WHAT IS AN ALLIANCE?GROUP 8

WHAT IS AN ALLIANCE?

An alliance is business agreement and relationship with two or more firms interfacing with executives of top global or European companies

As a role of global alliance partner Working with client and extend the joint service

offerings that developed with our alliance partner Working with many members of our alliance partner

organization and other members of the firm to both educate and promote the value of the alliance.

DEFINITIONS OF “ALLIANCE”

By Webster defines the word “alliance” as An allying or close association, as of nations for a

common objectives, families by marriage An agreement for this The countries, groups in such association

By Synonyms from Webster’s Thesaurus The state of being allied, connection, membership,

affinity, participation, cooperation, support, union, agreement, common understanding, marriage, collaboration, partnership and the act of joining, etc.

Sales Alliance Solution-Specific Alliance Geographic-Specific Alliance Investment Alliance Joint Venture Alliance

Types of Alliance

• WHEN TO USE? Two companies agree to enter the market

together to sell complementary products and services.

• MAIN PURPOSE? To create sales; especially for companies that have joint selling activities with specific

clients.

Sales Alliance

• Example: i2 Technologies : Ernst & Young (CGE&Y)

• Exclusivity is NOT a requirement

Sale Alliance (cont’d)

• WHEN TO USE?Two companies agree to jointly develop and sell a specific marketplace solution.

• MAIN PURPOSE?• Joint selling of a jointly developed solution• Usually there are incentives to maximize the return to

both parties for their parts of joint development effort.

Solution-Specific Alliance

• Example : • Whirlpool, Hearst, and Boston Consulting

Group

Solution-Specific Alliances (cont’d)

• WHEN TO USE? Two companies agree to jointly market or co-brand products and services in a specific geographic

region.has been practiced for many years in the beer industry

• MAIN PURPOSE?Being able to enter to an important geographic market without having to bear high-cost fromexportation.

Geographic-Specific Alliance

• Example: • Fosters Brewing Company (Australia) :

Molson (Canada)

Geographic-Specific Alliance

WHEN TO USE?• One company makes an investment in

another company and at the same time developing an agreement to jointly market their products

• Example :• viaLink : CGE&Y and i2• HP : viaLink

Investment Alliance

WHEN TO USE? • Two companies come together and form third company to exclusively market and/or develop specific products and services. • Setting up a separate organization and

financial structure• Ownership interests and incentives will be

stated when the join venture alliance is established.

Joint Venture Alliance

• Positive Aspect:• There is a financial and legal commitment between two companies

• Negative Aspects• Failure of joint venture alliance can be PAINFUL.

• Responsibility of a separate company, including financial implications that are tied to the performance of both companies

Joint Venture Alliance

Example : • Northern Telecom (now known as Nortel) :

Motorola

Joint Venture Alliance

FRAMEWORK TO DETERMINE

THE NEED FOR AN ALLIANCE

What is Alliance ?

Step 1: Business and Market Strategy

To review the company’s business and marketing strategies

Knowing the customers and their behavior is critical

Step 2: Market Scan

1. Review of existing competitors and their market positioning

2. Review of existing competitors against the identified total “customer solution”

3. The identification of new competitors drawn into the marketplace by the bundling activity

4. The identification of non-total-customer solution providers that are intermediaries in the marketing process through technology

Step 3: Product Portfolio Assessment VS. Marketplace Scan

Identifying what the current products and services are in the company’s product portfolio

Comparing and understanding the future position of competitors

Step 4: Build Internally vs. Acquire Externally

1. To do nothing2. To create or build the needed technology or products

internally3. To acquire externally access to the technology

products and services

Step 5: Organizational Readiness and Speed to Market Demand

A quick, decision-tree process

How fast your organization is in responding in the marketplace (Speed to market)

Step 6: Proceed to Build internally or Acquire Externally

From the step 4 to 5, we will be able to make decision whether to build internally or acquire externally

What Is an Alliance?

Framework to determine

what type of alliance is needed

Step 1. Do you need an alliance that is sales-based?

All Alliances must be directly or indirectly sales –and client- based.

They must generate additional sales for all alliance partners in order to be successful.

Includes solution-based, geographic-specific, investment alliances and JVs.

Should sales based alliance not be needed, “work for hire” arrangements with other companies could be taken into consideration.

Step 2. Is there a need for Joint Solution Development?

Sales Alliances and geographic specific alliances don’t require Joint Solution Development.

Solution specific alliance requires Joint solution development.

Additionally, Joint ventures and investment alliances rely on Joint Solution Development.

Step 3. Is the need Geographic based?

Sales based alliances focus on products and services. They can occasionally be Geographically based.

Solution specific and investment alliances are not usually based on Geographic location.

Joint Ventures and geographic-specific alliances have requirements that are geographically based.

Step 4. Is there a necessity for a direct investment in the external company?

Sales alliance, geographic-specific alliance and solution specific alliances do not require direct investment.

Investment alliance and JVs usually require direct investment in external companies.

The Direct investment should be defined as the investment capital in this framework.

Step 5. Is there an overriding reason to set up a company to acquire the needed product and services from the

external provider?

There is usually no requirements to set up a new company to acquire needed products and services in sales based, geographic based, solution-specific and investment alliances.

Step 6. Pulling together the answers from the framework

Examples.

1. Two companies failing to determine the type of alliance needed led to ambiguity and postponement of the alliance.

2. Although sometimes the framework for the need is appropriately determined, the motives and goals of each party plays a crucial role in the success of a successful alliance. Framework to determine the need could be done

internally whereby both companies develop the concentric areas they want to focus on and determine the type of alliance accordingly.