Alliance Constellations

Alliance Constellations in the Automotive Industry – A concept paper

What are Alliance Constellations

As defined by Casseres [2003], an alliance is a governance structure to manage an incomplete contract between separate firms and in which each partner has limited control. These structures may be more or less formal; it is the degree of incompleteness that determines whether we are dealing with an alliance, not whether or not there is a stand-alone structure to govern the relationship.

A constellation, on the other hand, is a set of firms linked through such alliances. This composite set competes in a particular domain. Constellations may be competing with other constellations or against single firms or alliances. They are also known as alliance groups, strategic networks or strategic blocks.

There are many examples of alliance constellations in business

* Airline alliances like Star Alliance

* Coca Cola and Pepsi manage complex groups of bottlers and distributors globally

* Visa and MasterCard

A closely related concept is clusters, discussed in detail by Porter [1998]. What Porter calls clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters can be looked at as a partial subset of alliance constellations, since not all may have an alliance feature to them. However, most geographical clusters have some alliance features.

Nature of competition in constellations

As per Casseres [2006], the following table summarizes the features of traditional competition and “collective competition”, which is competition between and with constellations.

| Traditional Competition | Collective Competition |

Competitive Units | Firms | Constellations |

Industry Structure | Oligopoly – firms | Oligopoly – Constellations |

Source of differentiation | Firm-based advantages | Group-based advantages |

Valuable resources | Firm-controlled | Constellation assembled |

Resources Governance |...