N&O: Strategic Alliances and Outsourcing

Question 1

What are four bad approaches to strategic alliances?

Answer 1

1. Choosing partners that are direct competitors
2. Starting an alliance with another weak company
3. If primary purpose is for weaker company to improve its skills
4. Using alliance to raise capital without giving up management control (requires passive investor)

Question 2

When is potential for con flight between partners high and low?

Answer 2

High: When they are competitors whose product and geographic positions overlap

Low: When each partner brings distinctive qualities to the table

Question 3

Why is a company selling itself to a an alliance member at a disadvantage?

Answer 3

Buyer’s bargaining power increases over the course of the alliance, the buyer usually gets a large share of the synergies without paying full acquisition price

Question 4

What are six categories of alliances?

Answer 4

1. Collision between competitors: Often short lived and fail to achieve goal
2. Alliances of the weak: Usually, the weak grow weaker and alliance fails
3. Disguised sales: Weak company combines with strong, weak player remains weak and will be acquired by strong player
4. Bootstrap alliances: Weak company tries to use strong company to improve its capabilities
5. Evolution to a sale: Starts with two strong partners but power balance tilts and one partner sells out to other
6. Alliances of complementary equals: Two strong partners remain strong during alliance. Usually achieve goal and last longer than seven years

Question 5

What are the key motivations for outsourcing?

Answer 5

1. Risk pooling
2. Economies of scale
3. Reduced capital investment
4. Increase flexibility
5. Focus on core competency

Question 6

What are the risks of outsourcing?

Answer 6

1. Conflicting objectives

2. Loss of competitive knowledge

Question 7

What are two main reasons to outsource? (fine and Whitney)

Answer 7

1. Dependency on knowledge

2. Dependency on capacity

Question 8

What are modular products?

Answer 8

1. Interchangeable
2. Independent of each other
3. Can be upgraded

Question 9

What are integral products?

Answer 9

1. Designed as a system by taking top-down approach
2. Not made from off-the-shelf components
3. Product performs multiple functions
4. Evaluated based on system performance

Question 10

What is procurement?

Answer 10

• Means buying services or goods from an external source

- The smaller the profit margins the more important it is to focus on decreasing procurement costs

Question 11

Explain Fisher’s framework

Answer 11

Functional vs innovative products

Question 12

Create Kraljic’s supply matrix

Answer 12

-

Question 13

Explain the combined Kralijic and Fisher framework

Answer 13

1. Forecast accuracy
2. Supply risk
3. Profit impact
4. Clock-speed