Academic journal article IUP Journal of Business Strategy

Collaborative Strategy - the Way Forward in Alliances and Joint Ventures: A Concept Note

Academic journal article IUP Journal of Business Strategy

Collaborative Strategy - the Way Forward in Alliances and Joint Ventures: A Concept Note

Article excerpt

An alliance or partnership is a relationship between two or more entities to pursue a set of mutually agreed upon goals or to fulfill a critical business need while remaining independent organizations. Alliance or partnership generally lies between Merger & Acquisition (M&A) and organic growth. Companies are actively considering alliances and partnerships to enter new markets, exploit new opportunities, to acquire competencies, to minimize the financial risk or to achieve faster growth. While alliances and partnerships are in existence for a long time, the rate of failure is far higher than their success. Highly structured and globally reputed companies like ATT, BT, TCL, Alcatel, Daewoo, GM, etc., have experienced failure of their alliances, while a few other companies like Procter & Gamble, Bharti Airtel, Xerox, Fuji, etc., are able to make them work. A study of the past alliances shows that a majority of them fail due to lack of adequate planning, commitment or internal support to make them work. A few of the successful alliances stand the test of time due to clarity of vision and purpose. This paper introduces the concept of 'collaborative strategy' as a way forward in achieving the goals of the alliance or partnership. Collaborative strategy is the framework for partnerships and alliances to be successful. It defines the factors the companies need to look at before forming a Joint Venture or alliance.

Introduction

Alliances and Joint Ventures have become the order of the day as companies are constantly looking for opportunities within their own country and elsewhere to expand, enter new markets or enhance value for their customers and investors. They are increasingly becoming a means to acquire critical assets of business like human resources, investments, market access, technology, etc.

Though many of these alliances are forged with good intentions, a study by accenture (Charles and Charles, 1999) showed that only 20% of them are successful. A related survey among alliance managers by Vantage Partners (2006) showed that the primary reason being poor or damaged relations between the companies. These failures are not limited to smaller or medium-sized companies, but extends as well to Fortune 500 companies like AT&T, British Telecom (BT), Alcatel, General Motors (GM), IBM, etc.

At the same time, companies like Xerox, Fuji, Procter & Gamble (P&G), Bharti Airtel etc. are successful in leveraging alliances for business growth, product innovation, entry into new markets and to acquire assets critical to business operations. These alliances are successful due to clarity in their objectives and a well-defined structure being in place to achieve them.

Although the route of alliance has significant factors of failure, it still holds evidence of significant potential. The companies looking for an alliances need to have clear understanding of their strategic objectives, analyze their capabilities and resources and evaluate if they can fill the gap or need to look for an alliance. The company should initiate a discovery phase to understand the resources required to meet the long-term strategic goals that are related to investment, geographical presence, credibility, technology, distribution or financial resources. A McKinsey & Company study (David and Tammy, 2005) found that using an alliance to hide a weakness, as opposed to leveraging strength, was hardly a successful strategy.

The evidence that a majority of alliances fail necessitates a framework for companies to consider and acknowledge before collaborating through an alliance. The framework of 'collaborative strategy' builds on the fundamental principles of trust, vision, value, pure competency and quantification that the companies need to consider and comply with for the alliance to be successful and produce desired results.

Trust is a key component in the selection of alliance partner and sharing of different resources; vision brings the long-term and short-term objectives the companies tend to achieve through the alliance; value is the enhanced or incremental benefits created by the synergy through alliance for the participating companies; pure competency is the unique and specialized expertise partners bring to the alliance to make it a success; and quantification of expected outcome from alliance defines the objectivity and sets the metrics for the participating companies. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.