Chapter 9 Notes

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University of Toronto Scarborough
Management (MGS)
Professor Constantinou

Chapter 9 Understanding Alliances and Cooperative Strategies NotesStrategic Alliances y strategic alliancerelationship in which two or more firms combine resources and capabilities in order to enhance the competitive advantage of all parties ie mutual competitive advantage y an alliance may involve sharing resources related to only one key activity in the partners value chain y an alliance may involve coordination across many value chain activities as well Why Alliances Alliances and Competitive Advantage y alliances not only spread the risk of business ventures by sharing that risk with other firms they also give firms access to knowledge resources and capabilities that the firm might otherwise lack y alliances achieve these potential building blocks of competitive advantage in 4 ways joint investment knowledge sharing complementary resources and effective management y alliances can help to increase returns by motivating firms to make investments that theyd be unwilling to make outside the alliance y this advantage is particularly important in light of the fact that productivity gains are possible when activities linked in the value chain are supported with transactionspecific investments y although partners may not be equally capable of absorbing knowledge two factors can help to facilitate the transfer of knowledge 1 mutual trust and familiarity between partners and 2 consistent informationsharing routines such as that obtained through higherlevel executive contact integrated information systems and employee swapping and crosscompany career paths Form and Structure of Alliances Joint Ventures and Other Equity Alliances y the form of an alliance depends on such factors as legal structure and the number and objectives of participants y joint venturealliance in which two firms make equity investments in a third legal entity y equity alliancealliance in which one or more partners assumes a greater ownership interest in either alliance or another partner NonEquity Alliances y arrangements such as solesourcing justintime supply agreements licensing cobranding and franchising are nonequity alliances y nonequity alliances are typically contracts that call for one firm to supply produce market or distribute anothers goods or services over an extended period of time without substantial ownership investments in the alliance Multiparty Alliances y other types of alliances such as consortia usually involve many participants perhaps even governments y the primary contribution to these cooperative arrangements is information though there may be some cost sharing as wellAlliances as Strategy VehiclesAlliances and Business Strategy y value net modelmap of a firm
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