Marketing Strategy and Competitive Positioning pdf ebook

Figure 15.6 
Forms of collaboration and inter-organisational commitment
Low
High
Inter-organisational commitment and closeness
Outsourcing
Partnership
Strategic
alliance
Joint
venture
Ownership
Purchasing of
goods/services,
possibly long term
with a close buyer–
seller relationship
Coordinated
activities between
companies, possibly
long term
Formal agreement
between companies to
collaborate and act
jointly
Shared ownership
in an operation with
a collaborator
Full ownership
and integration of 
an activity by one
party

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CHAPTER 15 STRATEGIC ALLIANCES AND NETWORKS
more attractive locations (Leahy, 2007). Indeed, India’s Wipro Technologies began reverse 
offshoring by sending work from its Indian clients to offices in Egypt (Leahy, 2009).
Companies make different choices where the outsource/insource decision is a key strate-
gic choice. For example, Jeff Immelt, CEO of General Electric, has declared that outsourc-
ing is ‘mostly outdated as a business tool’ (Mallaby, 2013). Certainly, Lenovo has decided 
to keep production in-house as a competitive strength, while competitors in smartphones, 
tablets and Internet televisions outsource manufacturing (Chao, 2012).
Nonetheless, outsourcing models remain central to the strategic choices faced in going 
to market and achieving an effective competitive position. For example, a crucial strategic 
difference between rivals Sony and Samsung in the 3D television business is that Sony has 
gambled on outsourcing its television production, while Samsung is dedicating its resources 
to its own manufacturing capacity (Ihlwan, 2010). Certainly, the use of outsourcing strate-
gies by government has greatly expanded in the UK, and outsource firms look forward to 
continued good earnings (Plimmer, 2015).
In supply chain management, the use of third-party logistics providers (3PLs) is illustra-
tive of successful long-term outsourcing. A growing number of firms outsource some or all 
of their logistics to 3PLs, such as FedEx Logistics or DHL Logistics. In fact, a group of 3PLs 
dominate logistics outsourcing around the world. Manufacturers need absolutely reliable 
sources of supply. Retailers need flexible links to suppliers with low-cost production, but 
these suppliers are often in remote regions. At the same time, retailers need rapid deliv-
ery channels for an ever-expanding distribution network of consumers. These global 3PLs 
provide transportation, consolidation, forwarding and customs brokerage, warehousing, 
fulfilment, distribution and virtually any logistics and trade-related services that their inter-
national customers need. In a global 3PL market worth $270 billion a year, the top three 
companies turn over around $42 billion a year. The global market leaders are Excel (UK), 
Kuehne
+ Nagel (Switzerland) and Schenkler (Germany). Unsurprisingly, the top seven 
global 3PL providers are European, since 3PL use is more widespread in Europe than the 
USA. Companies use 3PL providers for several reasons. First, because getting the product 
to market is their main focus, these providers can often do it more efficiently and at lower 
cost. Outsourcing typically results in 15–30 per cent in cost savings. Second, outsourcing 
logistics frees a company to focus more intensely on its core business. Finally, integrated 
logistics companies understand increasingly complex logistics environments.
15.5.2 Partnerships
These are collaborations that involve a closer relationship between organisations, but stop 
short of a formal strategic alliance agreement, shared ownership in a joint venture or verti-
cal integration. Lambert et al. (1996) suggest that partnerships vary in the degree and type 
of integration. They suggest that: (1) some partnerships are short term in focus and involve 
limited coordination; (2) other partnerships have a longer-term focus and move beyond 
coordination to integration of activities; and (3) the closest partnerships are viewed as ‘per-
manent’, and each party views the other as an extension of its own firm.
For example, in one strategic alliance, Dell Inc. and EMC had a partnership relationship 
in the data storage business, providing advanced networked storage solutions for organi-
sations of all sizes. The partnership made Dell the fastest-growing disk storage systems 
seller, and EMC the mid-tier market share leader in revenue. The combined capabilities 
of Dell and EMC made a major impact on the data storage business. Dell and EMC lever-
aged a unique model of sales, marketing, engineering and manufacturing collaboration to 
exploit each other’s strengths and deliver superior value to customers, but the relationship 
had a fixed term (Al Bawaba, 2006). In the end, Dell purchased EMC in 2016, taking the 
relationship-building process to its extreme.
A different form of marketing alliance was shown by the Jigsaw Consortium formed 
by Cadbury Trebor Bassett, Unilever and Kimberly-Clark. The consortium was managed 
for the members by direct marketing agency OgilvyOne. The members of the consortium 

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ALLIANCES AND PARTNERSHIPS
owned brands including Persil, Flora, Lynx, Huggies, Cadbury Creme Egg and Flake. The 
alliance created a consumer database covering the purchasing behaviour and brand atti-
tudes of nine million consumers. Importantly, while retailers such as Tesco and Sainsbury’s 
have a strength of consumer purchase data through point-of-sale scanning, the consortium 
database included attitudinal data for additional insight and predictive power.
In the same sector, excess capacity in British supermarkets is driving them to collabora-
tion in the form of placing concession stores within major supermarkets. With rapid expan-
sion now a thing of the past, supermarkets are looking to high-street retailers and leisure 
operators to take up their unproductive floor space. The first two Argos stores opened 
in Sainsbury’s in 2015, with more to follow. Sainsbury’s has also signed agreements with 
Jessops, the photographic retailer, and Western Union to begin global money transfer ser-
vices to its stores. Asda has partnered with French sports retailer Decathlon, while Tesco 
strongly considered bringing Sports Direct into its stores. Deals between supermarkets and 
dentists, opticians and hairdressers have also been considered, although remain rare. These 
horizontal collaborations have not always been successful in the past, but it looks like they 
will expand, driven by the excess selling space in large supermarkets, which face tough 
competition from discounters and convenience stores (Shubber, 2015).
15.5.3 Strategic alliances
Strategic alliances are more formal arrangements, sometimes under contract, for companies 
to collaborate and act jointly. The defining characteristics of strategic alliances are that: (1) 
two or more companies unite to pursue a set of agreed goals, but remain independent even 
though in an alliance; (2) the alliance members share the benefits of the alliance and control 
over the assigned tasks; and (3) the firms in the alliance contribute on a continuing basis to 
one or more strategic areas (such as technology sharing, product development or marketing) 
(Taylor, 2005; Todeva and Knoke, 2005).
In some sectors, such as airlines, strategic alliances have become the dominant way of 
doing business. Most of the world’s big airlines are members of one of the alliances. The 
three major airline alliances are Star Alliance (United Airlines, Lufthansa and 25 others); 
SkyTeam (Delta, Air France/KLM and 17 others); and Oneworld (American Airlines, Brit-
ish Airways, Cathay Pacific and 12 others). Between them, the big three alliances carry 
almost two-thirds of all passengers flying in the world and control more than half the global 
fleet of commercial passenger aircraft. While these alliances offer airlines advantages in 
code-sharing, loyalty programmes and marketing, they are also fragile as members move 
allegiance. It is also noteworthy that many of the world’s rapidly growing airlines (Emirates, 
Etihad) are not alliance members, and most of the successful no-frills fliers are unaligned 
(easyJet, Ryanair, Southwest). Some analysts predict a fracturing of the existing alliances 
and a fresh wave of consolidation in the airline industry. While alliance-based competition 
brings strengths, alliances may not last (Tovey, 2015).
15.5.4 Joint ventures
These are relationships where the ownership of a project or operation is shared between the 
parties concerned. For example, Mercedes, the German car company, and Swatch, the Swiss 
watch company, entered into a short-lived joint venture to produce the Smart mini-car, sup-
ported by partnership sourcing from its ten key suppliers, which relocated their operations 
to a ‘smart ville’ in France. This relationship focused on partners from different industries 
sharing innovative design abilities, technological expertise and marketing capabilities to 
innovate. The concept was that the partners were selling ‘mobility’ as a total product, not 
just a car – the overall market offer included the ability to borrow larger cars when needed 
for particular mobility needs. The joint venture became a wholly-owned subsidiary of Daim-
ler Chrysler and is now owned by Daimler AG.

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