Competitors joined by a "win-win" situation
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Competitors joined by a "win-win" situation
Competitors joined by a "win-win" situation
Monday, 9 november 2020 | Redacción CEU
Commercial agreements, conventions, committees or associations are only a few examples of the many different shapes alliances may take. Regardless of their format, all of them have as their goal a greater good. The idea is that two companies (or more depending on the case) are stronger than one, and this contributes to multiplying their chances of success. The objective of these partnerships is to lead to a win-win situation. However, can everyone win after striking up alliances with direct competitors? Are these types of alliances safe?
Last week, Burger King surprised the whole world by asking their customers on the official UK Twitter account to order food from its direct competitors. While recognizing that this was something they would have never thought of asking, they started their statement by saying: <<Order from McDonald’s>>. They were not satisfied with just that; they encouraged ordering from other brands specializing in this type of food: KFC, Subway, Domino’s Pizza, Pizza Hut, Five Guys, Greggs, Taco Bell, Papa John’s, Leon and so on. They even asked to do so from businesses they had not mentioned. Why did they do it? It was their way of asking for support for restaurants due to the new measures which were adopted to combat the spread of COVID-19.
Actually, this is not a strategic alliance, but rather an action on its own, since we understand that Burger King did not agree on this statement with any of its direct competitors. However, this action serves as an example to explain how historic rivals can bury their hatchets at certain times. They can do it at specific times, in longer periods or even permanently. Its purpose is always to achieve a greater good. In the case of Burger King, it was about managing to reduce the impact of the crisis on their businesses and launching a message of support and solidarity.
Alliances with your "enemies"
Surely you remember that line of Michael Corleone in The Godfather II that went: <<Keep your friends close, but your enemies closer>>. In this case, we are not talking about possible betrayals, conspiracies or bad wishes. Although competition can sometimes be hard, we prefer to talk about rivals and, better yet, competitors. And when we talk about being close, we mean creating alliances, rather than keeping a permanent state of vigilance, tension and, by no means, being willing to "pull the trigger".
Throughout history, many companies have created strategic and commercial alliances. We find, for example, cases like Starbucks and United Airlines. Both companies came together to serve only Starbucks coffee on board. In this way, it contributed to positioning the brand as a premium service and Starbucks achieved a new distribution channel. More recent is the alliance between the companies Renault, Nissan and Mitsubishi. With this union, the companies reduce costs and improve their processes by distributing the development of both their models and technologies. On the other hand, they also give leadership up to one of the brands in each region. It is a particularly interesting alliance, since it involves direct competitors -but we will come back to it later-.
The decision of allying with a rival
When entering into an alliance, it is necessary to weigh the pros and cons of this decision first. Without a doubt, a key element of these partnerships is trust. You have to ask yourself to what extent your brand is willing to share certain information and, above all, with whom it will do so. It is also convenient to take into account the loss of control in certain processes, the possible misalignments related to values and company culture, communication problems, etc. However, strategic alliances also have many advantages. For example, an alliance can open up the door to a foreign market, which is something that would otherwise be very difficult to achieve. It might also be useful to have a deep knowledge of clients, develop new products, have access to new technologies and achieve a greater investment capacity, among others.
Now that we are familiar with many of the advantages and disadvantages of alliances, we can understand that it is a question of balancing interests, but what about alliances between direct competitors. In the case of Starbucks and United Airlines, the allies work in completely different sectors, so their interests are more difficult come into conflict. Nevertheless, in the second example, the automotive brands are direct competitors. In this case, it is an alliance that pursues a greater good and, therefore, the companies are willing to make big concessions such as sharing the markets.
An association with a competitor may become really effective. However, it will depend on many factors and, of course, it will not be risk-free. Logically, one runs greater risks than when collaborating with a company that works in another sector, country or that does not share the same commercial goals.
The success of the alliance will largely depend on their members’ behavior, proportionality and reciprocity. Therefore, it is better not to proceed when brands consider that the interests are not appropriate, there is key hidden information related to the union or a good relationship of trust is not going to be established. Its success will also depend on the formula they choose, that is, whether it is a temporary or permanent alliance, whether it is superficial or deep, etc. They have to be aware of the extent to which today's allies may be tomorrow's rivals. At the same time, they must carefully consider what measures are described in the agreement and, therefore, what information will be shared.
Likewise, it is essential to design a clear and shared strategy. Otherwise, the chances that everything will fail can be high. Finally, it must be taken into account that, as a general rule, alliances do not remain in just one specific alliance; they are usually the first step towards something bigger.
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