Creating Profit Through Alliances - business models for collaboration E-book | Page 36

Ten forms of alliances There are many definitions of partnering or partnerships, each from its own angle. A frequently used definition is as follows16: Organisation form Market Alliance Company Collaboration mechanism Transaction Agreement/ joint venture Merger or take-over Agreement with a clear scope Open-ended contract One single company Limited mutual dependency Mutual dependence to achieve goals Control over all resources No separate operational costs Parties remain separate companies Features An alliance is any governance structure involving an incomplete contract between separate firms and in which each partner has limited control. 17 Features of a partnership are :    It involves two or more companies that pursue a common goal, yet remain independent. This can be pursued by means of an agreement, or within a separate legal entity: a joint venture. Both parties manage the alliance and share in the revenue. Costs or revenue are not necessarily known beforehand. Each of the parties contributes in strategic areas, such as technology, products, distribution channels, etc. A partnership may be viewed as an intermediate form between an open market and bundling activities within a single company. This is shown in Figure 17. In the market the parties work together on the basis of individual transactions. The mutual dependency does not extend beyond supply and payment, and there are no separate operational costs, aside from purchasing and sales activities. The organisational form at the opposite side of the spectrum is the bundling of activities within a single business, for instance through a merger or take-over. This yields full control over all required resources, and also makes it possible to sell off certain activities. 34 Shared decision making Internal operational management Option of divestiture Figure 17. Alliances as intermediate form between market transactions and an integrated company Partnering often involves sharing risks. For example, a customer-supplier relationship may develop into a true partnership if both parties decide to bear the risks that they are best able to manage, and if they both commit to improving the shared product. This can sometimes require a different mechanism than setting a fixed price for a predetermined amount of products or activities. The remainder of this book will employ a classification of alliances into 10 basic forms, each with its own goal, structure and intensity. This may represent a wider scope than most other authors use. However, all these forms occur in practice and meet the definition given above. The basic idea is always one of the three aforementioned competitive strategies: increasing customer relevance, creating a unique product, or seeking cost benefits (see Figure 18).