Tactics & Strategic Alliance

7/27/2019 Tactics & Strategic Alliance

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P G E X P 2 0 1 2 - 1 4

COMPETITIVE TACTICS


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TACTICS

Anticipatory Engagement

Offensive PREEMPTION ATTACK

*Pioneering *Frontal assault

*Intimidation *Flanking*Capture *Siege warfare

*Guerilla warfare

Defensive DETERRENCE RESPONSE

*Raise structural barrier *Counter attack*Increased expected retaliation *Fast Follower

*Lowering inducements for attack *Retrenchment

*Diplomatic peacekeeping *Withdrawal


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P G E X P 2 0 1 2 - 1 4

STRATEGIC ALLIANCE


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Alliance is a formal and mutually agreed uponcommercial collaboration between companies


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Alliance

Firm

Maintain Forfeit

Legal Independence Legal Independence

Domination Co-operation Merger

Acquisition Alliance


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Types of Alliance

EQUITY ALLIANCE NON-EQUITY ALLIANCE

Joint venture Licensing

Franchising

R&D Agreement

Joint Marketing

Joint Production


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Purpose of Alliance

Collaborative Advantage

(ex)


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Collaborative Advantage

Collaborativeadvantage

ValueCreation

Buyer-SupplierRelationship

Alliance withComplementor

Alliance withCompetitor

Increase my value Unit Sales *Enter new market*Product Development

*Explore emergingsegments*Product Bundling

*Enhance marketpower*Joint R&D*Interfirm Learning

Unit Price *Increasedifferentiation

*Co-marketing *High bargainingpower against buyers

Unit Cost *Inventorymanagement*Co-specialisation

*Product & Processtechnology

*Power againstsuppliers*Economies of Scale

Decrease rivals

value

Unit Sales *Entry barriers

*Vertical Integrationthat excludes rivals

*Pre-empt similar

alliances

*Pre-empt similar

alliances

Unit Price *Intensify scarcity ofsuppliers &distribution channels

*Increase rivalscosts of R&D, Mktg.& operations

*Joint bidding lowersrivals profits

Unit Cost *Intensify scarcity ofsuppliers &

distribution channels

*Increase rivalscosts of R&D, Mktg.

& operations

*Win industrystandards battle


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Alliance Process

StrategicRationale

PartnerSelection

Negotiation/

DesignImplement

Continue/

Terminate


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Strategic Rationale

Strategic

Importance

1.What is our strategy?2.What are our capability gaps?

3.Is alliance the bestalternative?

4.What do we expect thealliance to achieve?

5.Exactly how does that supportthe strategy?

OrganisationalReadiness

1.Is it too late?

2.Can we do itlater?

3. Is the timingright?

Timing

1.Are organisationalpractices conducive to

alliance?

2. Do we have people tomanage the alliance?

3. Is our organisationculturally ready?

Commitment

1.Do we have the funds &technical expertise toengage in alliance for long

term?

2. Are we prepared tocommit the necessary

resources?

Proceed toPartner

Selection


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Capability Gaps

What is needed? CurrentCapability

Measure Gap

Marketing 1.2.

1.2.

1.2.

Human Resource 1.2. 1.2. 1.2.

Financial Resource 1.2.

1.2.

1.2.

Infrastructure 1.2.

1.2.

1.2.

Operations 1.2.

1.2.

1.2.

Other Competence 1.

2.

1.

2.

1.

2.


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Partner Selection

StrategicRationale

PartnerSelection

Negotiation/

Design ImplementContinue/

Terminate


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Partner Selection

DevelopCriteria

1.What capabilities areneeded to close gaps inour strategy?

2.What kind of partnerwould need the kind ofstrengths that we offer?

3. What synergies areinvolved?

IdentifyPotentialPartners

1. Which candidatebest fits our criteria?

2.Does the analysisrequire adjustment in

the criteria?

IdentifyShort List

1.Have we explored allsources- personal

networks,associations,advisors?

2. Have we generated asufficient size of list?

ConductDue

Diligence

1.Are we culturally,structurally compatible?

2.Are they committed tothis alliance ?

3. Will we achieve what wewant from this partner?

Proceed to

Negotiations


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Cultural Fitness

Parameters Features Features

Strategic Orientation ST Time Orientation LT1 2 3 4 5

RT Risk Tolerance RA1 2 3 4 5

Organisational structure Cen. Structure Decent.1 2 3 4 5

Con. Locus of Power Diff.1 2 3 4 5

Management Style Think Prob.Solving Act.1 2 3 4 5

Collab. Decision Autocrat.1 2 3 4 5

Human ResourcePhilosophy

Ind. Performance Team1 2 3 4 5

Neg. Reinforcement Posi1 2 3 4 5


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Matrix for Partner Selection

From your gap analysis, list partnercompetencies sought. (Customer base,infrastructure)

1.2.3.

What are the characteristics of partners

that would find our core competenciesdesirable?

1.

2.3.

What is the ideal size & structure of apartner? (Revenues)

1.2.3.

Any other factor crucial to partnerselection

1.2.3.


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Negotiation/Design

StrategicRationale

PartnerSelection

Negotiation/


Terminate


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Negotiation/Design

Assemblethe team

1.Have we included keyoperational executives

who will implement theagreement?

2.Does our team haveexperience?Do they

require training?

3. Will they be effectivenegotiators?

Preparation

1. Have we clarifiedstructural and decision

making issues?

2. Have we discussedtechnological/marketi

ng issues?

Negotiate

1. What they will askfor?

2.What are the risksand obstacles we willneed to overcome?

Completethe

agreement

1. Do we allow for conflictresolution?

2.Are there clearperformance measures?

3.Have we allowed fortermination?

Proceed toImplementation


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Implementation

StrategicRationale

PartnerSelection

Negotiation/


Terminate


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Implementation

Laygroundwork

1.Have we assignedthe best candidate for

alliance?

2.Are the roles,responsibilities &

linkages clear?

First sixmonths

1.When conflict arise howdo we address them?

2.Are we able to protect IPand learn from the

alliance?

Afterhoneymoon

1.Have e identified early tasksthat can be achieved andgenerate quick success?

2. Is our mutualunderstanding of allianceconverging or diverging?

Does allianceserve ourintended

objectives?

YES

Continue

NO

Intervene/Terminate


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Termination

StrategicRationale

PartnerSelection

Negotiation/


Terminate


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Termination

Hard

Partner dependent on alliance

Firm not dependent on alliance

Alliance hinges on both partners

and moves towards goals

PARTNER

Alliance term expires Firm dependent on alliance

Goals achieved Partner no longer dependent

Goals impossible to meet

Easy

Easy FIRM Hard


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Multiple Alliance

CUSTOMERS

(Patients)

COMPETITORS(Other hospitals)

COMPANY(Hospital)

COMPLEMENTORS(Path. Labs)

SUPPLIERS(Equipments etc.)


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Constellation

Philips Toshiba

Sun

Fujitsu

Hitachi

HP

SamsungSequoia

NAS

EDS

AT&T Sony

NECMIPS

IDT

Prime DEC


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Constellation

Philips Toshiba

Sun

Fujitsu

Hitachi

HP

SamsungSequoia

NAS

EDS

AT&T Sony

NECMIPS

IDT

Prime DEC


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Constellation

Alliances Compete

Collaboration + Competition= Co-opetition

Cartel


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THE COMPETITION ACT 2002

as amended by

The Competition (Amendment) Act, 2007

THE COMPETITION ACT


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THE COMPETITION ACT

Competition Commission of India

To prevent practices having adverse effect on competition

To protect the interests of consumers

Jurisdiction-

Whole of India except J&K

Acts taking place outside India but having an effect on competition in India

THE COMPETITION ACT


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THE COMPETITION ACT

Cartelincludes an association of producers, sellers,

distributors, traders or service providers who, byagreement amongst themselves, limit, control orattempt to control production, distribution, sale orprice of goods or services

THE COMPETITION ACT


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THE COMPETITION ACT

Sec-3

PROHIBITION OF CERTAIN AGREEMENTS

Sec-4

ABUSE OF DOMINANT POSITION

PROHIBITION OF CERTAIN


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PROHIBITION OF CERTAINAGREEMENTS (Section 3)

No enterprise or association of enterprises shall enter intoany agreement which causes an appreciable adverse effect oncompetitionwithin India.

Any agreement entered into in contravention of theprovisions shall bevoid.

Appreciable Adverse Effect on Competition


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Appreciable Adverse Effect on Competition

Determines purchase or sale prices

Limits or controls production, supply, markets, technical development,

investment or provision of services

Act allows joint ventures for increasing efficiency in production, supply,

distribution, storage of goods or services.

Prohibition of abuse of dominant position


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Prohibition of abuse of dominant position(Section 4)

Dominant position means a position of strength,enjoyed by an enterprise in the market whichenables it to

(i) operate independently of competitive forcesprevailing in the relevant market

(ii) affect its competitors or consumers or the marketin its favour.


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Prohibition of abuse of dominant position

No enterprise or group shall abuse its dominant position.

There shall be an abuse of dominant position if an enterprise or a group

a) Imposes unfair or discriminatory condition in purchase or sale/price of goods or service(predatory pricing)

b) Limits or restricts production of goods/provision of services

c) Indulges in denial of market access

(d) Makes conclusion of contracts subject to acceptance by other parties of supplementary

obligations with no connection with the subject of such contracts

(e) Uses its dominant position in one relevant market to enter into, or protect, otherrelevant market.


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Penalty Structure

Discontinue and not to re-enter such agreement

Discontinue such abuse of dominant position

Impose penalty , not more than ten per cent of theaverage of the turnover for the last three precedingfinancial years, upon person or enterprises which

are parties to such agreements or abuse


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Penalty structure

Non-furnishing of information

Furnishing false information

Non-compliance with Commissions orders


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Case of Cement Industry

Alleged Cartelization

by

Cement Manufacturers

(Dated: 30 July 2012)


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Complaint

Price (Rs/-)

240

220

200

180160

140

120

100

Year 2003 2004 2005(Dec) 2006(Jan)


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Complaint

No corresponding increase in limestone price, royalty,excise duty, sales tax, railway freight or demand-supplymismatch warranting such abnormal increase.

Cement companies had resorted to unfair trade practices byunder-production or choking up of supply in the market,thereby raising the sale price.


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Inquiry u/s-4

S.no.

Company Market share (%)

1 Ultratech Cement 18.12

2 ACC 10.4

3 Ambuja Cements 9.78

4 Jaiprakash Associates 7.41

5 Indian Cements 4.89

6 Shree Cements 4.47

7 J.K. Group 4.29

8 Century Textiles 3.65

9 Madras Cement 3.39

10 Lafarge (India) 3.22

11 Others 30.38


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Inquiry u/s-3

Price Parallelism


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CCI-Observation

The coordinated act has neither caused anyimprovement in production or distribution of goodsor services nor any promotion of technical,scientific and economic development


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CCI-Observation

Cement companies have acted in their own self-interest to maximize the profit depriving both theconsumers and economy from the possible

benefits


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CCI-Verdict

Cement Companies are aCARTEL u/s-3 of theAct

CCI imposed penalty

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Tactics & Strategic Alliance