Trade Winds and Nisho Iwai - Issues that Could Produce Negative Effects for Alliance Firms - Assignment Example

Develop and Implement Strategic Plans By Student’s Name Code +course name Professor’s name University name City, State Date Answer 1 Introduction Both Trade Winds and Nisho Iwai lack the necessary component for them to succeed individually in a highly competitive global business environment. The high costs of warehousing in recent years have put pressure on Trade Winds Ltd profit margins. Nisho Iwai, on the other hand, faces such problems as foreign exchange fluctuations and suppliers directly seeking its customers due to the open nature of the market. This thus causes NI to lose the market share. How the two companies could find a way out of their problems The two companies could find a way out of their problems by forming a strategic alliance. In this regard, both NI and Trade Winds will not dissolve their identity. Instead, they will simply agree to share their core competence to realize their growth objectives. Both Nisho Iwai and Trade Winds are in vulnerable strategic positions, and therefore, forming strategic alliances will enable them to share resources. The Performance Difference from Alliances Point of View and Competitive Advantage and Competitiveness According to Wang & Horsburgh (2007), resources are inputs to an organization’s production process. Resources could either property based or knowledge based. Property-based resources typically refer to tangible input resources, whereas knowledge-based resources are the ways in which business organizations combine and transform these tangible inputs (Levy & Powell 2004). The valuable tangible and intangible resources that Nisho Iwai possesses include a trading house that holds the goods until it can find a suitable buyer and brand reputation. Trade Winds, on the other hands, have adequate knowledge in international dealings. According to resource-based view of strategic alliances, both NI and Trade Winds can link resources, capabilities and competencies in order to achieve a sustained competitive advantage. The following are the main benefits that both Trade Winds and NI will realize as a result of strategic alliances; resource acquisition, competitiveness in global market, effective management of risks, economies of scale, ability to cultivate multinational markets among others. Focusing on Resource Based View of strategic alliances, Wang & Horsburgh (2007) argued that different organizations have different idiosyncratic. Also, the RBV of strategic alliances emphasizes that no two firms have identical strategic resources. Both NI and Trade Winds can generate economic rent by leveraging their key assets. Additionally, firms activities Wang & Horsburgh (2007), in their studies, stated that alliances must create value. Thus, a strategic alliance should reduce uncertainties and expenditures, and also, offer access to complimentary assets. According to the resource based view of strategic alliances, organizations with valuable, rare and inimitable resources have high potential for achieving superior performance. In the formation of alliances, firms with valuable, rare, inimitable and non-substitutable resources are often reluctant to get into alliances with partners whose resources do not have the above characteristics. For this reason, such organizations often tend to seek partners who also possess a competitive advantage of some kind. Both Trade Winds and NI possess different components, and therefore, they will combine resources in order to achieve competitive advantage. What produces positive effects on alliance firms? Performance of an alliance highly depends on the resources that are available to the partners, and the more the resources, the higher the possibility of returns. These resources are contributed by the individual partners before the alliance is formed, and this is done through an agreement. Trade Winds have an upper hand in international dealings whereas NI has a warehouse. These two organizations will then come into an agreement on how these two resources shall be used to the benefit of the alliance. During the implementation of an alliance, organizations must make an agreement in regards to their contribution towards the partnership and the benefits they shall reap from the partnership to avoid future conflicts. Resources in an alliance are managed by mutual agreement. The parties agree well in advance on how the management shall be done, and also how the profits shall be shared. This is often done in accordance with the contribution of the each organization, a factor known as asymmetric division. Therefore, the firm that will contribute more resources to the alliance will gets higher benefits and vice versa (Hitt, Ireland & Hockisson 2001). Issues that Could Produce Negative Effects for Alliance Firms Despite its numerous benefits, strategic alliances has some advantages such as loss of competitive advantage, it’s not easy to find a good partner, relationship management and integration and coordination challenges. In order for the alliance to be successful, the two firms should demonstrate high levels of trust and understanding (Antoncic et, al. 2009). Both Trade Winds and NI should negotiate well in order to achieve a win-win outcome, and avoid a situation where one firm gets a raw deal. In addition, the two firms should have effective management teams in order to achieve success (Ungson & Wong 2008). Before Trade Winds and NI get into a strategic alliance, they should define outcomes and results that they expect. According to Cardeal & Antonio (2012) this plays a crucial role of avoiding future conflicts amongst the partners. Both Trade Winds and NI should also define and document any elements that each party provides, and also any benefits that are brought out by a successful alliance. Defining the basics of operations is also one of the issues that could bring about positive outcomes to the alliance. This is because each of the parties is assigned and charged with specific responsibilities according to their expertise and strengths. Many alliances fail due to poor management relationships (Hill, Jones & Schilling 2003). Protection of the intellectual property rights of the parties to the alliance by way of entering legal agreements restrictions while transferring proprietary information is also a way in which positive outcomes could be achieved by firms in the alliance. When firms get into alliances, inside information is bound to get exchanged in the process of doing business. Such information could be used by partners to put others at a disadvantage in some instances. It is for this reason that legal agreements should be entered into by all parties to ensure that information is kept confidential and only used for the purposes of the alliance (Wang & Horsburgh 2007). Reference List Antoncic, B et, al. 2009. Managing Global Transitions: International Research Journal. Vol.7, No.3: pp 1581-6311. Cardeal, N. & Antonio, N. 2012. Valuable, rare, inimitable resources and organization (VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to competitive advantage? African Journal of Business Management. Vol.6, No. 37: pp. 10159-10170. Hill C, Jones G and Schilling M, 2003, Strategic Management: Theory: an integrated approach. London: Cengage Brain. Hitt M, Ireland RD & Hockisson R, 2001, Strategic management: Concepts: Competitiveness and Globalization. London: Cengage Brain. Levy, M & Powell, P. 2004. Strategies for Growth in SMEs: The Role of Information and Information Systems. London: Elsevier Butterworth-Heinemann information systems series. Ungson, G.R. & Wong, Y-Y.2008. Global strategic management. M.E.Sharpe, Inc., New York. 392 Wang, Z. & Horsburgh, S. 2007. Linking network coherence to service performance: Modeling airline strategic alliances. Journal of Marketing Channels. 14(3), pp. 51-81. Answer 2 Shanghai Tang is a Chinese fashion designer label that is known for expensive accessories, giftware and clothes. Shanghai Tang, having emerged from china, prides itself as the first and the only company known for luxury brand (Zongming & Wei 2002). The brands from Shanghai Tang are wearable and affordable, and convey the image of modern Chinese lifestyle (Zongming & Wei 2002). The company was started by David Tang who was a wealthy tycoon, in 1994. The initial product line included silver chopsticks, leather items, bespoke tailoring, Chairman Mao wristwatches and silk panamas, all designed in Chinese styles (Lijun & Yiqiang 2005). The main aim of Tang was to expand the global presence of Shanghai Tang and took it abroad to Paris, London and New York. Within the first year of expansion, the company managed to make profits, but during the Asian financial crisis in 1997, the fortunes of the company turned down. Shanghai Tang is currently serving as a good example of a local company going global in the fashion industry. The first strategy that Shanghai Tang has used to expand globally is using improved marketing strategies to venture new markets. The major factor it has considered in this business strategy is design and having a unique Chinese identity that attracts consumers from all parts of the globe. The overall brand of Shanghai Tang is made of parts consisting of colors, layouts and cloth fasteners (Genfu 2004). The company name uses a Chinese name that is meant to emphasize its brand identity. The company logo emphasizes the unique Chinese identity because it follows the traditional Chinese direction (right to left), which proves its authenticity (Dongzhi 2003). At first, Shanghai Tang offered its customers mostly clothes that were fashion insensitive and expensive. To most tourist and international consumers, the high-end market was narrow and a once in a lifetime shopping opportunity (Langenberg 2007). This strategy has increased Shanghai Tang’s global presence. To maintain a status in the global fashion industry, Shanghai Tang increases its products and sales in its existing markets by focusing on holiday promotions, several seasonal collections and core collections (Songtao 2008). The element of core collections is important because it has stable collection of bestselling products, such as silk sweaters and cashmere, gift goods and furnishings. This strategy has however been affected by shortage of silk which affected its global demand and supply (Gu & Tang 2002). This element comprises of around fifty percent of the company’s total revenue. Having seasonal collections helps keep Shanghai Tang up to date with global fashion trends. This strategy has proved to very effective in helping Shanghai Tang maintain its status in the global fashion industry. The basic business strategy that Shanghai Tang has used to venture into global luxury market is forming mergers and acquisitions through allying with western luxury groups. This strategy has allowed Shanghai Tang to increase its customer base, increase its intellectual capital and combines the best characteristics of two companies. The use of Richemont group has enabled it to benefit from its competencies and networks (Danglun & Qingquan 2009). While fifty percent of designers in the company are Chinese, the other fifty percent is European, which offers a catalyst for creativity, and at the same time, keeps the Shanghai Tang brand rooted in Chinese culture (Wuxiang, Hanmei & Xun 2002). Shanghai Tang makes a good and careful selection of its retail locations, concentrating on symbolic luxury. Some outlets such as the Xin Tian Di portray the storied heritage of old Shanghai, while others like the Ritz Carlton Hotel in Beijing, exudes pleasure and luxury (Songtao 2008). Shanghai Tang has also used the strategy of launching business chains in various locations. Shanghai Tang has forty-five stores, thirty of which are located in Greater China, and have been very successful. The use of franchising and licensing has also been beneficial to Shanghai Tang. The company’s decision in 2013 to enter in a twelve-year worldwide licensing deal with Inter Perfumes, which is located in United States of America, is a good move because it will offer the company a chance to produce and distribute perfumes and other related products, in the US. This strategy, however, demands that Shanghai Tang lose some amount of control because it has to sell manufacturing, production or distribution rights; and therefore, may not be the best global expansion strategy. Shanghai Tang can penetrate the foreign market easily, and enjoy more sales by first improving their market penetration strategies. The company can achieve this by increasing their customer purchases without making changes in products and current market (Songtao 2008). One of the ways that Shanghai Tang can increase their purchases is by having monthly lucky draws. Thus, when an international customer makes purchases of more than one hundred and fifty dollars, he or she gets an opportunity to be one of twenty lucky customers who can be chosen for a fifty percent discount during month end. Repeat international customers can be encouraged to make more purchases by offering them two chances for every purchase of above one hundred and fifty dollars. This strategy will encourage repeat customers and attract new ones. Market development is one of the strategies that Shanghai Tang can use to increase its global presence. They can bring their brands to South Africa, which is among the emerging markets; having been ranked tenth position in market growth (Songtao 2008). Reference List Danglun, L & Qingquan, T, 2009, ‘The Performance of Institutional Environment Evidence from China's Private Listed Companies [J]’ Economic Research Journal, 2, pp. 106-118. Dongzhi, Y, ‘2003). Board of Directors, Corporation Governance and Performance: An Empirical Analysis of Listed Companies in China [J],’ Social Sciences in China, 3, 002. Genfu, F, 2004, ‘Double Principal-agent Theory: Another Analysis Framework of Listed Companies' Governance [J],’ Economic Research Journal, 12, pp. 16-25. GU, FR & Tang, Z, 2002, ‘Shanghai: Reconnecting to the global economy, Global Networks/Linked Cities, New York and London: Routledge, pp. 273-308. Langenberg, EA, 2007, ‘Guanxi and business strategy: theory and implications for multinational companies in China,’ Springer. Lijun, X & Yiqiang, F 2005, ‘Government Control, Institutional Environment and Firm Value: Evidence from the Chinese Securities Market [J],’ Economic Research Journal, 5, pp. 40-51. Songtao, FYT, 2008, ‘On the Strategic Alignment and Insider Trading in Non-tradable Share Market [J],’ Journal of Financial Research, 3, 011. Songtao, FYT, 2008, ‘On the Strategic Alignment and Insider Trading in Non-tradable Share Market [J],’ Journal of Financial Research, 3, 011. Wuxiang, Z, Hanmei, C, & Xun, W, 2002, ‘Product Market Competition and Financial Conservatism——Model and the Case of Yanjing Beer Co [J],’ Economic Research Journal, 8, 003. Zongming, T & Wei, J, 2002, ‘A Study on the Expropriation Degree of Large Shareholders of China's Listed Companies [J],’ Economic Research Journal, 4, pp. 44-50. Answer 3 Micheal porter, in his five forces analysis, provided a framework through which business organizations could analyze the competition and also determine their strategies (Wilson & Gilligan 2005). The Porters five forces examine the power behind the opposing competitive forces that determine an organization’s long term success as well as competition (Porter 1985). The five forces as suggested Porter include such elements as conflicting firms, threat of product substitutes and new market entrants and finally is the ability of buyers and suppliers to exercise their bargaining power in the market (Ries &Trout 2005). Porter’s Five Forces Green Environmental can therefore use the some of the elements of Porters five forces in order to analyze the new market. Michael Porter identified the rivalry among competing firms as one of the major competitive forces that affects the business strategy in his five forces model. The rivalry among firms that provide industrial waste collection and cleaning services is high, and therefore, the industry’s attractiveness is reduced as a result of this rivalry among firms. Green Environmental should, thus, provide attractive services to its clients in the new market, in order to gain a larger share of the market. In addition, Green Environmental could also devise its price strategy, advertise its products and differentiate its products, in order to attract more clients in the new market (Wilson & Gilligan 2005). Threats to new entrants have the effect of prohibiting a business organization from entering a new industry. As a new entrant, Greenway Environmental may face entry barriers from the government through its regulation. The government has an influence of determining the market participants through monopoly. The ability of a firm to control the prices in the industry has the effect of locking out other new firms. The government usually limits the number of firms that should participate in an industry. The government also creates a barrier with regards to entry through the patents and copyrights. The issuance of licenses by the government also restricts new firms. Additionally, the already established firms in the commercial (restaurants) waste collection industry may provide competition to Greenway Environmental as they enjoy economies of scale. Greenway Environmental may not have the necessary resources to purchase highly specialized machinery, and therefore, it can find it difficult to join the commercial (restaurants) waste collection industry (Wilson & Gilligan 2005). The other competitive force which is detailed in the Porter’s five forces model is the bargaining power of suppliers. In a commercial (restaurants) waste collection industry, there are several requirements such as the labour supply and machinery, and therefore, the requirements leads to an association between the buyers and supplies and the company’s that provides the raw materials. Powerful suppliers have the effect of exerting power on the commercial (restaurants) waste collection industry .For instance; the suppliers can choose to sell the raw materials at high pieces in order to make high returns. Suppliers usually have a greater influence in a given market and therefore they can change the prices of goods and services and also the quality (Klein 2007). Reference List Klein, G., 2007.Strategic Marketing. Munich: GRIN Verlag. Porter, M., 1985. Competitive Advantage. New York: The Free Press. Ries, A, &Trout, J., 2005. Marketing welfare. New York: McGraw-Hill. Wilson, R. M. & Gilligan, C., 2005.Strategic marketing management: planning, Implementation and control. London: Butterworth-Heinemann. 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