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Strategic alliancesE X T E R N A L R E S O U R C E A C Q U I S I T I O N

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3 main expansion modes

Internal development

Strategic alliances

Mergers and acquisitions

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What is a strategic alliance

An arrangement concerning the joint coordination of skills and resources between two or more firms related to a business operation or project

Requires cooperative behavior from all partners

Included: joint ventures, licensing, co-development, or co-marketing agreements

Not included: arm's-length supply arrangements, overseas or local subsidiaries, mergers and acquisitions

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HP x DisneyForm ed when founders Hewlett and Packard shook hands with founder Disney

During creation of Fantasia, Disney purchased audio equipm ent from HP

Alliance continued. Disney relied heavily on HP developm ent and IT for its own infrastructure

Current day Disney attractions: the Im agineering team still attached to HP system s architecture.

During design and build of Disney’s M ission: SPACE, HP engineers and Disney creatives worked side-by-side to develop the m ost technologically advanced ride

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Structure:

Renault owns 43.4% stake in Nissan (voting)

Nissan holds 15% stake in Renault (non-voting)

Carlos Ghosn was the founding chairman/CEO of the Alliance → 2018 (Brazilian/Lebanese/French)

Goal: Economies of scale without merging corporate identities of partners

Formerly the Renault-Nissan Alliance (1999–2017)

Automakers sell 1/9 vehicles worldwide

Leading plug-in electric vehicle manufacturer

Structured as cross-sharing agreement

Unique to the auto industry compared to the more typical consolidation trends

https://www.alliance-2022.com

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Why do these alliances exist?

This type of alliance is a consortium of companies that provides memberships with benefits

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Airline alliance and efficiency

Source: HokeyMin & Seong-JongJoo, 2015

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Efficiency scores of major alliances

Source: HokeyMin & Seong-JongJoo, 2015

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Types of strategic alliances, by legal structure

Joint Venture

– Two or more firms create a legally independent company by sharing some of their resources and capabilities.

Equity Strategic Alliance

– Partners purchase non-controlling equity interests (i.e., swap shares)

Non-equity Strategic Alliance

– Two or more firms develop a contractual relationship to share some of their unique resources and capabilities.

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From the news

Subaru officially joins Toyota Group (2020)

● Toyota increased stake in Subaru Corp from 16.83% to 20%

● Subaru not absorbed into Toyota M otor as subsidiary● Expected changes:

○ Subaru to use Toyota Hybrid and EV tech

○ Maybe better AWD in Toyotas

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From the News: TikTok / Oracle / Walmart

August/Septem ber 2020:

● Oracle/Walm art to partner for ByteDance in the US

● Provide back-end tech to TikTok, deals with security concerns over US users’ data

● Oracle is an enterprise software giant, but not a social m edia co.

Novem ber 2020:

● JV between ORCL, W M T, and US investors in BDNCE to handle TikTok in US.

● Deal requires approval by US govt

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Typology: by strategic intentBusiness level

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What are some risks of alliances?

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Risks with strategic alliances

Partners may act opportunistically

Partners may misrepresent competencies brought to the partnership

Partners fail to make committed resources and capabilities available to other partners

One partner may make investments that are specific to the alliance while its partner does not

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Forms of alliances by transaction type

Source: Peter Pekar Jr., Marc Margulis, Marc Margulis, 2003

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Alliance vs acquisitions

Executives do not always see alliance and acquisitions

as distinct m odes of achieving growth

M any consider the two as interchangeable strategies

In som e cases (Disney/Pixar), alliances lead to acquisitions

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Alliances vs acquisitions – success rates

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