Lenovo Case Essay

1179 words - 5 pages

Management of Strategic Alliances: Performance Evaluation

Where to Link in the Value Chain?
• Alliance combining same value-chain activities are to gain efficiencies, merge talents, or share risks • In operations alliances firms combine manufacturing activities to reach economies of scale • Operations/marketing alliances provide access to markets Identification of the links in VC forms the basis for performance of the SA

Negotiation & Performance
• The formal agreement is not as important as the ability of managers to get along • Negotiation issues • equity contributions • management structure • “prenuptial” agreements

Selected Questions for a StrategicAlliance Agreement

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• Parent involvement: As alliances get older and larger, they tend to develop their own HRM practices. • Staffing the alliance management and technical personnel: Crucial and risky decision. Must not unload unwanted managers to alliance. • Staffing the alliance workforce: Assess local labor supply • Performance assessment: Needed for retention, promotion and salary decisions. Avoid adopting the system of one partner. • Loyalty: Managers may often feel dual loyalty to parent and to alliance • Career development: Must provide clear information on how alliance assignments fit within careers. Career ladder must exist within the JV • Cultural differences • Training

Commitment and Trust in Performance
• Commitment and trust go hand in hand • Commitment: putting forth extra effort to make the venture work and taking care of each other • Facets of commitment: • Attitudinal commitment: willingness to dedicate resources and efforts and face risks to make the alliance work • Calculative commitment: the practical side related to the alliance partner evaluations, expectations, and concerns regarding potential rewards from the relationship

Commitment and Trust
• Trust: The confidence that the partner will deliver on the expected contributions to the alliance • Two types: • Credibility trust: confidence that the partner has the intent and ability to meet promised obligations and contributions to the alliance • Benevolent trust: confidence that the partner will behave with goodwill and with fair exchange

Why Is Trust Important?
• When there is no trust, partners hold back or take advantage of each other (Opportunistic Behavior). • Formal contracts can never identify all issues that will arise • Technology and knowledge also include tacit elements that can only be learned through trust.

BENEFITS OF TRUST

Trust and Competitive Advantage

• Site specialization • Physical asset
specialization • Human Specialization

Dedicated

Knowledge

Asset Investments

Sharing Routines

Interfirm

Trust

BENEFITS OF TRUST
Trust and Competitive Advantage

Dedicated

Knowledge

Asset Investments

Sharing Routines

• • • • •

Learning curve? Consulting teams? Voluntary study groups? Problem-solving teams? Interfirm employee transfer? • Performance feedback and? monitoring …

Interfirm

Trust
’ BUT

BENEFITS OF TRUST
Trust and Competitive Advantage

Asset Investments

Dedicated

Knowledge

Sharing Routines

Interfirm

Trust
’ • TRUST is one party’s confidence that the other party in the exchange relationship will fulfill its promises and commitments and will not exploit its vulnerabilities • Trust and alliances are a conundrum from a classical economics perspective – assumption of opportunism means firms must choose market or hierarchy, make or buy, not an alliance BUT Trust lowers transaction costs • Search costs • Contracting costs AND • Monitoring costs • Enforcement costs • Increases knowledge sharing •...

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