research@hec - Issue #19 - (Page VI)

Pierre Dussauge Strategic Alliances: research Even companies that seem invulnerable are not immune to the effects of alliances gone sour. The Danone Group appeared to be firmly established on the huge Chinese food and non-alcoholic drink market, but its position has recently deteriorated quite drastically. What happened? Danone’s 1996 alliance with China’s Hangzhou Wahaha Group was denounced by the latter in 2007. Hangzhou Wahaha criticized Danone for entering into joint ventures with competitors (i.e. Robust, Aquarius), and Danone reproached Wahaha for using its brand beyond the scope of their agreement. After a rough period of time dominated by conflict and law suits, the expartners finally came to an “arrangement” that cost Danone a fortune… Pierre Dussauge comments, “An alliance must not be viewed as a stand-alone arrangement. Every new alliance has to involve consideration of pre-existing alliances and assessment of potential benefits for the organization as a whole.” its expected benefits. The Need for a Holistic Approach Alliances enable companies to take advantage of opportunities, acquire new or complementary skills and/or technologies, counter competition, enter fashion. Firms are often involved in numerous alliances, and all must be considered to ensure that the cost of an additional alliance not outweigh new markets, and more. Yet to harvest such benefits, Pierre Dussauge says that companies must approach alliances in a structured and comprehensive hec BIOGRAPHY Pierre Dussauge is a professor of strategic management at HEC Paris and a business advisor for corporate leaders in France and abroad. He is the coauthor of Strategor—the “bible” of business strategy—as well as an expert on alliance strategies and the French armament and aeronautics industries. Dussauge holds a PhD in management sciences from HEC. THE SMALL VS. THE BIG PICTURE In recent years, there has been a proliferation of alliances in industries where both local and international activity is intense. For example, in the air transportation industry, alliances have increased from an average of 4 per airline to an average of 12 per airline (2008), with a few companies reaching highs of 30 or even 40 alliances! However, Dussauge explains, “Alliances are sometimes STEP ONE: ASSESS AN ALLIANCE’S SPECIFIC POTENTIAL When it comes to forming alliances, Dussauge recommends a multi-step decision-making process. All the parties concerned should be involved, and each should have a clearly defined role to play (see the RACI diagram on the following page). The first step is to assess the costs and benefits of a potential alliance in an isolated manner, considering the following four factors: economies of scale to be achieved by combining means and skills; access accumulated blindly, without any rational consideration of what they mean for the group. This happens because such decisions are made by local business unit managers whose eye is on boosting operational results.” Indeed, managers’ career advancement is closely linked to their business unit’s performance. This spurs internal competition, and mangers are highly likely to favor the specific interests of their unit over the well-being of the parent company. “Alliances reflect strong relationships with partners, so when business unit managers form an alliance, they are also affirming their independence, freedom, and status within their corporate group. It is critical to put a stop to such isolated ways of thinking. Companies need to establish a rational process for assessing the value of an alliance.” VI research@hec • February-March 2011

Table of Contents for the Digital Edition of research@hec - Issue #19

Cover & Contents
The Structure and Workings of Interorganizational Networks
Limit Orders: Time Counts More Than Information
Strategic Alliances: The Need for a Holistic Approach
HEC PARIS Publishing News

research@hec - Issue #19