External Strategic Developments at the Car Industry - Literature review Example

?Business Strategies Introduction This present paper provides answers to three questions that are based on the global car industry case study. The questions and answers are mainly based on the concepts of external strategic developments, knowledge management, and corporate social responsibility in the global car industry. Strategic Alliance With reference to the studies conducted by Jayesh (2012), he described strategic alliance as a business strategy whereby two or more companies jointly agree to share their resources, core competencies, and capabilities for limited periods in order to successful undertake a specific project that has mutual benefit to both partners. Jayesh (2012) further added that strategic alliances differ from mergers and acquisitions on the aspect that under strategic alliances, the partner companies maintain their autonomy or independence, which is not usually the case under mergers and acquisitions. Secondly, companies that form strategic alliances are not usually involved in direct competition but rather they offer related products and/ or services that are directed towards similar target consumers. According to Dorata (2012), there are various forms of strategic alliances and they include direct cooperation, which is the most common. The second form of strategic alliance is joint ventures whereby different companies come together and form a separate entity that they jointly own and manage together. The other form of strategic alliance is minority investments mostly in new and fast growing business organisations. Advantages Dorata (2012) in his writings listed the most common advantages of strategic alliances of which one of them is the fact that it enables companies to offer a wide variety of goods and/ or services to their consumers without incurring huge cost or spending lengthy durations in developing new products. Secondly, Dorata (2012) noted that businesses usually enter into strategic alliances to obtain competitive advantages that they would not have otherwise obtained if they operated on a solo basis. Therefore, strategic alliances enable businesses to expand more rapidly while still maintaining their autonomy unlike mergers and acquisitions strategy. Consequently, it is correct to assert that strategic alliances enable businesses to expand its customer base since it is able to reach a wide target market. Specifically to the car industry, Jayesh (2012) stated that among the companies that have recorded competitive advantages because of strategic alliances include Fuji and Toyota, which have jointly cooperated in various projects. Fuji gained an advantage from its strategic alliance with Toyota based on the research and development that was conducted by Toyota that lead to the development of the Toyota’s gas-electric Prius hybrid model. Because of their strategic alliance, Fuji was also able to develop their first Subaru hybrid mainly based on the Toyota technology that was used in the manufacture of first gas-electric car (Hill, 2010). Another strategic alliance in the car industry is the one between Fiat and Chrysler that enabled the two companies to share their technology, distribution channels, and vehicle platforms. This strategic alliance was viewed to be of much benefit to Chrysler, which was struggling financially at the time when both companies where entering a strategic alliance and therefore, it was able to gain added advantages without losing its independence despite its financial position at that time (Hill, 2010). Another example of strategic alliance that demonstrated the advantages of strategic alliance over mergers and acquisition is the one between General Motors and Fiat that enabled both companies to benefit from reduced cost of operating, common architecture and platforms, increased efficiency in financial service operations, and cross-sharing of automotive technologies (Hill, 2010). Disadvantages According to the writings by Dorata (2012), the key disadvantage of strategic alliance is because of the fact that neither of the companies gains financial reward from the alliance. This is because there is no actual exchange of assets or money that could have otherwise improved shareholders’ wealth and enable a company to use the additional financial resources to implement other competitive strategies. In mergers and acquisition, a bigger company pays for the shareholding of another company and therefore, gains the right to participate in the management of the other company that equally gains monetary rewards from the merger and acquisition. Importance of organisational knowledge creation process According to Nijhof (1999), he stated that globalization has brought about heightened competition in the business environment and therefore, to remain competitive, business organisations have to explore various avenues that can give them competitive edge against other companies. Traditionally, most business organisations have focused on the use of information communication and technology in order to gain a competitive advantage against their rival since it is able to increase efficiency within an organisation at a reduced cost and thereby increase profitability. However, the use of ICT to gain competitive advantage is no longer guaranteed because there are various forms, which are easily accessible in the market. Therefore, this has necessitated the exploration of avenues such as the use of knowledge workers to gain competitive advantage. According to Nonaka and Takeuchi (1995), knowledge workers are workers who provide a business organisation with competitive advantage because of their unique knowledge that is not available in the other rival companies. Nonaka and Takeuchi (1995, p 25-31) further added that utilization of knowledge as a tool for gaining competitive advantage has created the need for knowledge management, which is described as “the process of creating, capturing, and using knowledge to enhance organisational performance.” On the other hand, Nijhof (1999) described it as the process of documenting and codifying knowledge and disseminating it through database and other communication channels. In regards to knowledge creation, Nonaka and Takeuchi (1995) described it as “the regular transfer, combination and conversion of the different knowledge while people practice, interact, and learn.” With reference to the global car industry, it is noted that the industry heavily relies on knowledge to remain competitive since they have to manufacture products using latest innovations as well as fit the cars with new creations and innovations, and therefore the process of knowledge creation is crucial in the global car industry. Nijhof (1999) particularly stated that the creation of organisational knowledge in the global car industry is important for innovation purposes more so in regards to production technologies, designing, and development. For example, in the global car industry the processes of knowledge creation are important since they integrate new knowledge with insights from consumers, and even the industry regulators, thereby leading to dissemination of knowledge that will be helpful in the designing process, which will result in the manufacture of cars that befit consumers’ expectations and industry standards. Additionally, the processes of knowledge creation are important in eliminating inefficiencies within the different stages of car manufacturing including even the distribution channel. For example, knowledge creation processes at Toyota proved beneficial, as the company was able to create knowledge on lean production. Strategic social responsible behaviors by organisations focus on environmental activities In the studies conducted by Balabanis et al. (1998), corporate social responsibility is described under different terms that include corporate citizenship, corporate consciences, sustainable responsible business, or social performance, which collectively refer to the act of business regulating itself in order to ensure that it does not infringe the set ethical standards, rules and regulations, and international practices. Lantos (2001) stated that in the begin of the 21st century there has been increased pressure on companies to engage in corporate social responsibility and debunk the myth that they are all in it for profit and that they have less regard for their customer as well as various stakeholders. Fialka (2006) further added that the need to engage in corporate social responsibility was necessitated by the fact that business organisations were blamed for the environmental pollution that has greatly contributed to the current predicament of global warming that is facing the world. In particular, Barnett (2007) noted that industrial activities contribute 14.7% of the total global emissions in the world and therefore, because of increased attention on the issues, business organisations have been forced to undertake various corrective measures to reduce their contributory damage to the environment under the disguise of corporate social responsibility. Lantos (2001) lamented that originally, the concept of corporate social responsibility was devised for ethical purposes with no potential impact on the bottom line of the business organisations, but presently business organisations have largely used it as a public relations strategy. Moreover, some organisations categorize it as part of their advertisement strategy that is aimed at interlinking the organisation with positive attributes because of its good deeds to the surrounding community and environment. Because of this twist in the application of corporate social responsibility, many cases of strategically social responsible behaviours by organisations focus on environmental activities. This is because environmental activities currently attract a lot of attention and therefore activities directed towards saving or conserving the environment are more likely to receive a lot of public attention, which infers to positive public relations. Additionally, strategies for social responsibility focus on the environment more because of the strict government regulations that include penalties and even taxes such as the carbon tax on excessive carbon emissions. Therefore, organisational activities that are focused on the environment are geared towards shielding the organisations from suffering such consequences or violating government regulations. References Balabanis, G. Philips, H. and Lyall, J. (1998). Corporate social responsibility and economic performance in the top British companies; are they linked? European Business Review, Vol 98 (1) Barnett, M. (2007). Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility. Academy of Management Review. Vol. 32 (3) Dorata, N. (2012). Determinants of the Strengths and Weaknesses of Acquiring Firms in Mergers and Acquisitions: A Stakeholder Perspective. International Journal of Management. Vol. 29 (2) Fialka. J. (2006). "Politics & Economics: Big Businesses Have New Take on Warming; Some Companies Move From Opposition to Offering Proposals on Limiting Emissions". Wall Street Journal. Hill, M. (2010). Example of strategic alliance in the auto industry. Retrieved from: http://www.helium.com/items/1832742-strategic-alliance-in-the-auto-industry. Accessed on [04.05.2013] Jayesh, C. (2012). Why do Mergers and Acquisition quite often Fail? Advances in Management. Vol. 5 (5) Lantos, G. (2001). The Boundaries of Strategic Corporate Social Responsibility. Journal of Consumer Marketing, Vol 18 (7) Nijhof, W. J. (1999). Knowledge Management and knowledge dissemination. Academy of Human Resource Development 1999 Conference Proceedings Vol. 1. Arlington VA: Academy of HRD. Nonaka, I., and Takeuchi, H. (1995). The Knowledge-Creating Company: How Japanese Companies Create the Dynamics of Innovation. Oxford University Press, New York. Read More