know-how to individual entrepreneurs.
(ii) Equity strategic alliance is an alliance where partner companies own unequal shares of equity
in the venture and are considered to be superior at passing on know-how between companies
because they are closer to hierarchical control than non equity alliances. For example, Ford Motor
Company and Mazda Motor Corporation formed a long-standing equity strategic alliance.
(iii) Non-equity strategic alliance is an alliance in which two or more firms develop a contractual relationship to share some of their unique resources and capabilities to create a competitive advantage.
(iv) Global Strategic Alliances working partnerships between companies (often more than two) across national boundaries and increasingly across industries, sometimes formed between company and a foreign government, or among companies and governments
This is a contractual arrangement whereby trade marks, intellectual property and trade secrets are
licensed to an external firm.
This is similar to technology licensing except that the license provided is only to manufacture and sell
a certain product.
Direct cooperation alliances are usually entered into for the purpose of operational efficiency
or geographic expansion. They are non-equity alliances and are managed less formally than joint
Strategic Alliance and Joint Venture
Both forms of partnership can be used to transfer technology, assets and knowledge between
The competitive advantage of strategic alliancesStrategic alliances have become a key source of competitive advantage for firms and have allowed them to cope with increasing organizational and technological complexities that have emerged in the global market.Setting new global standards. Entering into an alliance can be the best way to establish standards of technology in the sector.
• Confronting competition. When a high-volume producer decides to attack a new geographic
market, defense is difficult if it does not have comparable size.
• Overcoming protectionist barriers. Alliances can allow companies to avoid controls on importation
and overcome barriers to commercial penetration.
• Dividing risks. For certain projects, risks of failure are high, when investments are
• Economy of scale. To divide fixed costs of production and distribution, seeking to improve volume.
• Access to a market segment..
• Access to a geographic market. A strategic alliance is often a way to enter a market that is
protected by (national) tariff and other barriers, or dominated by another company
• Access to technology. Convergence among technologies is the origin of many alliances.
• Uniting forces. Some projects are too complex, with costs that are too high, to be managed by a
single company (military supplier contracts, civil infrastructure construction).
• Bridging a gap. If a company does not have the resources or capabilities necessary to develop
a particular strategy, an alliance with one or more companies is the most logical solution. Making
an alliance to gain access to resources and capabilities that are lacking internally
Competitive dynamics is the analysis of competition at the action and response level to predict how a firm will act or react against opponents. Understanding engagements at this level is essential because this is where firms enact their strategies, test their opponents’ mettle and capabilities, defend their reputations, and signal their toughness--that is, where business rivalry occurs.
When analyzing the competitive dynamics of any industry, look at
A series of actions (moves) and reactions (countermoves) among firms in an industry create competitive dynamics. These action/reaction dynamics reflect the normal and innovative movement of firms in pursuit of profits.
Competitive Response When a firm undertakes an action that generates abnormal profits or an action that affects a rival’s position, competitors will be motivated to respond. A response that duplicates or matches a competitors move provides a powerful signal to the acting firm that the rival is committed to defending their market position. Response order represents the firm’s ranking in the order of responses (among multiple responding rivals) to a competitive action. Thus, a firm could be the first to respond, second to respond or a late responder. The concept of response order is distinct from response delay in that the former represents a firm’s ranking in the series of responses, whereas the later represents the elapsed time between the action and the response.
The Consequences of ActionCompetitive dynamics has generally used common measures of performance as the dependent variable, including: changes in market share, cumulative abnormal returns to shareholders, sales growth, as well as accounting measures of profitability and profit growth, such as return on investment Gaining market share to maintain industry leadership, dethrone an industry leader, or reduce the market share gap held leading competitors is an important objective of many firms. Accordingly, a firm’s change in market share serves as an important organizational outcome for firms because it represents both growth (or decline) relative to rivals, as well as profit potential.
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