The fourth case study for CMA (Final) Group 3 students-

Paper 15 - Business Strategy and Strategic Cost Management

CASE STUDY 4

Advantages of Global Strategic Alliance

HP and Microsoft global strategic alliance is one of the longest standing alliances of its kind in the industry, with more than 25 years of combined market place leadership focused on helping customers and channel patterns around the world to improve productivity through the use of innovative technologies. Branded the HP and Microsoft Frontline Partnership, the companies share technology, engineering and marketing resources to create and promote solutions based on industry-standard computing platforms that help solve some of the most challenging IT problems. HP and Microsoft have jointly engineered solutions that deploy smoothly, seamlessly and delivered competitive advantage. Over the time, the alliance has expanded from its earliest roots focused on the desktop PC to include innovations in the data center and emerging technologies for businesses of all sizes. The alliance also has expanded to provide opportunities for our more than 32,000 joint resellers and ecosystem partners.

(i) Define strategic alliance. Identify three basic types of strategic alliances.

(ii) What are the advantages of the HP and Microsoft global strategic alliance?

Answer:

(i) A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. This form of cooperation lies between M&A and organic growth. Strategic alliances are cooperative strategies between firms whereby resources and capabilities are combined to create a competitive advantage. All strategic alliances require firms to exchange and share resources and capabilities to co-developed or distribute goods or services. The three basic types of strategic alliances are:

(a) Joint ventures, where a legally independent company is created by at least two other firms, with each firm usually owning an equal percentage of the new company.

Benefits of Joint Venture:

(i) Pooling of resources, (ii) Full utilization of underutilized resources, (iii) Higher rates of profits, (iv) Low risk factors, (v) Massive leverage

(b) Equity strategic alliances, whereby partners own different percentages of equity in the new company they have formed.

Example of Equity Strategic Alliances Ford Motor Company and Mazda Motor Corporation formed a long – standing equity strategic alliance.

(c) Non-equity strategic alliance, which are contractual relationships between firms to share some of their resources and capabilities. Typical forms are like Licensing agreements, distribution agreements and supply contracts.

Example of Non-Equity Strategic Alliances Example of a successful non- equity strategic alliances is the du and Vodafone alliances formed in 2009.

 (ii) The following are specific advantages in the global strategic alliance:

(a) Get instant market access;

(b) Exploit new opportunities to strengthen the position in a market where a firm already have a foothold;

(c) Increase sales;

(d) Gain new skills and technology;

(e) Develop new products at a profit;

(f) Share fixed costs and resources;

(g) Enlarge the distribution channels;

(h) Broaden the businesses and political contact base;

(i) Gain greater knowledge on international customs and culture:

(j) Enhance your image in the world market place.

Source: Suggested Answers - December 2013 by ICAI