A framework in strategy and competition using alliances: application to the automotive industry

Abstract

Competition is a major driver of industry consolidation, pushing firms towards mergers or alliances. This paper discusses growing competitive challenges that make business partnering a core component of company strategy. We develop two frameworks for resource sharing using two dimensions: operational integration, and knowledge transferability. We analyze critical interface points at three levels in organizational design: corporate, business unit, and functional, and show that mergers could succeed without high level of integration. Large groups such as Renault and Ford witness such industry pressures from globalization, lower government protectionism, and shifts in buyer tastes. The framework illustrates preservation, incubation, osmosis, and full absorption as post-merger firm relationships, each requiring alignment with corporate strategy. The frameworks are illustrated using the Renault-Nissan relationship, the motivation behind it, its benefits, and its challenges.