It may be advantageous to enter into a production alliance with one of your competitors : if it means that you both stand to benefit from a cost advantage , this will thrust both of you ahead of other competitors . A single competitor grows in tandem with you , while the rest are left lagging behind . This form of alliance for example occurs in the automotive industry , since setting up a production line is a very costly affair . Certainly outside the domestic market , sharing capacity is an attractive option . For instance in the US , Toyota Camrys are finished in a Subaru plant in Indiana .
Another example is the collaboration between the two low-cost airline carriers Air Asia and Jetstar . This alliance is primarily targeted at defining the new generation of single aisle aircraft , as well as the joint procurement of these aircraft . Where the traditional airline alliances focus on commercial agreements and passenger benefits such as loyalty programmes , this alliance aims to cut costs by sharing some operational functions . Air Asia and Jetstar want to make sure that the new airplane types , which will be around for 40 to 50 years , are designed in a way that fulfils their own requirements .
Generally speaking , this type of collaboration does not carry much risk , and the important risks that do occur can be insured against . Depending on the settlement structure , there is a risk in the exploitation of the shared investment , yet that risk would be far greater if one of the parties were to make that investment on his own . The joint operational management , particularly of shared service centres , tends to be a trickier aspect . Many managing directors of shared service centres get a taste for independence and start to focus more on expanding their activities than on achieving the lowest possible costs for the partners .
The value of collaborating in this way is usually easy to calculate : the costs of investing directly and of investing jointly are generally quite transparent . The only hard part is to estimate the extra efficiency achieved by scale size . One should also take into account that joint purchasing often enables the negotiation of larger discounts .
Reciprocal hiring agreement
In a reciprocal hiring agreement , the partners share their resource pools in order to achieve a better staffing . This may involve consultants with a particular expertise , but also installation technicians with diverse abilities . Deploying each other ' s people is settled applying market-level rates , but the collaboration gives partners the advantage of not needing to keep extra people on the payroll with a view to peak periods . This form of collaboration is distinct from shared investing in that there are hardly any costs up front , and the collaboration is easily arranged , also in terms of operational management . The main condition is to share information , particularly regarding planning .
The value for both parties is better capacity utilisation , and being able to keep fewer people on the payroll .
A good example is the collaboration of TNT in Germany . In Germany there are around 150 regional mail service providers , all working within a confined geographical region . This is a viable business model , for with a lot of local governments , banks and insurance companies present , most of the mail is sent within the region . The mail services accept all mail from their clients and use the nation-wide firm Deutsche Post for the portion destined for outside the region .
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