Marketing Strategy and Competitive Positioning pdf ebook

CHAPTER 15 STRATEGIC ALLIANCES AND NETWORKS
Joint venture collaborations have proved highly problematic in some cases. BP’s growth 
strategy of partnering with companies in resource-rich countries such as Russia is illustrative. 
The relationship between BP and its Russian partners in TNK-BP was plagued with problems 
and conflicts of interest, culminating in the Russian security services raiding the joint venture 
offices, withdrawing visas for BP executives and chasing the TNK-BP CEO out of the coun-
try, from where he continued to run the business in hiding ( White and Chazan, 2008 ). TNK-
BP accounts for around a quarter of BP’s total global oil production and reserves. Eventually, 
BP had no choice but to concede to the demands of its Russian partners and accept it was 
no longer the ‘senior partner’. As such, what appeared a strategic triumph for BP had turned 
into a costly trap, and in 2013 TNK-BP was taken over by the Russian oil company Rosneft.
15.5.5 Vertical integration 
Here, an activity in another part of the value chain is fully owned by the core organisation, 
although the relationship may still be seen as a strategic alliance, even though strictly one 
company owns another. Apple Inc. provides an interesting example of a company that is 
vertically integrated using both outsourcing and direct financial ownership. Apple designs 
the computer hardware, accessories, operating system and much of the software itself, but 
does not manufacture. Production is outsourced to specialist suppliers such as Foxconn. 
Apple established a chain of high-profile, up-market retail outlets to protect its consumer 
market position, using forward vertical integration to retain control over its product pres-
entation in the marketplace. 
In another sector, Italian company Luxottica is the world’s largest eyewear business. 
The company produces many famous eyewear brands – including its own Ray-Ban and 
Oakley brands and licensed brands such as Burberry, Chanel, Polo Ralph Lauren, Dolce &
Gabbana, Donna Karan, Prada, Versace and Bulgari. It then sells these brands through 
some of the world’s largest optical chains – LensCrafters, Pearle Vision and Sunglass Hut 
– that it also owns. In another example, integrating the entire distribution chain, from its 
own design and manufacturing operations to distribution through its own managed stores, 
has turned Spanish clothing chain Zara into the world’s fastest-growing fast-fashion retailer 
( The Economist , 2012 ; Berfield, 2013 ). 
It is important that executives consider carefully the strengths and weaknesses of these 
different degrees and types of partnership in developing appropriate alliance strategies, 
and that we recognise that, in reality, networks may contain a mix of different partnership 
styles. It should also not be assumed that inter-organisational relationships are static –
collaborative forms may change or be removed during the course of a project if, for example, 
one partner is gaining benefits while the other(s) is/are not. For instance, BMW and Rolls-
Royce operated an alliance in the form of a joint venture – BMW Rolls-Royce GmbH – 
for some ten years in the aerospace industry, focused on advanced aero-engine develop-
ment. The partners succeeded in producing a commercially successful family of advanced 
engines. The alliance provided Rolls-Royce with a stronger product strategy, but after ten 
years BMW withdrew to concentrate on automotive and the business became wholly owned 
by Rolls-Royce as Rolls-Royce Deutschland ( Smith, 2003 ).
15.6 
Strategic alliances as a competitive force 
It is important that we recognise in our marketing strategy development that in some mar-
kets, competition is increasingly based on the relationship between alliances and the net-
works they create and no longer simply between individual companies or brands. We saw 
this in the airline industry example mentioned previously. This is particularly true in global 
businesses. Consider the following examples: 

---

441
STRATEGIC ALLIANCES AS A COMPETITIVE FORCE
● 
Increasingly, the global automotive business is characterised by global networks, rather 
than free-standing manufacturers. This sector is characterised by a fast-moving and flex-
ible array of alliances: 2012 saw Nissan and Daimler partnering to build engines together 
in the USA (Reed, 2012); GM and Peugeot have a broad alliance for European car opera-
tions as GM seeks to improve its European performance (Wall Street Journal, 2012); 
Ford and Toyota have teamed up on hybrid car and truck development in response to 
higher emissions standards in the United States (Bennett and Ramsey, 2011); and the 
highly successful entry of Western carmakers into China has been mainly through joint 
ventures with local firms (Mitchell, 2014).
● 
In the aerospace industry, a strategic alliance between Boeing and Lockheed Martin 
means that, by working together, the companies can leverage their expertise in air traffic 
management and aircraft-focused solutions to transform air traffic control system prod-
ucts. Lockheed-Martin brings air traffic route management experience, while Boeing 
contributes expertise in aircraft systems, avionics and airspace simulation and modelling 
(Airline Industry Information, 2007).
● 
In the rapidly evolving biotechnology industry, companies such as Novartis and Merck 
are forging alliances with biotechnology firms to stake a claim for part of the $40 billion 
market for new breakthrough cancer treatment drugs. Partnerships around immuno-
therapy developments offer traditional pharmaceutical companies access to new areas of 
growth. This is only one example of numerous technology-based alliances between tra-
ditional pharmacists and biotechnology ventures. Competition is increasingly between 
alliances rather than individual companies (Ward, 2015).
● 
In a completely different business, Coke and Pepsi are fighting over the growing ‘ready-to-
drink’ coffee market. But this is a battle between partnerships – Pepsi has partnered with 
Starbucks, and Coke with Illycaffe from Italy to respond and counter Pepsi’s initiative.
● 
Meantime, the media and communications sector shows a constant flurry of alliances and 
networks – many of which are short-lived. For example, Apple’s strength is integration of 
hardware and software and its network of apps developers. In response, Google teamed 
up with Motorola, and Microsoft with Nokia, to emulate Apple’s integrated hardware 
and software strategy – although neither alliance was really effective or sustainable. More 
generally, we saw the Web worlds of Internet search and social networks collide in a war 
for followers, with an alliance between Facebook and Microsoft’s Bing as the first salvo, 
along with a Google and Yahoo partnership replacing an earlier Microsoft and Yahoo 
alliance. Of course, time has shown that many inter-organisational relationships in this 
sector are transitory, with little to be seen of these alliances today, given Facebook and 
Google’s hegemony. Indeed, Apple and Google were once allies (with cross-board mem-
berships) but now they are rivals. Apple and IBM were once rivals, but later developed 
a collaboration to push Apple’s digital devices into IBM’s corporate heartland.
● 
Similarly, the ‘Internet of Things’ is bringing together search, software, apps and hardware 
manufacturers in novel ways as the fight is on to dominate this new category of products –
no one can move fast enough alone, which encourages acquisitions, partnerships and 
alliances. The battle to shape the ‘Internet of Things’ is rapidly hotting up, as technology 
and telecoms companies race to build the infrastructure to connect billions of devices in 
homes and offices. For example, in 2014 Google bought Nest Laboratories for $3.2 bil-
lion – twice what it paid for YouTube. Nest makes smart thermostats and smoke alarms, 
but has redesigned these appliances as connected, digital devices for the smartphone age. 
Google intends to provide the resources for Nest’s technology to run peoples’ smart homes, 
which is a huge market. Underpinning this move is the battle for whose service – Google,
Amazon, Apple, Microsoft, or others – will coordinate the new ‘smart home’.
Nonetheless, alliances and networks are a means to an end – that of delivering a strategy 
to the market and achieving the companies’ goals. The strategy matters more than the specific 
structures used to implement it. But, at the very least, our analysis of competitive structures 
would possibly be misleading if we did not account for the potential impact of strategic 
alliances – both existing and potential – on our ability to successfully implement a strategy.

---

442