Common forms include sub-contracting and franchising arrangements.
Such agreement can allow organisations to focus on core activities, while
contracting-out work to specialist operators. For instance, the prison service
has experimented with contract-out transportation and custodial services
to ‘Group-4’ – a private security firm. Finally, networksare informal agree-
ments of co-operation built on working relationships and mutual benefit, as
opposed to contractual agreement or ownership. Networks can also take
the form of opportunistic alliances that, while informal, focus on specific
opportunities. For example, a group of independent local retailers may join
together and launch a customer loyalty card, as a response to increased
competition from national retail chains.
For any alliance to stand the test of time, there needs to be strategic and
cultural fit. Strategic fitessentially means that the core assets/competencies
of the partners are configured in such a way as to complement each other
and offer more effective pathways to strategic goals than generic internal
development. As previously stated, strategic fit relates to efficiency, syn-
ergy and, on occasions, legal necessity. Strategic fit need to be clearly
defined and must offer sustainable competitive advantage. Cultural fitis
vital if organisations are going to work together. For any partnership to be
successful there is a need for the partners to have similar aspirations, goals
and attitudes. For example, joint ventures between a fast moving entrepre-
neurial company and highly risk averse conservative organisation could
be difficult to achieve. The question of cultural fit is pivotal in the selection
of a partner and type of alliance.
A marketing perspective on alliances can be illustrated by examining the
development of vertical marketing systems(VMS). A VMS approach offers an
alternative to the traditional view of distribution channels. Traditional dis-
tribution channels involve a chain of independent companies, each pursu-
ing individual goals. Each channel member aims to optimise its position,
normally at the expense of other channel members. The resultant tension
and conflict between the buying/selling organisations, within the channel,
tends to lead to distrust, erosion of margins, higher costs and other linger-
ing problems. A VMS approach aims to integrate channel members into one
cohesive unit, with common objectives and distribution being actively
managed across all channel members. Such an approach has the advan-
tages of: (i) reducing overall cost by avoiding repetition and reducing
administration and (ii) enhance quality and effectiveness by means of joint
problem solving and shared expertise. Figure 11.1 illustrates both activities.
VMS ventures tend to operate in one of the following ways. They can be
corporate– all parties in the VMS having common ownership. Alternatively,
it is possible to have an administrativeVMS – independent organisations
agree to conform to common standards and compatible interlinked sys-
tems, normally determined by the dominant partner. For example Ford car
dealerships, although independent, conform to service, stock holding and
marketing criteria set by the Ford Motor Company. Finally, there are con-
tractual VMS agreements which have legally binding obligations. For
example, the ‘SPAR’ retail chain is a group of independent retailers who
sign-up to a centralised buying agreement.234 Strategic Marketing: Planning and Control