The Strategic Derivations In A Business Commerce Essay

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Strategic could be said to have been derived from the word Strategy, and strategy could be traced down to the military term which according to business dictionary is defined as a plan or action designed to achieve a particular or set goals and objectives.

Alliance on the other hand could be defined as the coming together of two or more company formed for a specific purpose or reason. According to John Child et al., (2005), Alliance formation is as a great response to major strategic challenges or opportunities; What makes Strategic Alliances distinguished from other kind of collaboration or strategy is that the coming together of these independent participating firm to pursue a specific goal does not mean that these companies have to abandon their own individual specific interest ;and in Alliance, these independent firms can still carry out business operations independently.(Child and Faulkner 2005).

Figure 1 below gives a diagrammatic illustration which represent what an alliance is and how companies involved in alliance still have individual goal and still remains independent irrespective of alliance formation.

In other words Strategic Alliance could be said to be "the links formed between two or more independent company which choose to carry out a project or specific activity jointly by coordinating the necessary skills and resources rather than pursuing the project or activity alone and face risk individual company face and merging the operation or acquiring and divesting their entire business unit". (Dussauge and Garrette 1999 pg 4-5).

A good example of companies involved in Alliance are the Fiat and Tata motor Alliance; Whose aim was to improve dealership and customer services without incurring a lot of cost for fiat in the Indian market and also give Tata motors the opportunity to the globally recognised.

Other examples of alliances are the Alliance between Honda and Rover, General motors and Toyota alliance, Chrysler and Mitsubishi alliance (to produce smaller vehicle in the American market), Microsoft-visa Alliance; Bharti and Wal-Mart. Etc.

Various reasons account for the formation of an alliance, one of the main reasons suggested by Kogut in his work is the opportunity for organisational learning, he stressed this point saying that if firms cannot create knowledge on their own or buy it in the market place, then it should either acquire if from a firm that has the unique knowledge or can ally with such firm (Kogut 1988:322). Other reasons for formation of alliance include minimisation of cost, improving of current strategic position, risk limitation, access to new market, access to new technology and knowledge (Yves Doz. 1996).Resource dependency is also another key reason for formation of alliance when companies do not have the unique resource to compete in the global market, resources could be in form of finance or raw material in nature.(Powel et al 1996)

All the aforementioned reasons are the drivers behind why firms choose to voluntary come together to exchange their expertise or to pool resources together to achieve a set goals and objectives.

The Dynamic capacity theory also draws attention to the need of altering the resources and capacities which form the base of competitive advantages for organisations. Dynamic capacities according to Eisenhardt and Martin (2000) are defined as organizational and strategic routines by which the companies reach new resource configurations these capacities help to renew existing strategies of companies, which foster new adjustments in case of changing environments.

As easy as it sound by authors and writers and the theory they introduce, that alliances works out when two or more companies come together to pool resources and to learn from one another; this raise a question and argument that is it that easy for firms involved to exchange ideas and knowledge, resources, or learn from one another as knowledge is known to be an intangible asset to every firm? Attempt to answer this question is where findings and answers to what exactly the barriers and obstacles are when companies are in alliance, problems that lead to evolution or end of alliance as a result of incompatibility and unwillingness to learn from one another and also be transparent with each other.

"What distinguishes alliances that last long enough to fulfil their aspirations and goals from those who break apart in their early years of difficulty is their Capacity for learning and Adjustment" (Doz and Hamel 1998:169)

According to Child et al. (2005) Learning can be defined as the act, process or experience of gaining knowledge or skill with intentions of improving their future performance.

Learning could also be referred to both the process of acquiring new knowledge and outcome.

The main objectives of learning for a partner through any strategic alliance is to tap or gain new ideas, knowledge and learn things they do not know in terms of latest development and technology and how to penetrate/ gain access into new markets to tap various opportunities at low cost.

Learning can take various forms as this can be further subdivided into Individual and Organisational Learning. The Individual learning may be rationale or intuitional and this is referred to the unique skill individual has and this can add to the competencies of the firm. Organisational learning on the other hand develops at a level beyond that of the individual and this is usually embedded in the routines and system of the firm and the collection of the individual skills in a firm make up the Competencies of the firm as a whole. (Child et al. 2005).

The question at this stage is what exactly are partners learning? Partners involved in strategic alliances are learning from the KNOWLEDGE AND SKILL they lack. Like the wise famous saying: "KNOLEDGE IS POWER". Only those that have the knowledge others do not have stay and remain on top and they are companies that take the lead in the market.

knowledge is defined as an intangible asset that is found in the minds of individuals, processes, routines, and organizational capacities, as well as, in relationships that companies maintain with their environments .(Dewhurst and Cegarra, 2004).

Knowledge can be categorised into two; (I) TATIC and (II) EXPLICIT knowledge.

Polanyi (1966) distinguished between these two types of knowledge and he explained that the Tactic knowledge is usually regarded as personal, intuitive and context specified and this kind of knowledge is usually solely to individuals which is very hard to verbalise, formalise or communicate to others. People with this kind of knowledge find it hard to share as they do not want to lose control of it. Communication of this kind of knowledge requires constant seminars, observation and above ll working hand in hand and together as one.

The second kind of knowledge which is Explicit knowledge is specified and codified; hence it is much easier to be transferred using formal systematic language.

Learning is a continuous process; just the way individuals quest for knowledge, so do organisations do to be able to stand in the competitive world. Learning has to be done at various stages, before commencement, at the inception, during the alliance with proper evaluation of every goal and objectives from time to time; according to Lyer (2002) in the table (2) below, he identifies four phases of learning priorities in the alliance evolution; he also identified five key areas to learn from to be able to sustain a successful cooperation in the alliance; they are (Environment, Task, Process, Skills and Goal.

TABLE 2: LEARNING PRIORITIES IN ALLIANCE EVOLUTION

PHASE 1

PHASE 2

PHASE 3

PHASE 4

Learning Dimension

Awareness and Partner Selection

Exploration

Expansion

Commitment to Relationship

Environment

External context, including national and cultural contexts

External and internal context including the partners corporate culture and management practices

External context for new opportunities

External context mutually, for new opportunities

Task

Very little if any

Initiation of understanding and establishment of common task

Ability to establish common task

Ability to revise and reset effective common task

Process

Very little if any

Initiation of transfer of implicit skill knowledge in later phases of alliance

Ability to establish joint process and perform common task

Learning to revise and reste joint processes to perform effective common task

Skill

Explicit knowledge about potential partner skills

Initiation of transfer of implicit skill knowledge in later phase of the alliance

Transfer of implicit skill knowledge

New skill knowledge development and acquisition for mutual benefit

Goal

Strategic intentions and initial goals of potential partners

Partner goals, seeking to establish compactable common goal

Learning to set alliance goals

Ability to continuously evaluate, revise, and reset alliance goals for durable competitive advantage

Unilateral learning

Mostly Unilateral, with Elements of mutual Learning

Both unilateral and Mutual learning

Predominantly Mutual Learning

Source: Adapted from Karthik Lyer. 2002. Learning in Strategic Alliances: An Evolutionary Perspective. Academy of Marketing Science Review. Vol. 6, No. 5

From the above table Doz and Hamel(1998) in their work Alliance Advantage further explores and explains these five key area and the Environment which happens to be the first factor has a very crucial role to play in the success of the alliance because both partners are operating in their current environment irrespective of whether they are competing or complementary partners and Learning about technology, market environment at this stage helps build mutual trust and shared understanding and reduces risk in the alliance, outcome of learning at this stage is what gives an anticipation of what the future environment will be.

The task is also essential in the success as partner at the initial stage partners may not want to open up but as the alliance evolve and partners get matured and when mutual understanding and trust is in place; they begin to learn better from one another and they will be able to make proper delegation of task and to how to perform task jointly to achieve the best result.

The process of collaboration is usually done at the initial stage but usually this evolve and changes over time based on the partners, the process in an alliance but not be rigid but rather flexible for changes and it has to be re evaluated from time to time to make sure that the alliance is in the right direction.

The skills is unique and each partner come together to exchange knowledge and knowledge at this stage is explicit in nature as the alliance grow and partners do not doubt one another, implicit skill comes into place and transfer of this knowledge is experienced and new skills that benefits both partners is learnt and acquired.

Positive Goal is the end result of every alliance and this is usually the dream of partners involved, when proper knowledge has been acquired and both parties involved can be happy and say they have achieved the goal of the alliance but goals has to the beneficial for the both partners and not just one benefiting and the other loosing.

High rate of failure and early termination of alliances can mostly be traced to the inability of partners to learn from one another or to open up to each other, to be able to gain and tap into new knowledge, there must be willingness and determination to learn and it is in this light Child et al. (2005) argues that there are certain requirement to met for learning to be successful in a strategic alliance, in their opinion, intentions and capacity to learn is very fundamental and to convert what has been learned to organisational property; Figure (2) depicts this requirement graphically.

DETERMINANT TO LEARNING

Intention

Collaborative

Competitive

Competence

Creation of knowledge

Capacity to learn

Transparency Receptivity Experience

Conversion of knowledge to original property

Source: Child, Faulkner and Tallman (2005) Cooperative Strategy: Managing Alliances, Networks, and Joint ventures

From the above

Intent could be defined as the firm's determination to learn; Intention is the firm's initial propensity to view collaboration as an opportunity to learn. Systematic learning is required for internalisation. Internalisation intent is known to be the strongest in knowledge based firm rather than the product based ones.

Transparency is could be defined as the openness of one partner to the other(s) and its willingness to transfer knowledge

Receptivity is referred to as the partner's capacity to learn and the student approach which is (enthusiastic humility) is usually demonstrated

Competence is seen to the ability of the firm to recognise the value of new information, to assimilate it and to apply it to commercial end, this is often known as the Absorptive capacity.

BARRIERS TO EFFECTIVE LEARNING

Acquisition of knowledge can be done only if it is accessible; openness and intent of partners also matters; a lot of reason accounts for the hindrances and barriers to effective learning in organisations some of which are highlighted below:

TRUST

Trust is the founding pillar to any alliance; it is the essential element that propels the success of an alliance. According to Child et al. (2005) Trust n the business world refers to having sufficient confidence in a partner to commit valuable knowhow or other resources to transaction despite the fact that in so doing there is a risk that the partner can take advantage of the commitment. The absence of trust leads to the failure of an alliance. Learning will be hindered in the case where there is mistrust as partners will not be willing to share ideas and knowledge with one another. Trust is meant to be mutual between partners and it grows overtime; at the start of an alliance, level of trust might be little but at the alliance grows then partner becomes more open and see the importance of value creation through sharing of knowledge, Trust is a factor that should not be waived in any alliance hence such alliance heads for a crash and partners involved will not achieve the goal for its formation and learning which leads to acquisition of new knowledge creation will be hindered

PARTNER SELECTION

Partner selection is another barrier to effective learning as selection of wrong partner in an alliance will hinder the flow of learning, partner selection is a very crucial task, it involves careful selection of partner and this must be done in the light that both partners have common goal and objectives and are both having the same drive to learn from one another rather that a partner thinking of how to minimise cost and benefit from the other partner. Learning will be restricted when both partner have different mission.

CULTURAL DIFFERENCE

Culture refers to the way of life of people, before the formation of any alliance, every individual has its own social identity; Formation of the alliance brings people with different social identities together, ability to reach a Cultural fit is the only way to successful effective learning in alliance, else there will be cultural crash which can be in form of racism, language barriers, ethnic differences or religious believe and all these factors hinders people sharing knowledge with one another based on their social identity and believe and this can result in a big conflict in the alliance and can lead to early termination if not managed.

INCONSISTENT FIRMS PIORITIES

In any Strategic Alliance, its goals and objectives must be drawn out at the inception of the alliance as this gives a clear definition to why partners are coming together; Learning plays a good role here as both partners already know what they lack; why they are coming together and what they expect to get or achieve at the end of the day. Misplacement of priorities does not give room for effective learning as every partner will only pursue individual selfish goals and desire and learning will not take place.

INADEQUATE COMPETENCIES

Learning can also be hindered and might become more complicating when proper recruitment is not done and when good and qualified staffs are missing in the alliance and when alliance lack up to date training, The managers and Human Resource play a vital role here but when these people do not know their role and task, then their mill be gap in learning.

ORGANISATION BARRIER (CONTROL SYSTEM)

Managers play a vital role in the success of any alliance, as this alone reduces barriers to organisation learning; senior managers are the ones in the position to establish organisation procedure and provisions that improves and foster the learning process. They are places with task such as building trust, ensuring proper communication and ensure its staff works together as one to pool their knowledge and skills together and ensure to bias in treatment of staff and a good rewarding and motivating system should be in place, meeting organisation, identification of differences and proffering way out also adequate circulation of the information must be made available to everyone.

Other factors/barriers that can also hinder effective learning are:

ALLIANCE LEARNING

LEADERSHIP

INFORMATION EXCHANGE

DECENTRALIZATION OF DECISION MAKING

WORK DELIGATION WITHIN AND BETWEEN PARTNERS

HOW TO OVERCOME BARRIERS TO LEARNING

Partners must know how to deal with emotional barriers such as Trust and Cognitive barrier such as the Intent and Commitment. Trust is essential and it is not a day job or an easy task to trust another partner in relation to an alliance but as hard as it is, partners must learn to trust and to believe in one another rather than being deceitful and how to benefit from the alliance alone. Partner's commitment shows how concerned partners are to the alliance and their plan to do their best to see to the success of the alliance.

Reason for alliances which stands for the purpose of creation must be made know to partners involved and must be reviewed an evaluated from time to time and if there is any differences or lapses then reason for such can be investigated and correction to such differences or discrepancies should be put in place

Learning is a contentious process as no one knows everything, more inductions, symposiums and programmes should be put in place by the company for staff in the alliance to be enlightened by the locals on their cultures and what the people want and what is expected of them.

Learning to cope with ambiguity by paying attention to both structural and behavioural aspect of alliance.

Partners coming together to form alliance must not be self centred and must not just depend on what to get out from the alliance but must come together to learn from one another, pool resources together to achieve a desired outcome.

Organisational barriers can be overcome by having effective leadership position who gives a clear vision on what is expected and how to get things done by positive demonstration; and senior managers involvement should be in place as they can channel decisions made to the employees and they should not be stationary, they should be able to rotate shift with managers of parent company or partner and also visits.

Communication is also essential, hence open communication to promote knowledge migration should be in place; The use of modern and up to date IT should be enforced and senior managers should embrace the importance of information and they should also know the value of information redundancy.

CONCLUSION

Alliances are vehicle that provide opportunities to learning to enhance partners strategies and operations; Learning can successfully take place within an alliance if the partners have the intention and capacity to learn and are able to convert such knowledge to organisational resources; successful learning within an alliance requires the overcoming of cognitive and emotional barriers, reduction of organisational barrier and openness to communication and effective circulation system. Effective learning as led to a good number of successful alliance e.g. The Honda and Rover Alliance; American airline and SNCF alliance etc. It is in no doubt that any alliance that has learning as part of its priority and are open to learn from one another and able to put aside differences will surely achieve it aim/goal and build a long lasting relationship.

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