Cover image for Partnerships for profit : structuring and managing strategic alliances
Title:
Partnerships for profit : structuring and managing strategic alliances
Author:
Lewis, Jordan D.
Personal Author:
Publication Information:
New York : Free Press ; London : Collier Macmillan, [1990]

©1990
Physical Description:
xiv. 336 pages ; 25 cm
Language:
English
ISBN:
9780029190500
Format :
Book

On Order

Summary

Summary

The text provides the first full-scale analysis of the burgeoning joint venture phenomenon. In the last two decades, throughout the world, companies have turned to co-ordinating their efforts, resources and expertise to gain access to new technologies and new markets. For the first time, Partnerships for Profit provides the practical guidelines for designing and implementing successful alliances. Building on the experiences, from the late sixties to the present, of numerous American, Asian, and European firms, Lewis prescribes the steps to take and pitfalls to avoid in structuring and managing a strategic alliance, and he highlights the basic ingredients that - regardless of nationality, industry, or purpose - successful alliances require in order to succeed.


Excerpts

Excerpts

Chapter 1 Why Alliances Have Become So Important Blood ties aren't that important when it's a matter of survival. Japanese observer commenting on Isuzu and Fuji Heavy Industries, which broke a taboo against cooperation between companies in different groups Wherever we look, cooperation is accelerating. Consider the evidence: Between 1979 and 1985 the number of alliances among American, European Community, and Japanese firms grew thirtyfold. In Eastern Europe joint venture startups have been doubling annually. In India, even while the tragic memory of Bhopal was fresh, the government was actively promoting foreign corporate links and forging stronger ties to world science. Two basic forces are behind these striking developments: the rise of technology and the globalization of markets. This new thrust affects all firms, everywhere. The consequences are enormous. Cooperation Is Growing -- and Here to Stay Technology is relentlessly changing our world. In the process it forges new links among us, makes us more alike, and demands more of our resources to keep moving ahead. Expanding Technological Interdependence Technology has become so important to our lives that, for several decades, R&D growth has outpaced economic growth in the major industrial nations. The more we invest in R&D, the more it makes sense to look around to see if someone else might be producing knowledge we can use. This practice has been increasing around the world. Since at least the early 1970s, R&D cooperation between organizations -- businesses, universities, and government labs -- has been steadily rising for major nations. This trend is shown in the following graph, which displays the fraction of the world's science and engineering articles written by researchers from more than one organization. Simply put, joint publications are the fruits of joint research. Clearly, technological cooperation is already a strong and growing force. One remarkable feature of this trend is that, except for the Soviet Union, cooperation in R&D is growing faster than investment in R&D, as shown on the facing page. An expanding share of these nations' R&D efforts is thus going into joint programs. Given the tremendous importance of technology to competitive advantage and economic growth, this is a fundamental change in global business and economics. It is also significant that international cooperation is the fastest growing part of this thrust. This is illustrated on page 12. The world has clearly been shifting to cooperation as a major vehicle for technical progress. Without cooperation -- as the Soviets have apparently learned -- technological advance becomes a less effective, almost brute-force process of spending more and more on R&D, in part to duplicate what others have already done. World Markets Are Integrating Growing technological interdependence is matched and reinforced by rapidly integrating markets. This raises the demand for cooperation even more. Technology advances because new knowledge opens new paths for development, and because users' needs evolve to create new requirements. These complementary forces have increased living standards around the world. And since human needs are similar, markets in different places are becoming more alike. Many consumer goods must be adapted for local tastes. It will probably always be this way. However, consumer needs and incomes are now close enough to justify a global scale in many facets of R&D, and a global or regional scale in manufacturing and distribution. For many industrial goods, which are less sensitive to cultural differences, R&D, manufacturing, marketing, and distribution are already global. Few firms can meet these challenges on their own. The accelerating integration of world markets is evident in the way firms commercialize their technologies. Through the 1970s American firms' standard practice for introducing new products was to market them first at home and later abroad. In many consumer and industrial sectors the time lag has been reversed. Other markets have caught up or moved ahead. Significantly, about 70 percent of U.S. manufacturing is now subject to foreign competition. And despite protectionist pressures, world trade has grown faster than national economies since the 1960s. Global market integration has been supported by giant strides in the technologies of computers, communications, and transportation. The tremendous ease with which information, people, and goods move about has vastly expedited technology transfer. Newly industrialized countries have been quick to move up the learning curve. Korea, for example, has become a power in chemicals, metals, electronics, and other hightech fields. The world is clearly becoming a single market. In the process, the intensity of global competition is growing dramatically, raising the standards for competitive success. Cooperation Is Changing the Business World The powerful currents of technological interdependence and integrating global markets are catalyzing changes in national policies to promote cooperation. Suddenly, Nations Are Changing Their Ways In the brief decade of the 1980s: * British economic blueprints were rewritten to give high priority to technology transfer and cooperative research. * China created its first-ever joint venture laws to bring in needed technology. * The Soviet Union and East European nations launched sweeping policy changes to foster technological cooperation and economic integration with the rest of the world. * The United States changed its antitrust laws to encourage shared R&D, and began more than two dozen university centers for joint research. * Demands for more technological cooperation and a larger scale in the world market brought the European Community close to economic integration. Canada and the United States created their historic free trade agreement for the same reasons. Thailand, Vietnam, and other former adversaries in Southeast Asia launched similar moves. The benefits of cooperation have caused nations to yield their economic independence in favor of global efforts to coordinate exchange rates, set trade and agricultural policies, adapt uniform practices for patents and trade secrets, and develop world telecommunications standards. With their economies sadly trailing the rest of the world, less developed countries have launched an almost desperate effort to lure once-feared multinationals for jobs, investments, and technologies. While developing nations engaged in more than four hundred expropriations of foreign business assets in the 1970s, the number of such acts fell to around twenty during the 1980s. Reflecting on the huge debts piled up by international development borrowing -- with little progress to show -- Francisco Swett, Ecuador's finance minister, notes "we feel it is better to have partners than creditors." The Need to Cooperate Is Joining Old Adversaries In Japan, where everything is group-oriented, it is almost unthinkable for companies in different groups to cooperate. Yet Isuzu and Fuji Heavy Industries broke this taboo because they believed they had little choice. Both needed an American manufacturing presence to stay in business. For similar reasons entrepreneurial software firms Microsoft and Ashton-Tate, long regarded as bastions of independence, joined forces to develop a major new product that would have been hard for either to create alone. Every Firm Is Affected The growing drive to cooperate is not limited to high technology or global firms. For instance, local companies without foreign opponents feel cost and quality pressures from corporate customers that compete in global markets. For them and for other firms the logic of cooperation is hard to miss. Aetna Life and Casualty, for example, formed a joint venture with Voluntary Hospitals of America -- itself an alliance of several hundred hospitals -- to provide cost-limiting group health care plans neither could offer alone. As another example, hamburger chain Wendy's International and ice cream vendor Baskin-Robbins formed an alliance to explore the drawing power of their combined product lines. To do this separately, each would have had to assemble the needed expertise. Copyright © 1990 by Jordan D. Lewis Excerpted from Partnerships for Profit: Structuring and Managing Strategic Alliances by Jordan D. Lewis All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

Table of Contents

Prefacep. xi
An Introduction to Strategic Alliancesp. 1
1 A New Strategic Framework
1. Why Alliances Have Become So Importantp. 9
Cooperation Is Growing--and Here to Stayp. 9
Cooperation Is Changing the Business Worldp. 13
2. Employing Strategic Alliancesp. 15
When to Use Alliancesp. 16
How Cooperation Affects Strategic Thinkingp. 20
Including Alliances in Your Plansp. 27
3. Cooperating for Competitive Advantagep. 29
Ways to Add Product Valuep. 29
Improved Market Accessp. 36
Strengthening Operationsp. 40
How to Add Technological Strengthp. 42
Enhancing Strategic Growthp. 44
Organizational Reinforcementp. 46
Building Financial Strengthp. 47
Look for Wider Synergiesp. 48
4. Protecting Each Firm's Interestsp. 50
The Path to More Independencep. 51
Protect Key Product Valuesp. 54
Secure Essential Access Strengthsp. 54
Hold on to Vital Operating Abilitiesp. 55
Safeguard Critical Technologyp. 58
Preserve Growth Optionsp. 61
Maintain a Strong Organizationp. 62
Sustain Financial Strengthsp. 65
Plan for Unreliable Relationshipsp. 66
The Pros and Cons of Exclusivityp. 67
5. Cooperating with a Competitorp. 70
Look for Clear Mutual Benefitsp. 70
Separate Rivalry from Cooperationp. 72
6. Using Alliances to Build Market Powerp. 76
Reinforcing Key Partnersp. 76
Building Strength Through Strategic Networksp. 80
Using Alliances to Inhibit Opponentsp. 86
2 Kinds of Alliances
7. Working with Informal and Contractual Alliancesp. 91
When to Use Contractual Alliancesp. 92
Alliance Designp. 93
Alliance Organizationp. 100
Managing Contractual Alliancesp. 103
Why Relationships Are So Importantp. 108
8. Using Minority Investment Alliancesp. 109
How Minority Investments Build Commitmentp. 110
Conditions for Minority Investmentsp. 114
Making Commitmentsp. 115
Make It Work Like an Alliancep. 120
Follow the Principle of Shared Opportunismp. 121
Conducting the Alliancep. 122
9. Making Joint Venture Commitmentsp. 128
Defining a Joint Venturep. 129
Allocating Ownership and Governancep. 132
Committing Resourcesp. 137
Planning Parent Benefitsp. 138
Allowing for Terminationp. 142
10. Organizing and Operating Joint Venturesp. 144
Planning Startup Joint Venturesp. 145
Designing Buy-in Joint Venturesp. 146
Launching Joint Venture Mergersp. 148
Preparing for Independencep. 153
Providing Parent Supportp. 155
Integrating a Joint Venturep. 157
Multiple-Parent Venturesp. 159
11. Governing Joint Venturesp. 161
Building an Effective Boardp. 162
Filling Management Positionsp. 165
Information for Venture Controlp. 168
Governing Lead Parent Joint Venturesp. 169
12. Governing 50-50 Joint Venturesp. 173
When Equality Is a Source of Strengthp. 174
Building a High-Performance Boardp. 176
How an Executive Committee Improves Performancep. 180
The Critical Job of Lead Representativesp. 183
The Chief Executive's Rolep. 185
Three Ways to Build Relationshipsp. 187
Staying Equal in Foreign Marketsp. 189
13. Alliances with Universitiesp. 193
Connecting with Universitiesp. 194
Understanding Universities' Perspectivep. 197
Managing University Relationsp. 198
3 Implementation
14. Scanning for Opportunitiesp. 203
Scanning Is Always Importantp. 203
Scanning with Known Firmsp. 205
How to Scan Broadlyp. 206
Organizing and Managing the Scanning Processp. 210
15. Choosing Partners and Building Alliancesp. 215
Partner Selection Criteriap. 216
Finding Strategic Synergyp. 218
Will You Be Compatible?p. 220
Will Both Firms Be Committed?p. 222
New Alliances with Past Partnersp. 224
Negotiating to Build an Alliancep. 225
Picking the Best Structurep. 231
16. Developing Effective Relationshipsp. 235
Planning Interfirm Contactsp. 236
A Goal: Improve Your Joint Problem-Solving Abilitiesp. 239
A Winning Strategy: Always Be Constructivep. 241
Work to Understand a Partnerp. 242
How to Be Trusted--and When to Trustp. 247
Accept Them As Equals and Work on Their Needsp. 248
Continuity Is Importantp. 250
Keep Working on Relationshipsp. 251
17. Working with Other Culturesp. 253
Why Culture Is Importantp. 254
Anticipating Cultural Issuesp. 254
Designing Alliances to Reduce Cultural Conflictp. 264
Developing Cross-Cultural Understandingsp. 267
Cooperating with Another Culturep. 273
18. People and Practices: Getting More Value from Alliancesp. 279
Delegation Is Essentialp. 280
Make Internal Cooperation a Strengthp. 281
Maintain Internal Continuityp. 282
Develop a Culture for Cooperationp. 284
Overcome Internal Resistancep. 286
Emphasize Organizational Learningp. 289
Choosing People to Build Alliancesp. 291
The Emerging Corporationp. 293
Notesp. 295
A Note of Thanksp. 325
Indexp. 329