Knowledge Sharing Networks and Strategic Alliances - Case Study Example

?Running Header: Knowledge Sharing Networks: A Case Study of Large MNCs “Knowledge Sharing Networks and Strategic Alliances Module Strategic Alliances between firms is a very common phenomenon these days. There are many live working examples available to us in this regard. The result of this rise in this phenomenon has prompted researchers and organizational scientists to focus on this field more than ever before. As a result of research work done in this field, there are plenty of other avenues opening up. The impact of Strategic Alliance have also been studied in great detail and many scholars and researchers have linked it up with economics of returns, economies of scales, R & D and many other fields that have forward and backward linkages to an organization. The fruits of this research are going to be reaped by many firms in the future when they decide to form a Strategic Alliance and Networks with another firm. Strategic Alliances can be defined as voluntary agreements between firms for exchanging, sharing, and codevelopment of products. A strategic network may also be formed for the purpose of information sharing and using the knowledge learned from one part of the world by one firm, and then applying this learned knowledge to another part of the world through a different company. In the past research was also done to determine the behavior and performance of firms as a consequence of these alliances and partnerships. However, the major focus of the past research was the proclivity of firms or motivation behind entering into the partnerships and what variables were used by these firms for choosing their strategic partners. One important factor that was unearthed by this paper that gives firms motive to form strategic partnership is the use of information. As the paradigm of knowledge has shifted and firms rely on quick and fast information transfer and usage to increase their profitability, information has a premium attached to it. Many firms form strategic alliance and networks to get hold of this information and use it in their businesses for better profitability and performance of the organization. Hence, strategic networks and alliances have become increasingly important in the sphere of businesses today. (Gulati, Alliances and Networks, 1998) There are various factors that have to be considered before a firm makes a decision about the type of strategy that it is going to implement. Historically, businesses or focal firms can either take hold of other firms through investment, joint ventures or acquisition. However, as the time has elapsed it has become increasingly difficult to predict what kind of strategy, the focal or a firm in need of partnership is going to follow. In a study done on 87 firms and 9276 deal announcements, it found that a lot of factors play an important role in strategic partnership decisions. These factors range from economics to other important fields in a business context. They include transaction costs, R & D benefits internalization view and the level of technological stage of the targeted firm. It was also worth noting that other conventional theories also hold importance in the decision made by the firms to form Strategic Alliances and Networks. Agency Theory, for example, provides grounds for Strategic Alliances and Networks to materialize. Agency theory states that agents act on the behalf of the principle. The finding in the paper says that one firm agrees to act on the behalf of the other and chooses to forego its own business and resources. it becomes fairly easy to form Strategic Alliances and Network. (Belen & McGahan, 2005) Many other important factors play a very important role in the formation of Strategic Alliances and Networks. A study done on Network and Alliances show that profitability of a firm is likely to increases if there is some sort of connection between the industry participants. This is one major reason why firms operating in an Oligopoly collude and form cartels. Hence, forming strategic alliances and networks increase the returns for the firms and enhance their profitability. This is an important factor that leads to the formation of Networks and Alliances. The importance of a resource controlled by the supplier also leads to Network. (Gulati, Noharia, & Akbar, Strategic Networks, 2000) Case Study of Mercedes- Benz, Toyota, UNIX and Microsoft: Toyota history in America dates back to some Thirty-plus years. The sedan manufactured by an unknown automobile company that was prone to overheating and other problems debuted in California. This was a major disappointment and the firm ceased its exports to America in less than two-years. The company however was able to bounce back using a network of Strategic Alliances all around the world. They were able to shift their image from a disappointment to an important player in the World’s automobile industry in less than 30 years. This achievement was made possible thanks to Toyota’s continuous improvement strategy along with its acceptance to form Strategic Alliances and Networks throughout the world. The author of a study relates this with the example of Toyota Motors in America. Toyota has a whole network of Suppliers. The relationship between Toyota and these suppliers is based on trust and feeling of mutual benefit. The benefit accruing to Toyota from this relationship is the fact that the suppliers don’t supply the highly important resources and components to firms competing with Toyota. This has resulted in Toyota producing unique type of cars that its competition cannot produce. This is one of the major reasons why GM failed and was unable to compete with Toyota Corporation. The author of the same study correctly points out that Strategic Networks and Alliances are far from being Static. Instead, these networks are highly dynamic (Volti, 1991). They change their form and structure more often than not. This leads to innovation in the industry and leads to great gains for the firms who are part of these network. The author uses the case study of UNIX and Microsoft from the IT industry to highlight the importance of these strategic alliances and networks. They used their Strategic Network and Alliances to their “business wars”. The Strategic Networks formed by these organizations were not only beneficial for themselves but also their partners. For example, the strategic relationship formed by UNIX and Microsoft with their partners that were located in usually economic developing countries like India and Pakistan helped the technology transfer to these countries which in turn helped the economies of these nations. (Gulati, Noharia, & Akbar, Strategic Networks, 2000). Yet another innovative network was formed by a large organization Mercedes-Benz in order facilitate its growing demand. The management found out it was difficult for them to work 24/7 as all the employees asked for a need for some off days and break between works. The night shift was taking holidays on Saturdays and Sunday. Regulations in the constitutional framework of the Germany asked the company to give some leeway to employees so that they can have some leisure. Mercedes-Benz management was constantly flustered by their inability to work 24/7/365 days a year. However, they soon found a solution. They were amazed by the concept of “Azan” in Muslim World. They heard that each and every second of the years, there’s “Azan (Call to Prayer for Muslims)” happening at one part of the world or the other. There is never any time on the clock when “Azan” is not taking place. They were simply mesmerized. Therefore, they developed their own scheme of things. They name it time-shift technology. They realized that they can achieve their targets of twenty-four-seven-three-sixty-five days a year production by using this new system. They calculated the time zone differences and used them to their advantage. They divided the work in a form which will be move from one part to the. For example, Japan is the first country to see the sunlight of a new day. Therefore, the work started in Japan and Australia. In the evening when Japan closed, it transferred its work to South Asian Countries who transferred their work to Europe at their own business close time and the last part of the work was transferred to the America because when the Asia closes, there is still sunlight in America. Similarly, when the business hours of America end, there is sun again in Japan and Australia. This way the company was able to achieve its targets of 24/7 work productivity. This model was inspired from Azan and now many multinational organizations are using the same model in order achieve their work targets and are achieving fourfold growth. (Krishnan, Joshi, & Krishnan, 2004) Figure 1: Knowledge Management Network Reference: (Michael, 2001) The above study done by Earl Michael defines the importance of knowledge management for a organization. This network is used with the firm’s own employees and peripheral networks to communicate the goals of the organizations and then discovering any performance gaps and under performance. Later, it is identified if the knowledge flow is without any barriers and if the knowledge barriers resulted in performance gap. Once it has been ascertained, the network is further check for any loopholes and its feasibility is determined. If all goes by plan then a proper knowledge management is reinstated in the organization and using this the whole cycle continues in the organization. (Michael, 2001) This brings us to study the knowledge management system used by TMC or more commonly known as Toyota Motor Company. As discussed in the previous part of the paper how Toyota failed to make any impact as an infant company, we are going to study the development of knowledge management network within the company that has contributed to its success and the organization has been able to become one of the leading automobile organizations. This will enlighten us as to how the knowledge management can lead a firm towards success and lack of it can lead to an organization to trouble. Knowledge Sharing Networks: Case Study of Toyota: Figure: Knowledge Sharing Network of Toyota: (Dyer & Nobeoka, 2000) Toyota has established a variety of bilateral and multilateral process of communication for knowledge sharing. Some processes in the network are designed only for knowledge diffusion, while other processes are for knowledge diffusion and knowledge creation. For example, supplier association is used in the network to learn about the new trends and changes in the automotive sector. Similarly “Jishuken” network is used by Toyota multilateral transfer or tacit and confidential information. Toyota also uses sub-networks or nested network to connect it employees with Jishuken networks or supplier association networks. (Dyer & Nobeoka, 2000) The author of another study correctly points out that all firms pass through important stage of life cycle. These include stages of introduction, early growth, maturity, saturation and decline. Some firms pass through these stages quicker than other firms on the basis of strategies that they choose to adopt. The reason of this disparity is because some firms choose to work as a network while other firms choose to operate independently. However, the past research makes it clear that firms that tend to cooperate with others achieve fast levels of growth. It takes them less time to reach maturity than firms that are operating on their own. Networks and Strategic Alliances lead to egocentric growth of a firm. The networks and strategic alliances are not always in the macro sphere of the firm’s environment. Instead they can also be at micro level. For example, in small firm as owner can use his own personal and social networks to yield benefits to a firm such as discounts and easy payment terms. These are also one of the important types of strategic networks and alliances. In fact no strategic network can be better than the relationship between the organization and its owner. Once a firm grows, the pattern of networks change from identity-based to more calculative network and alliances. The advantage that calculative networks have over the identity based networks is that they tend to expose greater product availability to the firm. They also help the firm to reduce uncertainty in the environment. For example, instead of contacting and asking all the suppliers to supply their products, Wal-Mart has formed a strategic alliance with FedEx that has the responsibility of shelving the products for Wal-Mart. FedEx being a large logistics and distribution company can easily use its own network and partner to help Wal-Mart in return of profitability gains. Hence, the formation of strategic alliances has helped both the companies into achieving their own advantages. (Hites & Hesterly, 2001) Many MNCs these days are trying for form Strategic Alliances with firms in order to achieve competitive advantage. However, Strategic alliances and networks on their own do not provide a firm with competitive advantage. Instead it is the strategy used by the firms at the center of strategic alliances and their vision that helps the firms obtain competitive advantage. The best possible way to get the best out of a strategic network and alliance is to communicate the importance of the network not only to the central firm, but also to educate the staff and management employed in the peripheral networks about the value of the network to the organization. Another possible way to get the best out of the network is to erase and eliminate any knowledge barriers that are between the central firm and peripheral parts of the network. This will help the easy flow of information from one part of the network to another. Yet another way to improve the performance of the network is through leadership. There should be a focus on building relationship between the members that are part of the network. This would make sure that there is a mutual trust relationship between the members and hence create synergy in the various aspects of the networks. (Goerzen, 2005) Conclusion: We can conclude from this paper that forming strategic alliances are vital for an organization’s success. Not only forming alliance is important, but there is also a dire need for an organization to make sure that its information flow is without any barriers. If all of this is correctly implemented one can be sure that the organization will succeed. Works Cited References: Almeida, P., Song, J., & Grant, R. (2002). Are Firms Superior to Alliance and Markets? Organization Science, 13(2), 147-161. Belen, V., & McGahan, A. (2005). The Choice Among . Strategic Management Journal, 26(13), 1183-1208. Das, T., & Teng, B. S. (2000). Instabilities of Strategic Alliances: An internal Tension Perspective. Organization Science, 11(1), 77-101. Dyer, J., & Nobeoka, K. (2000). Creating and Managing a High Information Sharing Network: A Case Study of Toyota. Strategic Management Journal, 21(3), 345-367. Goerzen, A. (2005). Managing Alliance Networks. 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