St.

Nicolas College BS IN BUSINESS ADMINISTRATION

of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

LESSON 7: Strategic Relationships

Strategic Relationship is the association between two or more people that may range in duration from brief to enduring.

End-User Intermediate
Customers Customers
Suppliers

Strategic Competitors
Relationships
Joint
Ventures

The Rationale for Interorganizational Relationships

Internal
Strategic External Partners
Drivers of Interorganizational Relationships
Alliances Partners

Value-enhancing
opportunities

Environmental
Rationale for complexity
Forming Strategic
Relationships
Skills and
resource gaps

Competitive
strategy
 St. Nicolas College BS IN BUSINESS ADMINISTRATION
of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

Several Factors in Strategic Relationships

1. Opportunities to enhance value offerings to customers

2. The diversity, turbulence, and riskiness of the global business environment

3. The escalating complexity of technology

4. The existence of large resource requirements

5. The need to gain access to global markets

6. The availability of an impressive array of information technology for coordinating intercompany operations

Opportunities to Enhance Value

Modularity

Modularity in product and process design offers a promising basis for leveraging inter-organizational capabilities to create
superior customer value. It consists of “building a complex product or process from smaller subsystems that can be designed
independently yet function together as a whole.”

Environmental Complexity

Diversity

It refers to differences between the elements in the environment including people, organization and social forces affecting
resources.

To answer the environmental diversity, organizations should:

1. Alter their inter-organizational structure or;
2. Establish strategic relationship with others

Competitive Strategy

Hollow Organizations

Compete primarily through its relationships with other organizations to deliver value to end-users.

Skills and Resource Gaps

Sharing of complementary technologies are important drivers for strategic partnerships:

1. Technology Constraints

2. Financial Constraints

3. Market Access

4. Information Technology
 St. Nicolas College BS IN BUSINESS ADMINISTRATION
of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

Evaluating the Potential for Collaboration

Factors to consider:

1. What is the strategy?

2. The cost of collaboration

3. Is relationship strategy essential?

4. Are good candidates available?

5. Do relationships fit our culture?

Partnering is the result of two organizations working together toward a common objective such as sharing technologies,
market access, or compressing new product time.

Forms of Organizational Relationships

➢ Supplier Relationships

➢ Lateral Partnerships

➢ Customer Relationships

➢ Internal Partnerships

Supplier Relationship

Strategic Suppliers – relationships with suppliers are often managed by a company’s procurement function. However, when
a supplier has a major impact on the company’s value offering and its relationships with its own customers, the supplier
may be regarded as strategic.

Outsourcing – the outsourcing of activities, such as transportation, repair and maintenance services, information systems,
and human resources functions, has become widely used in recent years. Outsourcing parts of the value chain process to
partners is a form of leveraged growth – it allows a company to expand sales without capital investment at all stages of the
value chain.

*third shift – when an overseas contractor makes unauthorized products based on the customer’s designs, which
are then sold as counterfeits, threatening the position of the genuine brand.

Intermediate Customer Relationship

Intermediate customers may include marketing intermediaries and producers assembling products for the end-use market.

➢ Vertical relationships also occur between producers and marketing intermediaries.

➢ Value chain relationships provide access to consumer and organizational end-users.

➢ Interorganizational relationships vary from highly collaborative to transactional ties.

 St. Nicolas College BS IN BUSINESS ADMINISTRATION
of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

End-User Customer Relationships

The driving force underlying strategic relationships is that a company may enhance its ability to satisfy customers and cope
with a rapidly changing business environment through partnering.

Strategic Customers

Strategic, key and global accounts (customers) are increasingly considered strategic partners.

➢ Dominant Customers – these customers may pose considerable challenges because of their ability to exert
considerable influence and control over suppliers.

➢ Strategic Account Management – provides an innovative model for managing relationships with their most important
customers.

Strategic Alliances

A strategic alliance between two organizations is an agreement to cooperate to achieve one or more common strategic
objectives. Strategic alliances play a major role in almost every industry, and the typical corporation relies on alliances for
15-20 percent of its total revenues, assets, or income.

Alliance Success – the competitive realities of surviving and prospering in the complex and rapidly changing business
environment encourage companies to form strategic alliances in many different industries.

Alliance Weaknesses – may come from several causes. Weal alignment of objectives, performance metrics, and clashes
of corporate cultures can all undermine alliance effectiveness. Poorly structured partnerships may be extremely damaging
to all concerned.

Types of Alliances - typically involves marketing, research and development, operations (manufacturing), and/or financial
relationships between the partners.

Requirements for Alliance Success – The success of alliance may depend heavily on effectively matching the capabilities
of the participating organizations and on achieving the full commitment of each partner to the alliance.

Alliance Vulnerabilities – it is important to recognize the alliance relationships may be fragile and difficult to sustain
effectively, particularly if there is a lack of trust or mutuality of interest between partners.

Joint Ventures

Joint ventures are agreement between two or more firms to establish a separate entity. These relationships may be used in
several ways:

To develop a new market opportunity

To access an international market

To share costs and financial risks

To gain a share of local manufacturing profits

To acquire knowledge or technology for the core business

 St. Nicolas College BS IN BUSINESS ADMINISTRATION
of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

Internal Partnering

Internal partnerships may occur between business units, functional departments, and individual employees. The intent is to
encourage and facilitate cross-functional cooperation rather than specialization.

Four steps in evaluating internal partnering:

• a cost benefit analysis of the potential gains from improved internal synergies

• investigation of why collaboration is not happening – personal relationship difficulties, competing priorities,
resource constraints, skill gaps

• assessment of what is needed to unblock the problem – restructuring, personnel changes, senior
management intervention

• consideration of the possible downside of efforts t enhance internal collaboration before acting – distraction
costs and loss of accountability, initiative, and motivation.

Managing Interorganizational Relationships

Objective of the Relationship

➢ New Technologies and Competencies

➢ Developing New Markets and Building

➢ Market Selectivity

➢ Restructuring and Cost Reduction

Relationship Management

➢ Guidelines:

o Planning

o Trust and Self-Interest

o Conflicts

o Leadership Structure

o Flexibility

o Cultural Differences

o Technology Transfer

o Learning From Partner’s Strengths

 St. Nicolas College BS IN BUSINESS ADMINISTRATION
of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

Partnering Capabilities

Establishing a sound process for designing and managing interogranizational relationships, it is important to consider what
is necessary to build an organizational competence in strategic collaboration.

Control and Evaluation

Balanced scorecard approach allows evaluation criteria to be specified in financial, customer focus, internal business
process, and learning and growth dimensions.

Measures and metrics to consider:

• Metrics should be comparable across alliances

• Metrics should be defined and discussed with alliance partners

• There should be clarity about the implications of alliance performance

• A process for auditing alliance performance should be implemented

• Alliance performance should be linked to individual performance review

• A forum should be created for reviewing and acting on alliance performance data

Exiting from Alliance

Considerations for a successful disengagement plan

• Identifying and agreeing to the events that will trigger exit from the alliance

• Detailed description of the rights of each partner to alliance assets and products on disengagement

• Design of the disengagement process

• A communication plan for continuous flow of information to alliance partners, customers, suppliers, and
other involved parties during the alliance dissolution

Global Relationships among Organizations

The Global Integrated Enterprise

-is a company that shapes its strategy, management and operations in pursuit of a new goal: the integration of production
and value delivery worldwide.

Inter-Nation Collaborations

-may create significant market change and shifts in international trading patterns.

The Strategic Role of Government

• Government Interventions

• Competing With State-Owned Enterprises

 St. Nicolas College BS IN BUSINESS ADMINISTRATION
of Business and
Technology
MGMT 11 STRATEGIC MARKETING MANAGEMENT

• Collaborating With State-Owned Enterprises

• Government Regulations