Insights on Alliance Management, Accountability, Sarbanes-Oxley, Marketing Theory and Leadership Competencies

By Andal-Ancion, Angela; Yip, George et al. | European Business Forum, Spring 2005 | Go to article overview

Insights on Alliance Management, Accountability, Sarbanes-Oxley, Marketing Theory and Leadership Competencies


Andal-Ancion, Angela, Yip, George, Kedia, Ben, Lahiri, Somnath, Lovvorn, Al, Williamson, Dermot, European Business Forum


EDITOR'S NOTE

The in-depth section of EBF--which you will find in the next 26 pages--represents a change of style and pace for the reader. While the preceding EBF debate dealt with a specific theme, here we broaden the focus to look at a variety of topics that affect businesses across Europe and around the world. Leadership, the impacts of culture on accountability, the evolution of marketing thought and the impact of financial regulations are among the subjects discussed.

Smarter ways to do business with the competition

Culture and managing expectations are the key to developing successful business alliances

Every company needs to co-operate with rivals at some point during its business lifetime. Increased levels of local and international competition, coupled with smarter and more discerning customers, require more sophisticated and efficient ways of doing business. In addition, many regulated or protected industries have restrictions on cross-border activities or mergers.

[ILLUSTRATION OMITTED]

Alliances and partnerships with peers and competitors offer a credible alternative to flying solo. The idea seems easy and straightforward: pooling ideas, resources and capabilities gives managers and companies added strength and power. Yet with strength comes complexity, balancing power, decision-making and group dynamics. Alliances among peers and competitors pose many issues, including:

* Alliance structure (organisation, governance and ownership)

* Managing members' expectations

* Creating the alliance content

* Fostering a healthy alliance culture

* Managing external networks

* Measuring performance

Companies that enter into strategic alliances thus encounter many dilemmas. We have summarised the key issues into six categories of 10 dilemmas:

Structure

Dilemma 1: what sort of entity should be created to manage the alliance?

Dilemma 2: how should power be distributed among the members?

Expectations

Dilemma 3: how do you resolve differing visions of the alliance's evolution?

Dilemma 4: how do you build trust among actual and potential competitors?

Content

Dilemma 5: how do you create a separate identity for the alliance while maintaining the individual identities of members?

Dilemma 6: what should each member give up doing?

Dilemma 7: should members be involved with each other outside alliance business?

Culture

Dilemma 8: how should the alliance deal with cultural differences, whether national or business-related?

External networks

Dilemma 9: how should alliance members deal with their external networks?

Performance

Dilemma 10: how do you quantify the gains from alliance involvement?

This paper discusses how Star Alliance, the world's largest airline alliance, has dealt with these 10 dilemmas.

Star Alliance constitutes one of the most complex alliances in the world, with 15 air-line members from 16 countries: Air Canada, Air New Zealand, ANA (Japan), Asiana Airlines (South Korea), Austrian, bmi (United Kingdom), LOT Polish Airlines, Lufthansa (Germany), SAS Scandinavian Airlines (Denmark, Norway and Sweden), Spanair (Spain), Singapore Airlines, Thai, United (US), US Airways, and Varig (Brazil).

Structure

Dilemma 1: what sort of entity should be created to manage the alliance?

An alliance can be formed as an independent entity or as dependent on its parent companies. When only a few partners are involved, dependence can be the simplest solution, reducing the need for separate systems. BP and Mobil adopted this approach for their European oil business joint ventures, essentially operating the refining venture as a BP entity, and the lubricants venture as a Mobil entity (Bamford et al. 2004).

The road to finding the right entity for Star Alliance took many turns. …

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