Feedback to Activities – Cooperative Strategy By Distance Learning of Partner Selection and Alliance Negotiation
Q1. What are the main things that should be borne in mind in selecting an alliance partner?
- the key things that most companies consider in an alliance partner are strategic fit. This means complementarily of resources, skill-sets, competences and markets. This is relatively easy to asses and is normally the determining factor in choosing a partner.
However, whilst strategic fit is obviously important to alliance success absence of cultural fit is likely to lead to alliance failure.
- Cultural fit is often neglected in partner selection and means in the extreme that partners are unable to work easily with each other. It is possible to work with a partner from a different culture, but cultural sensitivity is vital in such situations.
- other perhaps less important factors than strategic and cultural fit are such matters as relative strength however measured (this should be similar in the sense that both need each other equally) and a greater need for cooperation than for competition.
Q2.What forces influence the choice of alliance form?
- Three criteria determine alliance form: focused or complex, two partners or more, separate alliance company or not. The most popular forms are two partner joint ventures, two partner collaborations, (no separate company) and consortia.
- Joint ventures are most appropriate where the assets allocated to the alliance are specific, its objectives can easily be measured and targets set, there is a perceived need to tie in the partners and perhaps an intention by the partners to limit their investment.
- Collaborations are most appropriate where there is uncertainty as to the potential scope of the alliance, great flexibility is required, visible commitment by the partners is not an advantage and the boundaries of the alliance are deliberately fuzzy.
- Consortia are of course appropriate for large projects where more than one partner is needed, wide skills are required, and there is a need to limit each partner’s financial exposure.Feedback to Activities – Cooperative Strategy By Distance Learning
Q3.How must negotiation in an alliance differs from that typically found in M&A?
The key to negotiation in an alliance is always to consider the partner’s interests, since not to do so will lead to an unsuccessful alliance. This must mean win-win bargaining or an integrative approach. This involves finding situations in which there is not a zero sum game but rather one in which synergies can be exploited and benefits achieved by both parties. Where problems arise resort can be had to GRIP (graduated reciprocation and tension reduction). This means deliberate role reversal and a demonstrated attempt to see things from the other’s point of view.
Q4.What is the main factor to consider in bargaining over the formation of an alliance?
Gray and Yan suggest that the components of bargaining power include: relative equity share, similarities of expertise, strategic importance of the venture to each parent, the alternatives available to each parent, and (in international settings) the intervention of the host government. These factors will influence decisions about control, alliance structures and procedures, the partner relationship, and the performance assessment of the alliance. The outcomes of the bargaining do not necessarily lead to equality of the partners. There may be a dominant partner in control, shared management, split control, independent management (as often in a JV) or even rotating management, although this is rarely successful.