Page 107 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes Alliance Termination: Alliance termination involves winding down the alliance, for instance
when its objectives have been met or cannot be met, or when a partner adjusts priorities or
re-allocated resources elsewhere.
Contract Negotiation: Contract negotiations involves determining whether all parties have
realistic objectives, forming high calibre negotiating teams, defining each partner’s contributions
and rewards as well as protect any proprietary information, addressing termination clauses,
penalties for poor performance, and highlighting the degree to which arbitration procedures are
clearly stated and understood.
Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths and
weaknesses, creating strategies for accommodating all partners’ management styles, preparing
appropriate partner selection criteria, understanding a partner’s motives for joining the alliance
and addressing resource capability gaps that may exist for a partner.
Strategy Development: Strategy development involves studying the alliance’s feasibility,
objectives and rationale, focusing on the major issues and challenges and development of resource
strategies for production, technology, and people. It requires aligning alliance objectives with the
overall corporate strategy.

6.3.2 Why alliances are more common now?

The drive to create alliances has evolved quickly over the last few decades.

In the 70’s, the main factor was the performance of the product. Alliances aimed to acquire the
best raw material, the lowest costs, the most recent technology and improved market penetration
internationally, but the mainstay was the product.

In the 80’s, the main objective became consolidation of the company’s position in the sector,
using alliances to build economies of scale and scope. In this period there was a true explosion of
alliances. The one between Boeing and a consortium of Japanese companies to build the fuselage
of the passenger.
Transport version of the 767; the alliance between Eastman Kodak and Canon, which
allowed Canon to produce a line of photocopiers sold under the Kodak brand; an agreement
between Toshiba and Motorola to combine their respective technologies in order to produce
microprocessors.
In the 90’s – according to Harbison and Pekar (1998) – collapsing barriers between many
geographical markets and the blurring of borders between sectors brought the development of
capabilities and competencies to the center of attention. It was no longer enough to defend one’s
position in the market. It became necessary to anticipate one’s rivals through a constant flow of
innovations giving recurrent competitive advantage.
It is easy to predict that various factors will contribute to the diffusion of alliances in the coming
years as well.
1. Acceleration of the rhythms of technological innovation and shortening of product life
cycles.
2. The convergence of technologies and the “permeability” of borders between sectors and
between markets.
3. Progress in telecommunications.
4. Strong improvements in R&D costs, new product launches, tools and systems.

5. The collapse of many barriers to competition, on account of deregulation, privatization and
globalization.

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