Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

282 Part 2: Strategic Actions: Strategy Formulation

A second major reason firms form strategic alliances is that most (if not all) compa-

nies lack the full set of resources needed to pursue all identified opportunities and reach

their objectives in the process of doing so, a reality indicating that partnering with oth-

ers will increase the probability of reaching firm-specific performance objectives. Given

constrained resources, firms can collaborate for a number of purposes, including those of

reaching new customers and broadening both the product offerings and the distribution

of their products without adding significantly to their cost structures.

Through the partnership between Expedia and Latin American online travel leader

Decolar.com, which operates the Portuguese Decolar.com and Spanish Despegar.com

websites, both firms are deriving important benefits that neither could access acting inde-

pendently. In this sense, the partnership “...offers Expedia better exposure to the Latin

American travelers (while) Decolar benefits by expanding its portfolio of international

hotel supply through Expedia.”^27

As we discussed in Chapter 5, when considering competitive rivalry and competitive

dynamics, unique competitive conditions characterize slow-, fast-, and standard-cycle

markets.^28 As shown in Figure 9.1, these unique market types create different reasons for

firms to use strategic alliances.

In short, slow-cycle markets are markets where the firm’s competitive advantages are

shielded from imitation for relatively long periods of time and where imitation is costly.

Railroads and, historically, telecommunications, utilities, and financial services are

Figure 9.1 Reasons for Strategic Alliances by Market Type

Market Type

Reasons for Using a Strategic Alliance

Slow-Cycle Fast-Cycle StandarCycled-

• Gain access to
  a restricted
  market
  
  
  • Speed up
    development of
    new goods or
    services
  
  
  • Speed up new
    market entry
  
  
  • Maintain market
    leadership
  
  
  • Share risky R&D
    expenses
  
  
  • Form an industry
    technology
    standard
  
  
  • Overcome
    uncertainty
    
    
    • Gain market
      power (reduce
      industry
      overcapacity)
    
    
    • Establish better
      economies of
      scale
    
    
    • Meet competitive
      challenges from
      other competitors
    
    
    • Learn new
      business
      techniques
    
    
    • Pool resources for
      very large capital
      projects
    
    
    • Overcome trade
      barriers
    
    
    • Gain access to
      complementary
      resources
    
    
    
    
  
  
  
  


• Establish a
  franchise in a
  new market


• Maintain
  market stability
  (e.g.,establishing
  standards)