Competitive Advantage in the Global Economy
Module
11: Strategic Alliances: Part II
ECN600
Table of ContentsTools
- Module Introduction
- 1. Small Business and
Strategic Alliances - 2. Small Business and
Strategic Alliances: Part 2 -
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Module
Introduction
Readings
Required
- Review Chapter 7 in Global Strategy
- Jakada, B. A. (2014).Building global
strategic alliances and coalitions for foreign investment opportunities. International Journal of Global Business, 7(1),
77-94.
Recommended
- Arnold, V., Benford, T. S., Hampton, C., & Sutton,
S. G. (2014).Enterprise risk
management: Re-conceptualizing the role of risk and trust on information
sharing in transnational alliances.
Journal of Information Systems, 28(2), 257-285.
For
Your Success
Module 11 establishes the importance
of strategic alliances for small businesses. Yet, the failure rates of these
alliances can be as high as 60 percent. There are many key actions that small
businesses can take to prepare for successful alliances. Among the more
critical are understanding the company’s brand and target audience and clearly
identifying the weakness that the alliance needs to address. Additionally,
strategic alliances are more successful if all partners agree to a common
management plan and an exit strategy.
For this week, you will be writing a
Critical Thinking Assignment that looks at strategic alliances through the eyes
of a Middle Eastern company. Be sure to consider the various characteristics
discussed in this week’s lectures as part of your work on describing critical
success factors. There will also be a Live Session this week. Your faculty will
provide further details.
Learning Outcomes
- Explain why a firm may want to enter an alliance with a
foreign firm. - Differentiate cooperation from competition and explain
the benefits of each. - Describe the strategic rationale of cooperating at
different points in the business process.
Backward Forward
1.
Small Business and Strategic Alliances
There is no doubt that a strategic
alliance can be good for business. But what benefits does it bring to a small,
entrepreneurial company? Consider the following positive attributes of a
strategic alliance for a small company:
- Increased revenue
- Increased global exposure
- New market segment penetration
- Customized products and services for local markets
- Enhanced technology
- Positive social impact
- Strengthened marketing and public relations
- Joint product development
- Proliferation of marketing channels
Most partnerships tend to be in the
area of marketing, promotion, and distribution. This makes sense since most
companies lack expertise and contacts in these areas and often have to turn to
third parties to help them get their name and product out there. But we are
also seeing more collaboration in the areas of product design and development,
technology licensing, and research.
One example of how these less
obvious types of partnerships are growing is the use of foreign firms to assist
in legal research. Considering that most major U.S. law firms cannot work their
attorneys and legal assistants 24 hours a day, some bright Indian companies
developed legal research and litigation support firms to keep the U.S. firm
churning out work all through the night. It works like this: the U.S. firm
takes on a case and assigns it to an attorney. That attorney works on it during
office hours in the U.S. At the end of the day, he or she sends a file
electronically to a firm in India that continues the work on the case, focusing
on things like legal research, and which in turn sends the file back to the
U.S. attorney the next morning. Overall, it is a great way to ensure that each
client gets the royal treatment by having his or her case worked on 24 hours a
day.
Indeed, the Association of Strategic
Alliance Professionals (ASAP) honors the best strategic alliances at its annual
Global Alliance Summit. Their prestigious Alliance Excellence Award has been
given to major corporations, small businesses, and nonprofit organizations.
According to the ASAP website (2015),
Past Alliance Excellence Award
winners have been measured by a variety of end results — revenue increase, new
market segment penetration, product/service/technology enhancement, social impact,
advancement of the profession, etc. — that have positively impacted many facets
of business, including (but not limited to) marketing, sales, R&D/joint
product development, regulatory affairs, strategic sourcing and services, and
the channel. (para. 2)
Among the winners have been global
giants like Cisco, Harley Davidson, IBM, and Starbucks. But alliances among
small companies are recognized, too. In 2015, ASAP awarded the Individual
Alliance Excellence Award – which is limited to small-and midsize company
alliances – to National Grid and Earth Network. Their joint project provides
free, accessible, local weather information to communities to help improve
storm responses and power restoration. This unusual alliance is dedicating to
saving communities millions of dollars in post-storm cleanup and getting
businesses back on their feet quickly following a major weather event. While
this is an unusual example of a strategic alliance, it demonstrates how small
companies can team to address a need and have a big impact.
Backward Forward
2.
Small Business and Strategic Alliances: Part 2
We’ve covered the importance of
strategic alliances for small businesses and how they can help a company grow,
prosper, and expand globally. When is the right time to engage in a strategic
alliance? Consider the lessons from this short video:
Is
your business strategic alliance ready?
Know what and how to prepare before considering
a strategic/business alliance. To find if there’s a mastermind support group
for small business owners near you, visit smartsmallbusinessforums.com.au
This short instructional film
emphasizes the need for small businesses to properly prepare before taking the
leap and teaming with another firm. Review the key points that a business
needs to address:
Know your target market.
This is true for any business.
Thoroughly understanding your target market will help you find an alliance
partner who has complementary products and services. This will promote
collaboration, as opposed to competition.
Be clear about what you want.
Identify your strengths and
weaknesses, and understand the market’s opportunities and threats. If you
understand these foundational pieces, you will know what strategic gaps you
will need to fill.
Be sure to reflect your brand.
If you’re clear about your brand
promise, you won’t get swallowed up in the alliance. You will be a strong
partner, instead.
Make sure your social media reflects your brand.
Companies feel a rush to set up
Facebook pages, tweet good news, and share images of their products on
Pinterest and Instagram. Your social media should be part of your branding
strategy, not just “bolted” on as a last-minute thought. Again, if your brand
is strong, your strategic alliance will be, too.
Ensure every touch point reflects your brand.
Ensure all touch points – e.g.
presentations, business cards, and website – reflect your brand. Are you
picking up a theme among the bullet points? Your brand is the life-blood of
your company. Be sure that every action your company takes accurately reflects
your brand and effectively communicates your brand promise.
Use the right tools.
Finally, know what you need to do
and how to do it. Use the right tools to get it done. If you need marketing
help but don’t have strong marketing tools, this may be the perfect area for a
strategic alliance.
The right strategic alliance can
create a favorable business opportunity for all partners involved, and the
chances of success increase when the partners take the time to properly prepare
and think through their needs and goals. While strategic alliances do not have
to have a formal agreement, they are more likely to succeed when the partners
agree to a clear management plan. The various types of alliances range from
very structured to very unstructured forms. They can be based on legal
documents – such as formal partnerships and joint ventures – or rely on a
handshake between partners. While a handshake agreement may signify a close,
enduring relationship between the business parties, there are high risks
associated with this form; without documenting specific understandings or
responsibilities, partners will leave themselves open to disagreements, unmet
expectations, or worse. There also should be an exit strategy in place for
strategic alliances. All parties should know and agree to the conditions under
which an alliance will be dissolved.
As you can hopefully see from our
discussion this week, strategic alliances are not just a good idea; they are
the trend of global business in the future. Partnering with other firms to
focus on joint success is necessary for many firms as they make their way
through the increasingly competitive global marketplace. Next week we will
shift from this collaborative view to a competitive view of the market.
Check
Your Understanding
Test yourself on some of the
concepts covered in Module 11 in this brief quiz.
Download Transcript
References
Association of Strategic Alliance
Professionals [ASAP].(2015). 2015 Global Alliance Summit. Retrieved from
http://www.strategic-alliances.org/page/summit2015aew
