impose formalmechanisms to drive the flow of resources, which mightotherwise not occur naturally. This may, for example, bein the form of documentation of key exchange processesor the creation of interface points where cross transfer ofinformation can be more effectively managed. Efforts toenhance understanding and visibility of resources play akey role in overcoming evaluation difficulties. Thesemay be formalized in communication mechanisms, suchas the documentation of internal meetings by the partnersor implementation of a monitoring system.

As in any form of exchange there is competition betweenthe partners for the spoils thereby realized or created. Ifeach partner knew the value of what they were receivingand giving, there would still be problems of competitionbut often they don’t. First of all, value depends upon con-text. A piece of information that seems rather trivial andworthless to one partner may well be the final piece inthe jigsaw that allows the other partner to undertake avery profitable course of action. Similarly, somethingthat has cost one partner a great deal of resource to createmay be considered virtually worthless by the other.

It is also the case that competition may occur during theagreement stage but then continue on during the life of thestrategic alliance; therefore, losing the battle doesn’t meanlosing the war. A further complication is due to the pro-cesses of commitment. Conflict can be resolved by exit orvoice. However, it will usually be the case that the rewardsof the strategic alliance do not flow at the same pace forboth partners. The effect is, therefore, to give the partnerwho has gained more, the upper hand in the competitionsince they have less to lose by exiting the alliance. Asstated earlier, power is crucial in a competitive situationand in these kinds of strategic alliances; perceptions are vi-tal since solid measurements are unavailable. It followsthat a great deal of game playing can occur.

As the alliance evolves, the context changes and be-havior within the relationship itself is likely to impact

Evaluation difficulties drive mechanisms to

control resource transfer.

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upon resource value. Contextual conditions may shiftthroughout the alliance period devaluing or enhancingthe worth of resources. Firms may be incapable of incor-porating new information and adapting their expectations[10] and may remain anchored in original estimates of re-source value. Management must develop mechanisms totrack and evaluate initial conditions and evaluate the re-sources on offer and obtained throughout the process. Forexample, regular structured reviews can allow partners tocheck whether learning advantages are still being at-tained from the relationship.

The evolution of the alliance may benefit from differ-ent approaches at different stages. Formalization of rou-tines may be more appropriate at later stages of the alli-ance based on information flows that have evolvednaturally through informal and formal processes as thealliance progresses [11]. At such stages, firms are betterequipped to make trade-off decisions regarding future re-source investment and benefits to be accrued. Initialstages, on the other hand, may benefit from greater flexi-bility and organizational slack [12].

Competitor Strategic Alliances

When competitors are involved in resource exchangealliances, “competition” introduces an additional prob-lem to those already described. The dilemma is that increating an alliance with a competitor, an organization is,in effect, in the business of making them more competi-tive. Thus, in addition to competition within the alliancefor value being created (local competition) there is alsocompetition in the market place (extended competition).At its simplest, it is not obvious why any organizationwould enter into such an alliance.

However, there are a number of situations where acompetitor strategic alliance can be justified by those in-volved. The first is where they are not really competitorsor, more generally, do not perceive themselves as such.Organizations may make the same products but not com-pete in the same markets or segments or may not com-pete in the same way. Second, strategic alliances couldprovide a mechanism whereby competitors collude.

A third alternative is that while competitors will reallybe competing with one another, the strategic alliance willallow them to compete better against third party competi-tors. In a similar vein, organizations may be so desperateto survive that they seek to work together to stave off theinevitable. In other words, short-term benefits of the rela-tionship (e.g., cash input to ensure survival) outweigh the

longer-term competitive concerns. The final rationalestems from the difficulty of assessing the benefits of co-operation. Both organizations may enter an alliance be-lieving that they can get more out of it than their potentialpartner.

Exchangeability now becomes important in terms ofits symmetry within the extended exchange process. Ifone partner can easily give a resource to a competitorbut would find it difficult to receive what is offered inexchange, then the situation is rather worse than for thenon-competitor situation. In the latter, the result willsimply be the cost of a lost opportunity. In the former,the effect is to increase the competitive advantage of acompetitor while remaining in the same position one-self.

The same argument applies to value creation. Themore valuable the exchange the more one firm may behelping a competitor to succeed. As pointed out earlier,since one partner can have little knowledge about the ef-fect that an exchanged resource will have on the perfor-mance of a competitor, their ability to assess the prosand cons of a competitor strategic alliance are very dif-ficult.

Within the process, firms develop mechanisms that at-tempt to deal with competitiveness within the relation-ship. They may, for example, place limits around thecompetition, e.g., geographical or project boundaries, tocontain the competitive arena from the start. As the rela-tionship progresses they may seek methods and tech-niques to differentiate themselves in the marketplace,such as different brand propositions, alternative distribu-tion channels or target different market segments. Alter-natively, firms may pursue new emerging product sectorswhere their partner is absent. In such cases, firms chooseto differentiate from each other. In other words, theyvalue the relationship more than the maintenance of posi-tion in the marketplace.

Competitiveness, however, may deviate from initialconditions through the process of exchange itself and ascontextual changes take place within the relationship as itevolves. Exogenous and endogenous contexts may alterthe closeness of competition, e.g., technology shifts mayallow firms to pursue new non-competing technologiespreviously closed to them. Resource transfer, e.g., marketknowledge via the relationship, may equip a previouslynon-competing firm with the ability to compete in newmarket segments occupied by its partner. Again, it falls tomanagement to develop mechanisms to gauge and moni-tor contextual conditions.

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MANAGEMENT IMPLICATIONS

It is clear that a firm in an exchange relationship hasmuch in common with a firm in an exchange strategic al-liance. It follows that we might use the similarities tosuggest ways in which firms might approach and manageexchange strategic alliances drawing on marketing ideas.Organizational marketing, because of the concentrationof purchasing power in organizational markets, is largelyabout treating individual customers as markets. That isthe approach that we will adopt in this case. The startingassumption is that a firm has located a possible partnerfor a strategic alliance and is deciding what should be thenext step.

The first step would be to assess whether this “cus-tomer” has potential. This evaluation is more difficultthan in the normal marketing case since the exchange isessentially a barter arrangement, each partner selling toand buying from the other. It follows that both the“product” and the “price” have to be carefully thoughtthrough. The product is the set of core strategic re-sources that the firm is prepared to transfer (e.g., accessto a key set of customers or knowledge of a particulartechnology). The price is the resources they get in re-turn. In order to decide whether this is a marketableproduct for a particular customer/partner the firm has tomodel the customer using all the information that it canobtain. The most important information is how much thecustomer is likely to value the offering. This in turn re-quires a sophisticated analysis of their strategic positionand how the transferred resource will help them toachieve a better competitive position and improved fi-nancial performance.

Such an analysis can be done, at least partly, withoutthe involvement of the customer, using external sourcesand conventional marketing and strategic research andanalysis. However, it is the perceived value of the re-source upon which the customer will base their barter po-sition and that can only be ascertained through initialcontacts and continuing negotiation with the customer.While the traditional concepts of organizational buying

behavior (e.g., non task factors, buying task group andpurchase stages) can be helpful in trying to understandthe customer, it should be remembered that this purchaseinvolves barter of an important, ill specified product andthat the buying task group at least may bear little resem-blance to those normally found in more conventionalbuying situations.

In the same way the selling firm has to decide what itis prepared to offer and what it would like to get in ex-change. A similar marketing and strategic analysis is re-quired but this time concentrating on the focal firm. Onekey marketing decision is the terms of trade for the ex-change. This decision is particularly difficult to make be-cause the exchange is a barter of low exchangeability, in-tangible resources upon which it is difficult to place avalue. Further, the devil is in the detail. Many strategicanalyses fail because they do not set out the way in whichnew resources can and will be employed and what the ef-fect of changes in the environment might be. In addition,while it might be clear what resource is required, it is notalways obvious that it can and will be transferred.

Happily there are two positive aspects to this situationthat make it less problematic. The first is that many re-sources that can be transferred (e.g., knowledge) still re-main in the possession of the seller. In this sense they areservices and services marketing concepts can be helpfulin these cases (e.g., services as renting of resources). Thesecond is that the valuation of a resource depends entirelyupon the context in which it will be used. It follows that aresource that has little value for the seller may have greatvalue for the buyer.

The marketing decision does not just involve the termsof trade; it also has to cover the exchange process itself.In the marketing of most organizational goods, the ex-change episode itself is largely trivial. However, an ex-change alliance has some of the features of a complex orproject-based exchange in that it takes place over a longperiod and the outcome is, to some extent, uncertain.Therefore it is crucial before the event to be, if anything,clearer about the exchange process than about the prod-

Employ customer analysis skills to assess

partnership.

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uct being exchanged. This issue will be dealt with in thefollowing process sections.

Once the strategic alliance has started the exchange ofcore resources begins to take place. Some of this maytake no time at all (e.g., allowing the buyer to use someof your facilities such as a sales force). In other cases itmay take years to accomplish (e.g., transferring particu-lar manufacturing skills and processes). In traditional or-ganizational marketing, especially involving exchangerelationships, the continuous process of exchangingproduct provides a basis for buyers and sellers to get toknow one another and adapt. In a strategic alliance nosuch base load of activity is involved and so has to becreated. Therefore, specifying the regular interaction ofemployees from both firms in a structured but flexibletask system, is central to the success of a strategic alli-ance. Marketing people can help in designing this process.

The low exchangeability of resources in exchange stra-tegic alliances leads to the problem, already referred toseveral times, of the uncertainty of the outcome. Can theresource actually be transferred and if so how? One re-sponse to this process is to black box the product, e.g., bytrying to specify a procedure in writing. What is involvedin this case is the “marketization” of a complex and un-certain commodity. In other words trying to treat the ex-change as a normal product with definable specifications.In terms of the control of the exchange processes blackboxing has the advantage of allowing for planning andcontrol and such procedures may work in some contexts.However, there is evidence that in other cases they simplygive management the impression that progress is beingmade while actually making the process more difficult.

Marketing’s experience of exchange relationships of-fers an alternative model. When the outcomes and theprocesses of achieving those outcomes are both uncer-tain, exchange partners require flexibility, adaptation andcommitment from each other. There needs to be a will-ingness to see the world from the partners’ point of viewand make trade-offs. Very often in the process of a strate-gic alliance the whole focus of the exchange will shift be-cause both partners see a better way and are not afraid toditch the original concept. Equally, of course, it may turnout that one or even both of the partners decide that theyare not getting what they want and so should not beafraid to bring the strategic alliance to an end rather thancontinuing simply because the alliance exists.

It follows that evaluation of the process, as well as theoutcome, needs to be built in to the strategic alliancefrom the beginning and both parties need to be commit-

ted to it. Too often process is seen as straightforward,mechanistic and unproblematic but this is seldom thecase. It is particularly important to evaluate because,first, the context for both partners is continually changingand what was once valuable may no longer be so. Sec-ond, partners learn about each other, about the context ofthe exchange and about the process, and adaptation isclearly crucial. Built in evaluation provides a way of in-stitutionalizing that adaptation.

Most exchange strategic alliances involve non-market-ing people, indeed people who have little experience ofmanaging interactions between organizations. An obvi-ous strategy is, therefore, to use the expertise of market-ing people, in a staff function, to point out the issues andsuggest tactics and strategies that make successful out-comes more likely.

Where the partners to a strategic alliance are competi-tors, other additional considerations apply. On the onehand the analyses of the partners should be easier sincethe environments will be similar and much of the data al-ready available. However, the analysis also has to bemore sophisticated and subtle since the penalty of misun-derstanding the nature of the markets and customers andthe bases for competitive advantage of both the firm andthe potential partner is very large indeed. The worst casescenario is if a firm transfers a key resource that allows acompetitor a huge increment in competitive advantagewhile being unable to leverage the resource acquired inthe same way. The best case scenario is where it turns outthat the two partners discover that they are not reallycompeting or move to such a position as a result of thestrategic alliance.

In terms of process, the key issue is how to contain theexchange so that the benefits to the partner are limitedwhile those to the firm are not. Information is particularlycrucial in this respect since individuals who are not usedto being at the forefront of the marketing battle may inad-vertently give away more than they need to. Chinesewalls are the obvious answer but such devices are ex-tremely problematic. They limit the ability of the firm toget the most out of an alliance since so many of the bene-fits are spin-offs from unpredictable connections andhence likely to be restricted by Chinese Walls. An alter-native is to confront and legitimize the issue rather thanemploy wholesale and general rules (no one below mid-dle management can talk to anyone in the partner firm).For example a good question to ask is, “How exactly willit help the partner competitor if we tell them ‘do this ordo that’ with them?” However, the acute tensions in-

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volved in such situations often lead to the marketizationof the process or its total failure.

CONCLUSIONS

We have explored a range of relationships and identi-fied commonalities of structure and process across thisvariety of resource exchange situations. We suggest thatsuch similarities give rise to similar techniques and skillsfor managing exchange processes across the span of rela-tionship types. However, the concepts of exchangeabilityand value influence in particular, at the core of this analy-sis, explain key differences between these exchangeforms. Such dissimilarities need to be recognized and un-derstood, as the implications for management will vary.

Among the resource exchange forms that we have dis-cussed, the value and importance of the exchanged re-source seems to be inversely proportional to its ex-changeability. Put another way, those resources that caneasily be exchanged are those that seem to be less crucialand more easily left to market forces. This phenomenonis partially explained in terms of competition and its rolein firms’ strategies. Competitive advantage is useless un-less it is sustainable. One way of making it sustainable isto make sure that it cannot be imitated. What can bebought on the open market is imitable. What is created orexchanged in private is less likely to be. Of course theremust be competitive advantage; that is to say, it is of littleuse to have a resource that cannot be imitated if it has novalue to the customer. This caveat brings in the second ofthe distinguishing resource dimensions; value to the cus-tomer and thus to the firm.

However, poor exchangeability also has its price. Itmakes the process of exchange that much more difficult,expensive, confining and risky while offering, of course,many benefits. Here there does seem to be a major dis-continuity in the continuum of exchange forms that wehave described. The third distinguishing dimensioncomes into play here; consumption/creation or how andwhere an exchanged resource is incorporated into a firm.

Where the exchanged resource is involved in the creationof other exchangeable resources, the relative standardiza-tion and continuity and the incremental nature of the re-source exchange shapes the exchange process. It providesa framework from within which trust and commitment cangrow incrementally and investments can be made resultingin improved efficiency and effectiveness and the creationof new and valuable resources. In a sense, the exchangeprocess has a sequential life of its own.

By contrast, where the resources are transforming re-sources being exchanged to provide further transformingresources, the exchange process is somewhat different. Itcannot be built up incrementally since these are one-off,albeit complex and lengthy, exchanges to which the part-ners will be committed. There is an end point in sight. Asa result, initiating the process is a discontinuous and riskyevent and firms have to find ways to specify the ex-change process when they are generally not in a good po-sition to do so because of the low exchangeability of theresources involved. Firms are “entering the unknown”and should make efforts to understand the nature of re-sources and what it means to get involved.

Similarly, the implementation of the exchange is madedifficult because firms find it difficult to decide when, oreven whether, exchanges are being made in a satisfactoryway. The normal responses are to specify more closelywhat should be done by when (often resorting to things thatcan be measured at the expense of things that are required)and to formalize the exchange processes so that they can becontrolled. In particular, firms pay close attention to up-front initiating conditions. These actions do not guaran-tee success; indeed they may more often lead to failuresince neither engenders trust and commitment. In contrast,our research indicates that attention should be given tothe development of skills dedicated to opening up resourcesand increasing their visibility throughout the process.

Finally, strategic alliances have the further problemthat they cannot assume that their partners are either will-ing or able to support the exchanges concerned. Againlow exchangeability means that it is not easy to predict

Encourage resource visibility throughout the

exchange process.

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whether what is being exchanged can be transferred bythe sender or can be easily accepted into the receiver’senvironment. By contrast, the relatively high exchange-ability involved in exchange transactions and exchangerelationships means that, in general, sellers know whethertheir product offerings can be made and sold and buyersknow whether they can use the product offering in a re-warding fashion.

While buyer–seller exchange transactions and relation-ships have traditionally fallen under the responsibility ofmarketing, strategic alliances (including joint ventures)have not. We suggest that relationship managementskills, within the remit of marketing, should be moreprominent within strategic alliances, so often led by otherfunctional areas. Critical marketing skills in exploringand monitoring contexts and environments, understand-ing behavioral cues and generally handling intangible re-lationships should be made transferable and tailored to alltypes of complex exchange processes.

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