Selecting the Partner

1. Selecting the Partner By 4980104 4980157 4980552 4980570

2. Selecting the Partner • Alliances are often compared to marriages • In alliance as in marriages, there is no recovery from choosing the wrong spouse

3. The Alliance Framework Process 6 Steps of the Alliance Framework process: 1.Appointing the Planning and Negotiating Team 2. Achieving Internal Consensus 3. Approaching Potential Partners: Strategic FIT Assessment 4. Conducting Resource FIT Assessment 5. Selecting the Partner 6. Negotiating an Agreement

4. Step 5: Selecting the Partner The partner selection process: 3 issues • Which potential partner presents the least trouble and disagreements in Strategic Assessment Elements(SAEs)? • Which potential partner provide the best match of required resources? • Which potential partner has self-selected itself into the deal?

5. Selecting the Partner • In ideal world, the partner selection is obvious after step 3 and 4 in the alliance framework. • In the real world, narrowing down the list to one partner or a select few can be difficult. Therefore, this chapter will discuss how to use the alliance framework to make the best possible choice of potential partners and then move to negotiating an agreement in step 6.

6. Looping Back to Step 2, Achieving Internal Consensus • The strategic fit and resource fit assessments provide great information about each partner. • The information can identify that what strategy both firms have in common or different. • With this information, the planning and negotiating team can understand the quality and quantity of each partner’s resources. • The team can loop back to step 2 and resolve the SAEs conflicts.

7. The Strategic Fit Reconciliation Map 3 Possibilities in dealing with SAE disagreements. 1. Agree with the partner’s position 2. Convince the partner to agree with your position 3. Develop a compromise between the two positions

8. The Strategic Fit Reconciliation Map • It can provide a visual summary of the strategic fit between each partner. • It guides the team’s thinking on resolving SAE conflicts. • It acts as a communication tool for top corporate management by allowing them to assess to strategic fit between the firms “At a Glance”.

9. The Strategic Fit Reconciliation Map

10. Symbol Meaning • OK : the partner accepts our position on the sale • ? : have disagreement and are unsure of the resolution • : have disagreement but partner accept our position • : have disagreement but partner’s position is acceptable to us • = : compromise can be negotiate to meet both firms’ strategic need • X : deal killer, have disagreement and cannot accept

11. Case Study • Large pet food company alliance with biological firm to add the new nutritional ingredients into the company’s existing product lines. • The goal of the alliance project is to jointly develop a series of new product with a biotechnology firm. • The pet food company will distribute the improved products through its distribution network.

12. Case Study (Con’t) • The pet food company lists down the two potential partners which Company A and B. • They both have SAE conflicts with the pet food company

13. Case Study (Con’t) The Pet Food Company Objectives: Establishes and maintains its reputation for innovation through sole branding of any jointly developed product. Market Model: Only the pet food company brand is named on the product.

14. Case Study (Con’t) Conflicts : Company A – Market Model “Any jointly developed product will be Cobranded” Company A plan to sell nonfood products to pet owners not completing with the pet food company. Company A want to introduce its brand to pet owners in a powerful way. Company B – Exclusivity “ Company B will give the pet food company a one-year exclusive right to use the nutrient, after which Company B will be free to provide licenses to others” The pet food company want to have sole right to use the partner’s novel nutrients in pet food, on the other hand, Company B want to maximize the value of its ingredients by providing them to all pet food company.

15. Case Study (Con’t) Strategic Fit Reconciliation Map for Pet Food Alliance Note: OK The partner accepts our position on the SAE. ? We have a disagreement and are unsure of the resolution.

16. Case Study (Con’t) Resolving the Disagreements The pet food company reconsider: Company A: “Is sole branding necessary?” “Can the pet food company label the products as jointly developed with Company A and still achieve its marketplace objective?” Company B: “Will a one-year head start allow the pet food company to establish a strong enough foothold in the marketplace to fend off the competitors?”

17. Case Study (Con’t) Conclusion The pet food company could accept Company A’s co-branding position. However, Company’s B position on Strategic Exclusivity was not acceptable. Strategic Fit Reconciliation Map for Pet Food Alliance Note: OK The partner accepts our position on the SAE. • We have a disagreement, but the partner’s position is acceptable to us ? We have a disagreement and are unsure of the resolution

18. The Resource Fit Reconciliation Map Notes: OK+ The partner’s resources are outstanding and complementary to ours OK The partner’s resources are satisfactory and complementary to ours • Though biotechnology Company B’s resources were slightly better, their exclusivity position was a deal-killer. • Based on the updated Alliance Framework, the pet food firm selected Company A for step 6 negotiations.

19. Self-Selection: The Intangible Factor in Partner Selection • Strategic fit and resource fit are only part of story • Vital motivation behind a successful alliance comes from the hearts and minds of key people • When a firm’s people have self-selected themselves into a deal, the energy that comes from self-motivation is tangible and translates into positive alliance results

20. The Multiple Partners Option • Sometimes the strategic fit, resource fit, and commitment level assessments show that 2 or more candidates are highly qualified • In this case, to move forward to step 6 negotiations with multiple firms, final partner selection is dependent on the results of other Alliance Framework elements such as Financial Pie-Split

21. Example • Battelle’s MicroCATS alliance, The resource fit assessments show that an alliance with several partners could best meet Battelle’s needs. • Before starting step 6 negotiations you will need to review the strategy fit and resource fit assessment carefully. • In that review, you must evaluate the linklihood that all of the companies involved will agree to compatible positions on all Alliance Framework element in step 6.

22. Tips for Completing Step 5 of the Alliance Framework • Use the Strategic Fit Reconciliation Map and Resource Fit Reconciliation Map to compare the results of step 3 and 4 among potential partners. • Include a motivation assessment as a partner selection criterion. • Loop back to step 2 with internal stakeholders to reassess your positions in light of new information. • Select the best partner or partners for moving ahead to step 6. • Look back at strategic fit and resource fit assessments for possible interpartner conflicts before attempting a multiparty alliance in step 6.