Marketing Strategy and Competitive Positioning pdf ebook

By Andrew Edgecliffe-Johnson in New York
Source
: Maurice Savage / Alamy Stock Photo.

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424
CHAPTER 15 STRATEGIC ALLIANCES AND NETWORKS
Introduction 
In developing marketing strategy, it is important for executives to consider the new organisational 
forms and routes to market that are developing, and in particular the impact of strategic alliances 
and networks as a way of competing. However, from the outset, two points are important: first, 
what matters are your strategic objectives – alliances and networks are a means to an end, not 
an end in themselves; and second, if partnership and alliance is your way forward, then you need 
to take a strategic approach to managing these new types of business relationships, or they will 
fail – one estimate is that between 60 and 70 per cent of alliances fail ( Hughes and Weiss, 2007 ). 
Thus, this chapter adopts a critical perspective that examines the following issues as a 
framework for competing through strategic alliances and networks: 
● 
the implications of an era of strategic collaboration for our strategic choices;
● 
the types of partnership, collaboration and strategic alliance that are emerging in the 
marketplace, as important ways of building networks;
● 
the forms that networks of collaborating organisations take, and the development of 
new organisational forms for marketing based on networks;
● 
the importance of strategic alliances as a competitive force in global markets;
● 
the risks involved in strategies of collaboration and alliance.
A clear management agenda is needed that details the issues that should be addressed in 
evaluating alliance-based strategies as a way for us to go to market. Figure 15.1 shows the 
structure of our coverage of this topic.
separate bus ticket, and ‘intelligent personal route-
ing’, using data to advise users of their best routes 
home. 
‘All transit systems are built for the peak of the 
peak. If you could find a way to take 5–7 per cent of 
the peak of the peak traffic off to less used routes 
you could reduce the cost of how you build and 
plan transit systems enormously,’ he said, estimat-
ing that large urban transit systems could save 
$150m–$200m by being able to delay upgrades to their 
infrastructure. 
Citing the example of Transport for London, 
which has opened up its ticketing systems from 
depending on its Oyster Card contactless payment 
system to accepting ordinary bank cards, Mr Banga 
said MasterCard could save transit system operators 
the cost of maintaining their own systems. ‘It’s actu-
ally cheaper for them’ than maintaining their own 
systems and handling cash, he said. ‘It takes out the 
friction.’ 
Mr Banga said that getting transit systems to 
accept payment cards could be a ‘critical factor’ in 
expanding MasterCard’s market. It processed more 
than 11bn transactions in the first quarter from the 
2.2bn MasterCard and Maestro cards in issue. 
Mr Banga added that most MasterCard users are 
in cities, which are home to more than half of the 
world’s population and about half of the world’s 
‘financially excluded’ – a group MasterCard has been 
targeting through separate initiatives with the UN, 
the World Bank and others. 
The company is among several, including IBM 
and Google, to have identified the business potential 
in the rise of ‘smart cities’ – increasingly automated 
and connected urban areas whose authorities use 
data to inform the provision of public services. 
More public–private partnerships would be needed 
as urbanisation puts a strain on cities’ networks, Mr 
Banga added, saying the challenges transit systems 
face were ‘too vast, too deep’ to tackle alone. 
Source : from ‘MasterCard cashes in on smart transit’, Financial Times , 02/07/15 (Edgecliffe-Johnson, A.).
Discussion questions
1 
What are the issues facing MasterCard?
2 
How is the company attempting to address these issues?

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425
PRESSURES TO PARTNER
It is important from the outset to recognise that alliances and networked organisa-
tions may be the basis for driving new business models and new marketing strategies in 
markets everywhere. For example, Chinese e-commerce phenomenon Alibaba became 
the world’s largest stock market flotation in 2014, with a $22 billion valuation on the 
New York stock exchange, which some see as heralding the end of US dominance in 
e-commerce. Alibaba is the world’s largest online marketplace for trade between com-
panies and has built an unrivalled online retail platform in China. It ships around £90 
billion worth of goods a year, and handles more packages annually than Amazon and 
eBay combined. Its Taobao website has been the engine of growth by linking consumers 
together on a peer-to-peer model. More recent emphasis is on the Tmall website that 
hosts large retailers selling to consumers. Alibaba operates on a net margin of 50 per 
cent because its model is to connect buyers and sellers and leave others with the costly 
business of moving goods around. Helping merchants to market their goods in China 
accounts for half of Alibaba’s sales; sellers’ commissions account for a quarter; and most 
of the rest comes from the wholesale business and international commerce. Cost of sales 
is incredibly low. The wall around Alibaba’s business is the network effect – the company 
has the most buyers and sellers, giving current users an excellent reason to stay and new 
users reasons to come. Alibaba has created multiple sites – each tailored for a different 
style of transaction, and each with the potential for massive global reach. Alibaba is a 
global channel in a way that Amazon is not, because it facilitates so much business into 
and out of China ( Collack and Armstrong, 2014 ). Alibaba is a compelling example of 
the strength of a networked competitive model.
15.1 
Pressures to partner 
The topicality of alliance and network concerns reflects the fact that the environment in 
which businesses go to market has changed radically in most sectors and continues to be 
turbulent and higher risk than ever before. We will consider the nature of this revolution 
and its profound implications further in Chapter 18 . For the moment we note that the new 
environment for business is increasingly characterised by: 
●