Build, Borrow, or Buy: Solving the Growth Dilemma by Laurence Capron & Will Mitchell

Author:Laurence Capron & Will Mitchell [Capron, Laurence]
Language: eng
Format: mobi
Publisher: Harvard Business Review Press
Published: 2012-07-30T14:00:00+00:00

Integration-demanding alliances

These alliances are much like attempts to create music when there are many musicians, each playing a different tune at a different tempo. It is nearly impossible to create and manage a successful alliance if you require broad engagement, across multiple functions, with an ally whose incentives are markedly different from yours. In that case, acquisition will probably provide a better way of obtaining the targeted resource. The Ford-VW alliance exemplifies an integration-demanding relationship that failed. Likewise, Merrill Lynch and HSBC created a joint venture in 2000, with the goal of providing online banking and investment services for customers in the United Kingdom, Australia, Canada, Germany, Japan, and Hong Kong. Each company provided an executive to serve as the venture’s CEO and COO. However, when the demands of managing the relationship went beyond the scope of alliance governance, HSBC took over the venture in 2002. It would be easy to blame the early problems on the people who were assigned to the leadership roles, but in fact, the problems stemmed from the choice of pathway to obtain the desired resources.

Firms that enter into integration-demanding alliances often achieve greater success after moving to an acquisition. During the 2000s, Spain’s Santander Bank expanded extensively in South America, targeting additional customer segments with a range of new products and services. Santander initially considered forging alliances with banks in Brazil, Argentina, and other countries in the continent. But it quickly realized that the relationships would be too complex to manage as partnerships of independent entities. (Just the challenge of aligning and orchestrating the incentives needed for each alliance would have been a tall order.) Instead, Santander acquired several South American banks and used them as focal points for designing and introducing new services.

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