Week 4 Post by Will

Review of “An Overview of Strategic Alliances” (Elmuti, D & Kathawala, Y.)
from Management Decision

This week’s reading assignments gave us insights on how an alliance imitates a marriage,
although Kanter is careful to use the neutral designation of “setting up housekeeping”
(Kanter, 1994. p. 99). As corporate alliances are generally bound by binding legal
documents, the term matrimony is probably apt. We saw how this arrangement is
predicated on three levels of trust (weak, semi-strong and strong form) (Barney, J. &
Hansen, M., 1994) based on different levels of vulnerability.

But what happens when infidelity enters the picture? How do corporations respond when
one member seeks satisfaction outside of the bounds of that alliance wedlock?

Elmuti and Kathawala (2001) claim that the failure rate of strategic alliances might be
as much as 70%. After citing the reasons why corporations enter into alliances (growth
strategies, access to new technology, cost sharing and competitive advantages), the
authors take an unromantic look at the causes leading to the demise of the alliances. They
set ten years as the typical threshold for most corporate alliances, noting that most fail
because of one or more of the following factors (which I am here paraphrasing to fit the
marriage metaphor):

- Our chemistry doesn’t work – A clash of cultures, or perhaps the partners hail from
different social classes

- I don’t trust you – One partner is not communicating, leading to despondency and
trust issues in the other.

- We’re going in different directions – Mismatched goals for the relationship.

- You cheated on me – One company takes advantage of the partner’s commitment
and gets involved with a competitor.

- You’re not carrying your weight – One company is doing all the work.

- I can’t handle your friends – One company has business relationships that don’t
mesh with the partner.

- The sex isn’t great – One member’s performance doesn’t measure up.

- You’re just using me – One company uses the relationship for competitive
advantage over the other.

Interestingly, in their analysis of why alliances fail, the authors cite the case of Publicis
Communication and Foote, Cone and Belding (FCB), an alliance invoked as a shining
success in Kanter’s work. Kanter, of course, could not have known that three years after

her writing, the alliance would eventually succumb to the Franco-American cultural
obstacles that they’d so valiantly survived at the time of her study. “The venture
officially ended . . . after bitter and expensive divorce proceedings” (Elmuti, D. and
Kathawala, Y., 2001, p. 209).

In the end, as in marriage, it all comes down to communication. The partners must
express their wants and needs. Doubts and insecurities must be overcome, whether
through more face time or binding contracts. The partners must maintain a shared vision
of where the relationship is heading. In times of conflict, counseling is advisable (i.e. an
integrator or mediator). In the end, many alliances fail because the participants entered
into the partnership out of haste or without a clear understanding of the other’s corporate
personality.

Given the obstacles, one wonders if these corporate alliances are worth it. Marriage
rates may be falling, but the authors predict that corporate alliances will become more
the norm than the exception in the changing international economy. “Firms will need to
expand into the expanding global markets in order to economically survive.”

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References

Elmuti, D. & Kathawala, Y. (2001) “An Overview of Strategic Alliances.” Management
Decision, 39 (3) pp. 205-217.

Kanter, R. (1994) “Collaborative Advantage: The Art of Alliances.” Harvard Business
Review pp. 96-111.

Barney, J. & Hansen, M. (1994) “Trustworthiness as a Source of Competitive
Advantage.” Strategic Management Journal, 15. pp. 175-190.