Strategic alliances and their cultural aspects

Strategic alliances and their cultural aspects

IBC 2003

Hogeschool Arnhem en Nijmegen

Joop Vinke M.A.

Definition of an allianceDefinition of an alliance

1. Open-ended (“incomplete”) agreement

2. Between separate firms

3. With shared control

Arm’s length control

Merger or AcquisitionAlliance

important motives for entering into strategic

alliances

important motives for entering into strategic

alliances

1. Obtaining know-how

2. Entry to (new) markets

3. Increasing efficiency

4. Spreading business risks

5. Offering integrated solutions to clients

6. Increased competition due to liberalisation of markets

7. Growing costs and necessity to bring new products and services to the market

8. Trend to follow the leader

Mergers, Acquisitions and Takeovers

Mergers, Acquisitions and Takeovers

Merger: any transaction that forms one economic unit from two or more previous units

Acquisition: the purchase of a controlling interest in a firm, generally via a tender offer for the target shares

Takeover: a general term which includes both mergers and acquisitions

Kinds of alliancesKinds of alliances

- Tactical and strategic alliances;(Van Gils, 2000)

- Horizontal, vertical (upstream/downstream), diversification, and diagonal alliances;

(Macbeth & Ferguson, 1994; Nooteboom, 1999)

- Strategic alliances: learning, business, and hybrid alliances;

(Koza and Lewin, 2000)

- Scale alliances (horizontal, business) and complementary alliances (learning).

(Garrette and Dussage, 2000)

Advantages of co-operation

Advantages of co-operation

- forming novel combinations of perspectives- stimulates specialization (and through that

economies of scale) - sharing of risks- motivation for survival and continuity (of smaller

firms)- more flexibility and greater diversity of sources

of competence

Polygamy is O.K.!!!Polygamy is O.K.!!!

A single ideal partner seldom exists Complexity demands multiple capabilities

But:

Promiscuity is not……….

From traditional competition

From traditional competition

To group vs. group

Results:Results:

From ………………

Traditionally rivalry Firm vs. Firm Firms advantage Core competence Corporate structure

To…………….

Collective competition Group vs. Group Group advantage Group competence Group structure

How to build strategic alliances?

How to build strategic alliances?

Strategic alliances are formed to unite culturally different partners in pursuit of a common objective.

Successful alliance leaders manage the relationship in the context of the partner’s cultural differences, finding ways to create value from complimentary differences and reduce the impact of those differences that impede alliance success

But remember:The number of successful alliances is still less then

50%

The influence of alliances on the culture

of organisations

The influence of alliances on the culture

of organisationsResults of a survey of 455 CEO’s in 2000:

1. Overly optimistic2. Poor communication3. Lack of shared benefit4. Slow results for payback5. Lack of financial commitment6. Misunderstood operating principles7. Cultural mismatch8. Lack of alliance experience

Spekman, Robert E., Alliance competence, New York 2000

What is CULTURE?What is CULTURE? Symbols:gestures, words, objects etc. of which only the group

members know the meaning Heroes:public figures, dead or alive, real or fictive, who serve as

role models Rituals:acts that, for outsiders, may seem useless but are socially

essential

Norms and ValuesNorms and Values Norm:

What is right? / What is wrong?

Value:What is good / bad?What is beautiful / ugly?What is natural / artificial?What is normal, not normal?Etc.

Explicit culture

Values and Norms

Symbols

Heroes

Rituals

Is culture inborn or learned?

Is culture inborn or learned?

Definitions: “The right way of doing things”” “The collective mental programming of people in

an environment “The collective preference of one decision above

another one”” “Integrated system of patterns of behaviour which

are acquired by all members of a society

Models: 1. HofstedeModels: 1. HofstedePDI - power distancethe extent to which a culture accepts that power in organizations is distributed unequally

MAS - Masculinitythe value attributed to achievement, assertiveness, and material success as opposed tothe stereotypical feminine values of relationships, modesty, caring and the quality of life.

IDV - Individualismthe extent to which people are supposed to take care of themselves and be emotionallyindependent

UAI - Uncertainty avoidancethe degree to which members of a society are uncomfortable with risk and uncertainty

CDI - Confucian dynamismthe extend to which a society exhibits a pragmatic future-oriented perspective rather thena conventional historic or short time point of view

The seven dimensions of cultureThe seven dimensions of culture

universalism vs. particularism

individualism vs. collectivism

neutral vs. affective relationships

specific vs. diffuse relationships

achievement vs. ascription

Sequential vs. synchronic culture

Internal vs. external control

Models: 2. Trompenaar

Universalism vs. particularism

Universalism vs. particularism

Universalism:

“What is good and right can be defined and

always applies!“

What is more important - rules or relationships?What is more important - rules or relationships?

Particularism:

Great attention to the obligations of

relationships and unique circumstances

Individualism vs. collectivism

Individualism vs. collectivism

Do we function in a group or as an individual?

A. “It is more important to focus on individuals so that they can contribute to the collective as and if they wish”

B. “It is more important to consider the collective first since that is shared by many individuals”

Neutral vs. affective (emotional) relationships

Neutral vs. affective (emotional) relationships

“The nature of our interactions

should be

objective and detached”

North European business relationships

“The expressing the emotions

is part of

the relationship and therefore acceptable”

South European business relationships

Specific vs. diffuse relationships

Specific vs. diffuse relationships

When the whole person is involved in abusiness relationship there is a real and personal contact,

instead of the specific relationship prescribed by contract.

Achievement vs. ascription

Achievement vs. ascription

Ascription:

“The status isattributed to you, by

birth, childhood,gender or age, but

also by yourconnections and youreducational record.”

Do we have to prove ourselves to receive status or is it given to us?Do we have to prove ourselves to receive status or is it given to us?

Achievement:

“One will be judgedon what you have

recentlyaccomplishes and on

your record.”

Sequential vs. synchronic culture

Sequential vs. synchronic culture

Is time a line ?

…..or is it a circle?

Past, present and future

Past, present and future

…. Or? How would You draw it??

Past Present Future

Internal vs. External control

Internal vs. External control

Do we control our environment or work with it ?

1. Major focus affecting their lives and the origins of vice and virtue as residing within the person (part of the nature)

2. World is more powerful than individuals. Nature is to be feared or emulated.

Global Literacy Global Literacy

Be effective in doing business and managing with

different culture

This applies equally to: 1. those working where there is diversity in the

work force 2. those travelling and working in different

cultures 3. those receiving business visitors from other

cultures

Don’t………..!Don’t………..!Change your behaviours to try to

emulate the culture(s) you are working with.

orSimply 'Do in Rome as Romans do...

etc.

Try …………Reconciliation

Try …………Reconciliation

In dealing with different cultures, you have several options:

• Ignoring other culture

• Abandon your standpoint

• Compromise or…………

Reconciliation:

Universalism

…We do not want to drown in chaos or lose our sense of central directions so we must…

…Apply rules and procedures universally to ensure equity and consistency although……

..Encourage flexibility by adapting to particular situations. However......

…We do not want to degenerate into rigidity and bureaucracy so we must………

Particularism

Central guidelines with

local adaptations and discretion

Cultural differencesCultural differences How does a company learn and work, Where is it? Whom does it serve

and how?…………..…….are all manifestations of its culture.

How does it deliver knowledge throughout the organization? What is the corporate structure? What practices distinguish its operations? Who are its stakeholders? What are their objectives?

Company-culture is defined by the answers to these questions, but determined by the context in which the

company exists.

Three types of cultures affecting

organizations and alliance partner behaviour

Three types of cultures affecting

organizations and alliance partner behaviour

National / Ethnic CultureIndustry / Organizational CultureProfessional Culture

1. National / Ethnic Culture

1. National / Ethnic Culture

The values and norms that create the society in which the partner

organization is based.

Drives for thinking, communications styles, attitude towards hierarchy, gender roles and

other aspects of individual and group

A model for defining national culture

A model for defining national culture

based on the diversity of European regimes

Rheinic modelGermany, Austria, Netherlands,Scandinavia, France

Anglo-Saxon model UK, Ireland

Latin Rim modelGreece, Spain Southern Italy, Portugal

The “Rheinic” modelThe “Rheinic” model

Social partnership in various forms

Germany, Austria, Netherlands, Scandinavia, France

Juridified industrial relations Work councils Emphasis on social cohesion and social market Welfare as “first resort” Corporatist tradition

The “Anglo-Saxon” model

The “Anglo-Saxon” modelFree marketUK, Ireland

Voluntarist, adversarial industrial relationsFree marketWelfare as “last resort”

The “Latin Rim” modelThe “Latin Rim” model

Greece, Spain Southern Italy, Portugal

Conflictual, antagonistic industrial relations Mixed labour market Rudimentary welfare (church, family support)

2. Industry / Organizational Culture

2. Industry / Organizational Culture

“Reflects the values and norms that permeate the organization”

It is distinguished by: orientation towards risk, collaborative management style, maturity, corporate arrogance, level of centralization market focus, among others.

3. Professional Culture 3. Professional Culture

“the values and norms embodied by professionals of a specific

discipline”

People in different occupations usually incorporate the professional biases associated with their roles within the

organization

Managing cultural differences

Managing cultural differences

      Define differences!

      Research!

      Simplify!

      Management!

Building alliance competence

Building alliance competence

The most frequently items that companies miss are:

An “alliance-culture” throughout the organisation

A clear understanding of how and where within the company the alliance issues should be resolved

The know-how to develop internal alliance competences

Five steps to build alliance competenceFive steps to build

alliance competence

1.      Embracing the concept2.      Identify alliance responsibility3.      Allocate dedicated resources4.      Adopt a methodology5.      Develop an alliance process

Alliance StrategiesAlliance Strategies

“More important than creating strategic alliances is to develop alliance

strategies” B. Gomez-Casseres (2002)

1. Let Business strategy drive alliance decisions

2. Grow relationships; don’t “do deals”

3. Create portfolios of alliances, not stand alones

4. Organize internally to co-operate externally