Strategic partnerships Content of the lecture n Facts supporting cooperation n Reasons to cooperate – cooperation theories n Forms of strategic partnerships n Strategic alliance n Cooperation in retail and wholesale Some statistics n volume of direct foreign investment exceeded 7 billion EUR in 2008 n 99,8% of all the Czech companies in the CR belongs to SME n 60% of all the employees in the national economy are employed in the SME n Great importance of SME in the CR for GDP n Ability to compete in the EU can be acquired when co-operating with other companies around even if they are competitors Classification of an enterprise n Eurostat: ¨ micro enterprise – up to 9 employees ¨ small enterprise – up to 99 employees ¨ medium enterprise – up to 499 employees ¨ large – more than 500 employees Disadvantages of SME´s n limited possibility of financing (this disadvantage causes other secondary problems) n higher interest rates at the bank n underutilization of production machines n employees motivation Which of the mentioned problems can be solved by strategic alliances? Main purposes of the alliances • activities and resources shared between partners – co specialization • competition battle reduction – co-option. coopetition • knowledge creation, transmition and utilization – co-learning, learning and internalization • power shift, image and trustworthiness shift Theories explaining interorganizational cooperation n Resource dependance theory ¨ Formalized by The External Control of Organizations: A Resource Dependence Perspective (Pfeffer and Salancik 1978) n Transactional cost theory ¨ R.Coase in 1937 n Social network theory ¨ Sociometry, Moreno, Milgram, Granovetter, Burt n IMP Group ¨ Value of relationships Business Collaboration: The Four C's Intensity of linkages Strategic Partnerships ¨ „open“ form of co-operation n occasional co-operation n „salient“ informal agreements ¨ informal collaboration with information sharing n handshake agreement ¨ production, assembly, buy, back agreement ¨ management, marketing, service agreement ¨ licensing (outsourcing) ¨ franchising ¨ preferred suppliers and buyers ¨ joint ventures ¨ „close“ form of co-operation n merger n acquisition Strategic alliance n alliance → one form of strategic partnership n A relationship formed by two or more organizations that share (proprietary), participate in joint investments, and develop linked and common processes to increase the performance of both companies. Many organizations form strategic alliances to increase the performance of their common supply chain. Source: http://www.apics.org/ n A Strategic Alliance is a partnership between two or more companies to pursue a set of agreed upon goals while remaining independent organizations. Strategic alliances come in all shapes and sizes, and include a wide range of cooperation, from contractual to equity forms. Source: Encyclopedia, Wikipedia, http://en.wikipedia.org/wiki/Strategic_alliance n Definition accroding ASAP: ¨ agreements with „open“ end ¨ between separated companies ¨ sharing common interests or goals The process of strategic alliance creation Process model of strategic alliance formation Informal collaboration with information sharing n Sharing of information which are interesting for the both sides (supplier and subscriber) n The partners can share the experience and other data resources concerning the market conditions, experience with other partners, computer programs n Handshake agreements n Question of trust – it can be problem in the CR Preferred suppliers and buyers n Agreements connected with the special position of the partners (sole agency) n Long-term co-operation n License agreements are the subgroups of strategic partnership (strategic partnership is wider notion than strategic alliances) but they are also established on the principles of preferred suppliers and buyers n ŠKODA Auto Mladá Boleslav Sole agency n The company Starlift s.r.o. is the exclusive agent of the company Mithsubishi Forklift Truck (manufacturer of material handling equipment for a wide range of industrial and commercial applications, ) n Starlift is a distributor of the lift trucks and alongside it provides the customer of Mitshubishi company with maintenance services n The co-operation started 15 years ago n Starlift company is also sole distributor for the Slovak market Production / assembly / buy back agreements n The participating companies are trying to exploit the advantages coming from the economies of scale n Co-operation connected with fluently recovery of the capital equipment and later with buy back by the supplier of the equipment Management / marketing / service agreements n Agreements concerning the collective solution and implementation of external processes n The external processes can be presented by mutually coordinated marketing, assembly and servicing of complicated equipments, commen distribution n The example of Technicoat and DuPont, co-operation in the strategic planning of marketing activities Licensing n The Czech company Technicoat s.r.o. operates in the surface coating business specializing in the application of industrial coatings (Teflon, Xylan, Dykor, Halar, Rilsan) n Technicoat was awarded DuPont license to apply Teflon® Fluoropolymer coatings „DuPont Licensed Industrial Applicators“ n Technicoat is supplying also Slovak and Polish market n Success of the co-operation: troublefree communication, sharing of know-how, knowledge of Czech and Slovak market Joint ventures n An agreement between two or more firms to undertake the same business strategy and plan of action n It has its legal form n Two companies want to co-operate (share knowledge, markets, and profits) and they decide to create another company together – JOINT VENTURE n In the CR typical for the enterprises with foreign capital Barum Continental n tires producer n JV partner – German company CONTINENTAL – 1992 n Barum – part of Continental Group SEPLAST n The company Plastika s.r.o. Kroměříž established joint venture with the French company Seat Ventilation, SA in 1994 – SEPLAST s.r.o. n Seplast is a producer and distributor of industrial ventilators units and plastic industrial ventilators n Plastica provided the French partner with knowledge of the Czech market Close form of cooperation n merger n acquisition n Acquisitions – key success factor: ¨ ability to integrate the company (85) ¨ synergies (84) ¨ competitive position of the company acquired (81) ¨ evaluation of acquisition candidate (80) ¨ management abilities of company acquired (77) ¨ prior experience making acquisitions (69) ¨ market growth of the company acquired (69) ¨ technology position of the company acquired (68) ¨ compatibility of management styles (67) ¨ price paid (64) ¨ aid from public authorities Wall Street Journal/Booz-Allen &Hamilton Survey 2002 Co-operation in retail and wholesale Cooperation in retail and wholesale n Stages of co-operation: ¨ Purchasing and payment alliance ¨ Purchasing and selling alliance ¨ Marketing alliance ¨ Service organization n NC Praha – purchasing and payment alliance SPAR n COOP Centrum n Marketing alliances - Droxi, RENOME Traditional Sales Model The Partnering Model Dissatisfaction with alliances followed by their end n Low rate of strategies conformity n Unrealistic expectation concerning difficulty of establishment and running the alliance n Key workers don't want to work n Key workers don't manage to fulfill qualification requirements n Enemy effort to become independent with regard to the founder My experience concerning cooperation in the CR n Problem with trust between the Czech companies being competitors, if they are going to co-operate (the Moravia Silesia Cluster) – problem especially of the co-operation supported by public authority n Foreign partners are trying to produce for cheap in the Czech Republic n Foreign partners want to expand and don´t know the Czech market n Cooperation between Czech firms in the sphere of research and development (24 of innovative research parks in the CR) n Expansion of outsourcing Thank you