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PITFALLS

PITFALLS OF STRATEGIC ALLIANCES

Incompatibility Of Partners

Incompatibility among the partners of a strategic alliances is a primary cause of the failure of such arrangement. At times, incompatibility can lead to outright conflict, althought typically  it merely lead to poor performance of the alliances. 

In many case, compatibility problems can be anticipated if the partners carefully discuss and analyze the reasons why each is entering into the aliances in the first place. a useful starting point may be meeting beetween top managers of the two partners to discuss their mutual interest, goals, and beliefs about strategy. the manner in which the managers are able to cooperate  in a strategic alliance. Obviously, if the partners cannot agree on such basic issues as how much decision -making power to delegate to the alliance's business unit, what the alliances strategy should be, how it is to be organised , or how it should be staffed, compromise will probably be difficult to achieve and the alliance is unlikely to succeed. For example, a marketing aliances between AT&T and Italy's Olivetti announced with great fanfare in the mid-1990s quickly failed after the firm could not reach agreement on a marketing strategy, what they wanted the alliances to accomplish, and how they planned to work together.

figure - pifalls of strategic alliances


 Access To Information

Limited access ti information is another drawback of many strategic alliances. For a collaboration to work effectively, one partner (or both) may have to provide the other with informaton it would prefer to keep secret. it is often dificult to identify such needs ahead of time; thus a firm may enter into an agreement not anticipating having to share certain information. when the reality of the situation becomes apparent, the firm may have to be fortcoming with the information or else copromise the effectiveness of the collaboration. 

Conflict Over Distributing Earnings  

An Obvious limitation of strategic alliances related to the distribution of earnings. Because the partners share risks and costs , they also share profits. and example, General Mills and Nestle split the profits from their European joint venture on a 50/50 basis. basis. of course, this aspect of colaborative arrangements is known ahead of time and is virtually always negotiated as part of the original agreement. 

However, there are other financial considerations beyond the basic distribution of earning that can cause disagreement. the partners must also agree on the proportion of the joint earnings that will be distributed to themselves as opposed to being reinvested in the bussiness, the accounting procedure that will be used to calculate earnings or profit, and the way transfer pricing will be handled. 


Loss Of Autonomy

Another pitfalls of s trategic aliances is the potential loss of autonomy. Just as firms share risks and profits, they also share control, thereby limiting what each can do. most  attempts to introduce new product or services, change the way the alliances does busines, or introduce any other significant organizational change first must be discussed and negotiated.

At the extreme, a strategic alliances may even be first step toward a takeover. In the earlier 1980, the japanese firm fujitsu negotiated a strategic alliances with International Computers, Ltd .(ICL), a British computer firm. After nine years of working together, Fujitsu bought 80 percent of ICL. One survey of 150 terminated strategic alliances found that more than three-fourths ended because a japanese firm had takenover its none-Japanese partner.  In other cases, partner may accuse each other of opportunistic behavior, that is, trying to take unfair advantageof each other. For example a joint venture between the walt Disney  Company and Sky Television, a British pay-TV channel operator, broke down after Sky accused Disney of Deliberately delaying the supply of promised programming. Disney, in turn , accused Sky of proceeding too hastily and without cosulting it.

Changing Circumstances

Changing circumstances may also effect the viability of a strategic alliances. the economic conditions that motivated the cooperative arrangement may no longer exist., or technological advances may have rendered the agreement obsolete. For example, in 2008, Siemens announced it wished to terminated its joint venture with Fujitsu, Fujitsu Siemens  Computers (FSC). Although FSC has been one of Europe 's leading personal computer manufacturers since its creation in1999, Siemens believed that the future profitability of the joint venture wan unpromising due to increase competition from Hewlett-Packard, Dell, and Apple. Similarly, the joint venture between Corning ang Asahi Glass, Asahi Video Product Company, was terminated in 2003 due to declining demand for the venture's product, cathode ray tubes for TV sets.  



 

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