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Definition
| exists whenever two or more independent organizations cooperate in the development, manufacture, or sale of products or services |
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Term
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| cooperating firms agree to work together to develop, manufacture, or sell products or services, but do not take equity positions in each other or form an independent organizational unit to manage their cooperation efforts. usually managed by contracts |
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| where one firm allows others to use its brand name to sell products |
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Definition
| where one firm agrees to supply others |
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| where one firm agrees to distribute the products of others |
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| 3 examples of nonequity alliances |
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Definition
| licensing agreements, supply agreements, distribution agreements |
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| cooperating firms supplement contracts with equity holdings in alliance partners |
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| cooperating firms create a legally independent firm in which they invest and from which they share any profits that are created |
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Definition
| exist when the per-unit cost of production falls as the volume of production increases |
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| ways strategic alliances can create economic value |
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Definition
1. exploiting economies of scale
2. learning from competitors
3. managing risk and sharing costs
4. creating a competitive environment favorable to superior performance
5. facilitating the development of technology standards
6. facilitating tacit collusion
7. facilitating entry and exit
8. low-cost entry into new industries and new industry segments
9. low-cost exit from industries and industry segments
10. managing uncertainty
11. low-cost entry into new markets |
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Term
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| characterized by increasing returns to scale. (ex. fax machines, one fax machine is worthless if you are the only person in the world to have one, but if 500 people have them they can be very useful) pg. 253 |
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Term
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Definition
| a firm's ability to learn, usually differs from firm to firm |
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| exists when two or more firms in an industry coordinate their strategic choices to reduce competition in an industry |
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| exists when firms directly communicate with each other to coordinate their levels of production, their prices, and so forth. this is illegal in most countries. |
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Term
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Definition
| exists when firms coordinate their production and pricing decisions, not by directly communicating with each other, but by exchanging signals with other firms about their intent to cooperate |
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| how do firms manage uncertainty? |
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Definition
| by using strategic alliances to maintain a point of entry into a market or industry, without incurring the costs associated with full-scale entry |
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Definition
| potential partners misrepresent the value of the skills and abilities they bring to the alliance |
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| partners provide to the alliance skills and abilities of lower quality than they promised |
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Definition
| partners exploit the transaction-specific investments made by others in the alliance |
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Term
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Definition
| when firms attempt to develop all of the resources and capabilities they need to exploit market opportunities and neutralize market threats by themselves. this can sometimes create the same-or even more-value than using alliance to exploit opportunities |
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Term
| Alliances will be preferred to "going it alone" when: |
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Definition
1. the level of transaction-specific investment required to complete an exchange is moderate
2. an exchange partner possesses valuable, rare, and costly-to-imitate resources and capabilities
3. there is great uncertainty about the future value of an exchange |
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Term
| Alliances will be preferred to acquisitions when: |
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Definition
1. there are legal constraints on acquisitions
2. acquisitions limit a firm's flexibility under conditions of high uncertainty
3. there is substantial unwanted organizational "baggage" in an acquired firm
4. the value of a firm's resources and capabilities depends on its independence |
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