chapter  2
18 Pages

Alliance Strategy Formulation

During the alliance strategy formulation stage, a fi rm decides which governance mode is appropriate for realizing its objectives, that is, how it will organize the procurement of its desired resources. We distinguish three prototypical types: ‘make’, such that fi rms gather resources internally through inter-unit exchanges or through mergers and acquisitions; ‘buy’, which means fi rms procure resources through discrete market transactions organized by simple contracts; and ‘ally’, which refers to alliance arrangements organized through complex contracts with external parties to procure resources. This chapter is divided as follows: to inform their decisions about alliance strategy formulation, managers must understand the difference between alternative governance modes (fi rst section) and comprehend the rationales underpinning each of them (second section). When a fi rm adopts the ally governance mode, it also must formulate an alliance strategy to detail the requirements that the alliance should meet. We therefore wind up this chapter with three sections describing a set of decision-making steps, a summary for alliance strategy formulation and a case illustration.