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Leverage Alliances for Growth

by on March 3, 2010

I was reading along the lines of our discussion on the topic ‘Alliance’ in Monday’s class. I understood why small companies would have interested in having an alliance with bigger ones but was pondering about the benefits big banners gain from such alliances.

This interesting article gives an  insight into this aspect.

Little brothers need to create win-win alliances with big brother companies to help them open new, high-margin markets while big brothers also need little brothers to help them remain on the cutting edge of innovation and serve emerging markets as well as to fill portfolio gaps.

Especially during a down economic cycle, large companies can’t invent everything. Their product offerings will feature defined portfolio gaps that need to be filled by smaller companies.

General Electric makes the sensor chips that go into the Advantage PressurePro systems and Michigan-based Lextronix handles the Advantage PressurePro’s development and production. Each is a classic example of a Little Brother-Big Brother Alliance.

For GE’s sensor business unit, the Little Brother partner has provided entry into the aftermarket wireless tire-pressure-monitor market. This segment offered GE opportunities for incremental revenue growth and high margins.

Today the alliance is growing exponentially, based on a set of win-win interests.

[Source]

-Deepti Shah

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From → Coursework

One Comment
  1. Nishant permalink

    True. In today’s difficult economy, when the companies do not prefer to spend their capital in manufacturing, the best way they found is to acquire small start-up firms that serve their purpose. Hence you can see more and more acquisitions by Big Brothers of Little Brothers!

    I had read an interesting article a month ago in NY Times when Apple was getting ready to launch it’s I-Pad. What was special with this I-Pad was that they had experimented a new micro-chip called A4 in their I-Pad. This chip was expected to be faster and battery-friendlier than any other chip designed for small devices. A4 chip is what is called now as “Apple’s Future”.

    Apple likes to do everything on its own in their enclosed entity…from designing to manufacturing to marketing. This is what is Apple’s strategy. However, engineering this A4 chip was proving to be a costly affair. So they acquired a 150-employees start-up company called PA Semi in 2008. That company had been working on chips that could handle large volumes of data while consuming very low amounts of power. They had just the type of expertise that a company making music players, laptops and phones would want.

    Now, Apple continues to use PA Semi’s A4 chip while half of the PA Semi staff has left Apple to join other start-ups as Apple had not given them enough incentives to stay with them.

    -Nishant

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