Researching Strategic Alliances: Emerging Perspectives - Assignment Example

? Strategic alliances A strategic alliance provides an avenue for the corporate growth via increased availability of new sources of innovation and new markets. Alliances fashion a core initiative for corporations as it aids the corporation in gaining global significance. As such, the relevant management teams need to comprehend the drivers of success that are correlated with strategic alliances. Advances in technology have made it feasible to transact business across borders. When this is coupled with tremendous advancement in the transportation sector, international corporations find it easy into enter foreign markets. This action of entering into foreign markets opens up the firm to benefits of economies of scale and increased opportunities for marketing and distribution. However, the cost linked with entering into foreign markets may far out-span the capabilities of a single firm (BLEEKE & ERNST 1993, 27). This then dictates the need to enter into a strategic alliance with another international firm. This has the effect of expediting the rate of entry into the foreign market albeit maintaining relative low costs (SHENKAR & REUER 2006, 71). Several logistical tussles are still to be encountered with entry into foreign markets. These tussles range from entrenched competition, unfriendly government regulation and irrelevant beauracracies (GIBBS & HUMPHRIES 2009, 45). There is a higher prospect of overcoming these obstacles when strategic alliances are employed, as contrasted to when the firm decides to venture into foreign markets on a solitary basis. There exist three core categories via which strategic alliance can be regarded. The first one of these is joint ventures. Joint ventures are formed when the respective companies combine to form an independent company. The respective companies decide to share the profit and loss of the new entity that will be created. One of the most notable cases where joint venture was created is that of Sony Ericson. Sony and Ericson decided to form a new entity known as Sony Ericson Mobile Communications. However, this new entity has just recently been fully owned by the Sony Corporation who renamed it Sony Mobile Communications. The next category of strategic alliances is equity strategic alliances. This entails the new partners having different percentages of equity in the new venture. Depending on the motive or goal of the strategic alliance, the partners can either opt to share equity in each other’s business on in one business. The determining factor is the reason for the strategic alliance. An example of such an alliance is that between Star-Bucks and Kraft. The last category of strategic alliance is non-equity strategic alliances. This is when a strategic alliance is carried out on the terms of a contract agreement rather than on the ownership basis. The relationship of this kind is usually referred to as a contractual relationship. A good example of a non-equity strategic alliance is the one between Vodafone and Telecom Malaysia. The deal was signed in 2006 whereby Vodafone was the leading partner. Strategic alliance requires a well though-out procedure to ensure the alliance is successful and realizes its intended goal(s). Prior to embarking on an alliance, firms should choose partners whose strategic goals and objectives are compatible to their own. The firm should take into consideration the extent to which synergy will be availed. Additionally, firms should endeavour to participate in strategic alliances that complement the firm. This translates to mean that, firms ought to engage in alliances that will complement their skills, their products and services in addition to its market share. Akin to all business agreements, rules and regulations must be incorporated into strategic alliances. These factors are divided into scope of operation and length of cooperation. The scope of operation entails partners agreeing on how to handle potentially competitively sensitive information. Secondly, it expounds on what will be shared and what will be restricted. Also, how the partnership will deal with proprietary technology and subsequently how shred technology will be handled. In the context of length of cooperation, it should be clear to all partners that the alliance will someday be broken, as such; measures should be instituted to ensure a smooth transition. This ensures that no one partner is left shorthanded in the event the alliance breaks apart. Preferably, the length of the alliance should be known in advance. In the event the time that was set for the alliance elapses, it remains the prerogative of the parties to choose to continue the alliance or break it up. When they chose to continue the alliance, they must adhere to this same procedure. A key incentive for engaging into strategic alliances is the endeavour to reduce the risk associated with the said venture (DAS 2010, 51). When a new market has just sprung up or in the event there is an elevated level of uncertainty and instability, it necessitates the need to engage in risk sharing. The aspect of competition, that is present in a business environment, exerts pressure on businesses to perform. In this perspective, engaging in strategic alliances aids in controlling the level of risk susceptible to a firm. No firm is well conversant in all areas of business. Firms can be proficient in one area whilst being ignorant in other fields. As such, structuring strategic alliances fashions the opportunity for a firm to gunner expertise and valuable knowledge in an area where the firm lacks understanding (GLAISTER et al. 2004, 102). This new array of information can be employed not only on the said joint venture but on other projects in which the firm is engrossed. This expertise and knowledge can range from learning how, best, to deal with government regulations, knowledge about efficient production strategies, to the best mode for acquiring relevant resources. Some key reasons support the action to engage in strategic alliances. The respective firms are, in a position to reduce operational costs associated with hiring new staff as the new partner will have brought a new team on board (KUGLIN & HOOK 2002, 32). A strategic partnership provides an avenue for each of the partners to endorse each other in advertisements. This is an extremely effectual undertaking in the event where parties, in the alliance, have a strong business presence. This stems from the fact that, these endorsements will labour to fortify their credibility (REUER 2004, 93). Since there is augmented access to trained personnel, the respective customer experience is bound to heighten. This stems from the fact that, customer demands and queries will effectively be handled. An additional reason to incorporate strategic alliances is that, a firm is able to offer an increased array of products and services without having to incur costs associated with product development (WALLACE 2004, 72). These new products and service are, basically, based on those that are already being offered by the new partner(s). Conclusion The goal of corporate growth has a significant chance of being realized when strategic alliances are employed. However, for this to work effectively, significant effort must be employed to build on the trust between the concerned parties. Additionally, it is vital for the parties to maintain open lines of communication throughout their encounter. Strategic alliances are an inevitable action in the cooperate world, and as such, caution should be taken when entering into such agreements. References BLEEKE, J., & ERNST, D., 1993. Collaborating to compete: using strategic alliances and acquisitions in the global marketplace. New York, Wiley. DAS, T. K., 2010. Researching strategic alliances: emerging perspectives. Charlotte, NC, Information Age Pub. GIBBS, R., & HUMPHRIES, A., 2009. Strategic alliances & marketing partnerships gaining competitive advantage through collaboration and partnering. London, Kogan Page. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=433140. GLAISTER, K. W., HUSAN, R., & BUCKLEY, P. J., 2004. Strategic business alliances: an examination of the core dimensions. Cheltenham, UK, Edward Elgar. KUGLIN, F. A., & HOOK, J., 2002. Building, leading, and managing strategic alliances how to work effectively and profitably with partner companies. New York, AMACOM. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=71475. REUER, J. J., 2004. Strategic alliances: theory and evidence. Oxford, Oxford University Press. SHENKAR, O., & REUER, J. J., 2006. Handbook of strategic alliances. Thousand Oaks, SAGE Publications. WALLACE, R. L., 2004. Strategic partnerships: an entrepreneur's guide to joint ventures and alliances. Chicago, IL, Dearborn Trade Pub. Read More