June 20, 2016

MB0052 [Strategic Management and Business Policy] Set2 Q5

Q. 5 Mention any 5 successful strategic alliances and discuss the key aspects concerned with it. What kinds of problems were faced by companies that were involved in these strategic alliances?

Ans:

Joint venture
Joint venture is the most powerful business concept that has the ability to pool two or more organisations in one project to achieve a common goal. In a joint venture, both the organisations invest on the resources like money, time and skills to achieve the objectives. Joint venture has been the hallmark for most successful organisations in the world. An individual partner in joint venture may offer time and services whereas the other focuses on investments. This pools the resources among the organisations and helps each other in achieving the objectives. An agreement is formed between the two parties and the nature of agreement is truly beneficial with huge rewards such that the profits are shared by both the organisations.

Merger is the process of combining two or more organisations to form a single organisation and achieve greater efficiencies of scale and productivity. The main reason to involve into mergers is to join with other company and reap the rewards obtained by the combined strengths of two organisations. A smart organisation’s merger helps to enter into new markets, acquire more customers, and excel among the competitors in the market. The participating organisation can help the active partner in acquiring products, distribution channel, technical knowledge, infrastructure to drive into new levels of success.

Collaborations and co-branding
Collaboration is the process of cooperative agreement of two or more organisations which may or may not have previous relationship of working together to achieve a common goal. It is the beginning to pool resources like knowledge, experience and sharing skills of team members to effectively contribute to the development of a product rather working on narrow tasks as an individual team member in support to the development. Such collaborations are the foundation for concepts like concurrent engineering or integrated product development.

Collaboration is a win-win methodology. It means that both the organisations insist upon each other to gain equal profits with no negative attitude of acquiring each other’s possessions.

Effective collaboration can be obtained by the following actions:
The organisations must get involve in the process from the beginning and avail the necessary resources for collaboration.
— The work culture in the organisation must encourage teamwork, cooperation and collaboration.
— There must be effective team work and cooperation among the employees of both the organisations to achieve the goal.
— Systematic approach of product development process must be based on sharing of information, technology etc.

Co-branding involves the process of combining two or more brands into a single product or service. It is becoming a positive way to associate different brands and develop a strong brand in the market. It creates synergy among the various brands. An organised co-branding strategy leads the co brand partners to a win-win situation and helps in realising large demands in the market.

The co-branding agreement includes the important aspects such as rights, obligations, and restrictions that are abiding to both the organisations. It also includes important provisions and the needs must be carefully drafted to provide clear guidelines to the involved organisations. The organisations form co-branding to accomplish many goals which include expansion of customers, obtain financial benefits, respond to the needs of customers, strengthening its competitive position, introducing new product with strong image and to gain operational benefits.

It is more frequently used in the field of fashion and apparels. It can also be used for promoting campaigns, using cartoons on T-shirts, logos, distributing through branded retailer etc.

Example – The sportswear giant Nike formed co-branding agreements with Philips consumer electronic products. The Philips electronic products will contain Nike’s logos and it is mainly marketed in United States since the market share of Philips is not much impressive. The newly introduced digital audio player and portable CD players of Philips will be unveiled with the Nike logo to enhance profits in the market share in United States.

Technological partnering
It is the process of associating the technologies of two different companies to achieve a common goal. The two organisations work as co-owners in business and share the profits and losses. The technologies of individual organisations are shared to achieve desired outcome. The required resources like knowledge, machinery, and expertise are collaborated between the organisations.

Example – The software giant, Infosys Technologies Ltd. has entered into partnership with US based NVIDIA, GPU inventor and the world’s visual technologies giant. The purpose of this partnering is to develop NVIDIA CUDA (Compute Unified Device Architecture). This technology is viewed as the next big revolution in the field of technology in lending high performance in computing. The software helps the developers of various applications to tap into the previously uncultivated power of the GPU. This will enable certain applications to achieve high performance. The capacity of CUDA is expected to multiply fifty times the performance of existing computing and reduce the run time to advance the user enterprise.

Contractual agreements
It is the process of agreement with specific terms between two or more organisations which guarantee in performing a specific task in return for a valuable benefit. The contractual agreement is the heart of business dealings. It is the most significant areas of legal concern and involves variations in certain situations and complexities.

The organisations require analysing fundamental factors before involving in contractual agreements.

The elements to be analysed are:
— It is necessary to identify the type of offer being laid by the organisation to make an agreement.
— The acceptance of the information involved in offer which results in meeting the market needs.
— The organisations are required to recognise the strong commitment towards the contractual agreement.
— Systematic scheduling of the process involved in manufacturing product without any hindrances to both the organisations.
— Discover the terms and conditions for manufacturing the product and the guarantee of the organisations in fulfilling it.

The contract agreement includes several documents such as letters, orders, offers and counteroffers. 

There are various types of contractual agreements. They are:
Conditional – It is based on occurrence of an event.
Joint and several – The organisations promise to perform together but still they possess individual responsibilities.
Implied – The judicial court will determine the contract between the organisations based on circumstances. The parties will be able to buy all manufactured products, enter into a contract to supply other’s requirements, or renewal of the existing contract.

Problems Involved in Strategic Alliances
There are numerous problems related to strategic alliances. Some of them are:
— One of the organizations suffers benefits due to incoherent goals
— Lack of trust between the organizations lead to poor performance in achieving the desired goal
— The existence of conflicts between the organizations’ due to internal issues like personnel and resources causes problem to the strategic alliance
— Lack of commitment between the organizations leads to termination of the alliance contract
— Many organizations experience the risk of sharing too much knowledge with the partner organization to become a competitor
— Reduces the possibility of future opportunities of getting into agreement with partner’s competitors.

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