An alliance (アライアンス) is a partnership between companies in which they join forces while remaining independent and supplement each other's management resources.
Main forms of alliance
Business partnership
Joint development
Technology partnership
Sales partnership
Capital partnership
Investment and cross-shareholding
Joint venture
Jointly fund a new company
M&A (mergers and acquisitions) brings the other company under your own ownership, whereas in an alliance each company stays separate and simply cooperates. An alliance can include a capital partnership (資本提携) that involves investment, but it stops short of controlling the partner. Because no single company has to shoulder the whole investment in a new business, the partners can share its risk.
AnalogyIt is like two neighboring shops that stay separate businesses but team up to hold a joint sale.
How to rememberThe English word alliance means a pact between allies. Allied nations do not merge into one country, and allied companies likewise cooperate while staying separate.
Exam points
ExamAn alliance (アライアンス) lets a company fill gaps in its technology or know-how quickly by drawing on other companies, without merging the organizations.
ExamSince a partnership gives no control over the partner, a company has only limited say in how the partner uses its management resources.
ExamA joint venture (ジョイントベンチャー, 合弁会社) is a company that several firms fund and run together, and it is one form of alliance.
An ecosystem (エコシステム) is a network of interdependent businesses in which many companies and users create value together around a core product or platform (プラットフォーム).
The term borrows the image of living things in nature that are linked together and keep a whole forest alive. Rather than one company supplying everything, the products and services of each participant connect and make the whole more attractive. The more participants join, the more valuable the platform becomes, which in turn tends to draw in still more participants.
AnalogyIt is like a town square where more food stalls draw more people, and more people draw still more stalls.
How to rememberThe eco- in ecosystem comes from the Greek word for "house".
Exam points
Mix-upAn alliance (アライアンス) is a partnership between specific companies, while an ecosystem (エコシステム) is the whole business environment in which many participants depend on each other around a platform.
Outsourcing (アウトソーシング) means entrusting part of your company's work to an outside provider.
Handing non-core work to a specialist frees your own staff and funds for the core business. Handing a whole business process, such as HR or accounting, to an outside firm is called BPO (business process outsourcing). On the other hand, the experience and skills behind the outsourced work are harder to build up inside the company.
AnalogyIt is like hiring a housekeeping service for cleaning and cooking and spending the freed-up time on your own work.
How to rememberOut + sourcing: you source the work you need from outside the company.
Exam points
ExamBPO is a management approach that entrusts an entire business process to an outside specialist, and it is one form of outsourcing (アウトソーシング).
OEM means that a contract manufacturer makes and supplies products that are sold under another company's (the client's) brand.
The client orders production
The contractor makes it in its own factory
Products are delivered to the client
Sold under the client's brand
The client can widen its own-brand lineup without producing anything itself, and the contractor keeps its existing equipment busy with steady volume. Its hallmark is that the name on the product in the store differs from the company that actually made it.
AnalogyIt is like a supermarket's own-brand snacks that are actually made by a different snack maker.
How to rememberShort for Original Equipment Manufacturer; Japanese renders it as 相手先ブランド製造, manufacturing under the partner's brand.
Exam points
ExamContract production such as OEM is also a tie-up between companies that remain independent, so it counts as an alliance.
Mix-upIn OEM, products made by the contractor are sold under the client's brand, whereas fabless (ファブレス) describes a company that owns no factories and leaves production to others.
Fabless (ファブレス) describes a company that owns no factories, focuses on planning and designing products, and leaves production to other companies.
The company avoids heavy investment in building factories and updating equipment, and it can easily change its production partners or volumes as demand shifts. The model is common in semiconductors and electronics.
AnalogyIt is like a food brand with no kitchen of its own that designs and sells its menu while contracted kitchens do the cooking.
How to rememberFab (fabrication plant) + less: no factory.
Exam points
ExamA fabless company is the ordering side that hands production to outsiders, and it directs its own resources to product planning, design and sales.
A franchise chain (フランチャイズチェーン) is a store network that grows through contracts in which headquarters lets franchisees use its brand name and store operating methods, and the franchisees pay a royalty (ロイヤルティ) in return.
Headquarters is called the franchisor (フランチャイザー) and each store the franchisee (フランチャイジー), which runs its store as a business separate from headquarters. Because new stores are funded by franchisees, headquarters can expand its network quickly with little capital of its own. Franchisees, for their part, can open for business with a well-known brand and proven operating methods.
AnalogyIt is like opening your own shop with a popular restaurant's sign and recipes and paying a monthly fee to use them.
How to rememberThe English word franchise means a special right or license to do business, so the chain is a group of stores licensed by headquarters.
Exam points
ExamThe royalty (ロイヤルティ) a franchisee pays headquarters is compensation for the right to use the headquarters' trademarks and operating methods.
Mix-upIn a voluntary chain (ボランタリーチェーン), independent retailers band together on their own to do things like purchasing jointly, so its headquarters plays a different role from that in a franchise chain (フランチャイズチェーン), where headquarters supplies the brand and methods in exchange for fees.