Strategic alliances concerning investments of equity by business involved tend to be more motivated and often more long-term undertakings. Furthermore, business effort towards equity-investment alliances more often than not had a explicit intention or aim in mind for the joint venture or alliances. The alliances arrangement may also include other forms of agreement, particularly the trade off of technology and the supplying or purchasing of each other's stuff. As indicated in the paper of Jenster & Hussey, (2001), in comparison to the establishment of wholly owned enterprises, such strategic alliances may engage more unpretentious investments even though considerably in excess of those for such other strategies like licensing or exporting. Their added distinctiveness also plunge in between these two options, as does the quantity/level of risk, the profit potential, and the extent of control over the ensuing products and their manufacturing process and profit. In addition, Jenster & Hussey, (2001) added that there are some alliances that involve simple cross-border joint ventures whereas the firm or business participates in the foreign market with a local firm. Aside from this, there are other alliances that are considered genuine global ventures whereas the multinational corporations cooperate with other global business at different levels of the business and in numerous areas. Basically their objective was more on expanding the operations of both businesses on a wide-reaching level (Jenster & Hussey, 2001). With respect to the current business environment, the so-called strategic alliances are known to be global phenomenon since it possesses significant effect to involved businesses. With this, this paper aims to discuss information concerning the reason behind why companies numerous global companies want to go into Strategic Alliances.
The CompaniesNumerous companies especially the technology-based companies are now forming strategic alliances. As for the latest news, Facebook, a social networking site formed an alliance with Microsoft, one of the leading companies in terms software, services and technology solutions. Based on the press release of Microsoft (2007), “Facebook and Microsoft expanded their advertising partnership and that Microsoft took a 0 million equity stake in Facebook’s next round of financing at a billion valuation. Under the expanded strategic alliance, Microsoft was the exclusive third-party advertising platform partner for Facebook, and started to sell advertising for Facebook internationally in addition to the United States.”
On the other hand, Apple and HP also formed an alliance last January of 2004. As for their agreement, HP consumer PCs and notebooks are preinstalled with Apple’s iTunes® jukebox software and an easy-reference desktop icon to point consumers directly to the iTunes Music Store, ensuring a simple, seamless music experience. This offering is yet another way that HP is helping consumers enjoy more from their personal digital entertainment content (Apple, 2004).
As for concrete samples of such alliances, in year 2000 Ericsson and Sony established a London-based joint venture. The new business was called Sony Ericsson which aimed in exploiting the opportunities of third generation mobile systems in which the implementation had commenced in Japan (Sony Ericsson, 2010). As seen in the current condition of the company, Sony Ericsson makes use their capabilities to achieve continuous development and progress. And in accordance to the observed success of the company, the strategic alliance of Sony with Ericsson demonstrated positive effect or both firms in which their fusion gained them a distinctive identity in the cell phone industry. The alliance of Ericsson with Sony helped both firms survive a chaotic business existence and helped them attain improved returns. Actually, Sony Ericsson’s resources come from consistent and dependable manufacturers and suppliers. Sony Ericsson made sure that the raw materials used in developing the products are environment friendly. Sony Ericsson’s capabilities include its extremely advanced product, viable products and notion of sustainability.
The Changing Business TrendsCompanies around the globe are like mobiles in a storm being blown about by incessantly changing breezes of wind. The mobiles' balances have gone skewed and the mobiles quiver for a period of time before they can patch up into their original poses. When a breeze of wind rips off one of the balances, the mobile again quivers and then patches up into a new spot. In this tumultuous twister all of the units that have been stunned about have not yet settled into their latest arrangements. According to Hitt, Ireland, & Hoskisson (2003), people are not certain what things will look like or if they will settle down in their current stance. What people do know or what we know is that innovative strengths are at work. In business or even in normal work environment, employers and employees need to be attentive in order not to be swept away by the wind breeze. There are different types of wind breeze, crossing and blending, making the mobiles be unstable and send-off employees looking for employment. These wind breezes comprise the business trends that state the new careerism. The increasing business globalisation has resulted in a twister of competition, causing firms to try paring behind and invigorate their swollen operations to be more rapidly on their feet. From this and in relation to business context, changes in the world tend an individual or a business unit collaborates to the needs of the changing environment. Firms may add and omit business efforts in order to survive. For instance, the importance on financial concerns in the business world is the reason of important exclusions. The evaluation of strategic decisions has occasionally suffered from this inadequacy, when definite financial criteria imposed instinctively have forced decisions to be considered from a merely financial standpoint (Kaplan, & Norton, 2001). The purpose of maximising business wealth also differs from the well-known idea of maximizing profit (Kaplan, & Norton, 2001). The principal aim for most businesses is profits. Though, within the firm, executives are paying attention on accomplishment in the two element areas of fringe and exploitation, with explicit targets applicable to their part of accountability. The extremely aggressive nature of many industries and the likely outlook of sustained economic instability as countrywide and global economic fortunes fluctuate, requires that business managers keep on looking for chances to perk up feat. This will principally be attained by enhancing efficiency in the ranges of /retaining clientele, increasing business capability and fiscal management (Kaplan, & Norton, 2001).
Business studies like Kaplan, & Norton, (2001) and Neely, (1998) identified significant features for business firmness. The significant features engage the organization style, attention on core business, costs and resources control, assessment of product and service effectiveness, working capital management, safeguarding of sensible stock values, and cash forecasting and projections. As stressed out by Kaplan, & Norton, (2001), the management style must be appropriate to the viable necessities of the market and the condition of the company. A diverse style will be required dependent relative on the rumble or recessionary environment of the market segment and the general market (Kaplan, & Norton, 2001). There should be no concern in diversification unless this is evidently associated to the company and defers direct cost or viable advantage. Firms need to constantly practice cost reduction/efficiency schemes and ought to cease from the holdup of taking action. Furthermore, businesses need to have a lucid and precise perceptive of the definite earnings produced by diverse products/services. In order to practice this, a certain business must have suitable systems that will identify actual costs. Apparently, rigorous management of stocks is also recommended and made sure that work in advancement and debtors are tied up. Aside from this, there must be valuation of all stocks at the accurate value. Lastly a firm should have systematic cash forecasting and excellent cash flow management (Neely, 1998).
Aside from returns, business companies must also be aware that there are other factors that create a huge impact to their progress. This comprises the inventory cost, competitions and distribution of products issues. The cost of inventory and expenses in keeping materials has a significant blow to a business since too much cost doesn’t help in the business development and attainment of goals. High level rivalry can generate huge impact to businesses for the reason that the level of competition may compel a business to use a lot of resources. The troubles in distribution of products can produce huge bang to the business because lower allocation of products may mean loss of clients, lower income, and a stained image. But with strategic alliances, the effects of key impacts to businesses will be lessened. Through strategic alliances, primary problems of the key impacts will be given solution.
Why should businesses go into strategic alliances?There are a lot of motivating reasons behind the formation of joint ventures or strategic alliances and other cooperative strategies. As stated previous, businesses go into joint ventures because of the need for resources, particularly, skill money, and manpower. As indicated in the paper of Galbraith, (2001), there are three basic motivations for the development of strategic alliance. One of which is it embodies the lowest business deal cost alternative; it also permits an enhanced strategic situation to be achieved, and it gives a prospect for business learning. These motives may be substitutes, even though in some cases all three motivations may be relevant. An exacting motive for considering a cooperative strategy and entering into alliances is offered by the challenge of entering latest international market arena (Galbraith, 2001). The option is one between exporting, entry by means of joint contracting such as franchising, licensing, counter-trade, and contract manufacture, and venture in the target market by setting up strategic alliance with local associates (Galbraith, 2001).
Even though the alliances and joint ventures formation is offered as characteristically the product of unitary decisions in the existence of adequate data to make them, it is typically the result of a union of views in both businesses pointing to the probable reward of such venture, when the definite benefits and costs cannot be known until the coalition has been started. Thus, as much political as economic resolutions depending greatly on the inner corporate political influence of the champions, and placed at danger if those champions must lose power in their home organisations strategic alliances are generally created for the reason that each organisations feels insufficient in a certain area of its activities and needs to be taught from the other partner. Obviously this effort also engages risk if total truthfulness is not present, as one partner may acquire and not give fully in return. From an economic standpoint, the main argument for joint venture is that they are usually created as a result of an external motivation or change in business conditions to which business react with a feeling of internal business necessitate that they feel is finest met by in search of a relationship with a new business (Hitt, Ireland, & Hoskisson, 2003). An additional issue advancing alliance formation as contrasting to the alternatives of joint venture is the requirement to limit risk. The scattering of financial risk is often cited as a primary motivation for the creation of strategic alliances. Another motive behind the consideration of strategic alliances/joint ventures is the need for velocity in attainment the market. Alliances are the greatest means of attaining market presence to meet an opportunity. Finally, the motivation to collaborate remains lofty even when the alliance has uncovered the partners to the attraction to steal each others' secret (Hitt, Ireland, & Hoskisson, 2003). Strategic alliances are desired by business for the reason of changing business prospects. In the case of Sony and Ericsson or even Apple and HP, they engage in strategic alliances not only because of the need for resources. But their alliances also created different opportunities that lessen transaction cost, improvement of strategic position, an opportunity for organisational learning, establishment in the international markets, the need to set up for a change in environmental circumstances, the need to limit business dangers, the need for quicker market entry, and the opportunity to increase and share business secrets.
Implementing Strategic AlliancesAs discussed previously, there are numerous types of alliances in business, but commitment is what makes alliances strategic. As argued, a number of businesses enter numerous transactional dealings through joint programs, licensing, and sourcing agreements. While all those are imperative, they are not regarded as strategic alliances. Alliances are about development, capabilities and consolidation. Joining a business’ technology with other’s delivery systems provides big return to both firms without anyone of the firm losing their sovereignty. If firms collaborate well, neither one of them has to contract with the other parts of each other's business that they don't recognize or need (Rindova, & Kotha, 2001). Capabilities are extensively known as the key viable differentiators among companies. But a small number of corporations are the world’s best at more than a handful of capabilities, and hardly ever on a global level. One of the most significant challenges for development is to be able to arrange world-class capabilities where one carry out their business. So the finest businesses are incisive to acquire capabilities from whatsoever means obtainable whether it is internal development, acquisition, hiring, and a variety of partnerships and joint ventures. Alliances are redefining business limitations (Rindova, & Kotha, 2001).
The environment of strategic alliances has moved from minor issues to the core business of the allies to issues directly in the crosshairs of the business' approach. In a short span of time; strategic alliances have jumped onto the international business juncture as one of the most significant mediums for development and competitiveness. Alliances have become superior and nearer to the strategic core of business and have become a bigger and bigger part of the business portfolio. The main downsides of strategic alliances for instance complexity in discussing and managing are receiving extensive top-level awareness as alliances befall an ever-greater component of the business portfolio.
ConclusionFrom the discussed issues and in accordance to the alliances of stated companies, they proved that strategic alliances help them gratify their need for resources and lower transaction cost. Their alliances gave involved companies an opportunity to perk up its strategic position and expand learning as an organisation. In addition, the strategic alliance paved the way for them to have an opportunity at entering their respective market such as mobile phone market for Sony and Ericsson, digital music for both HP and Apple and advertising market for Microsoft and Facebook. These alliances justified that business achievement can be obtained through excellent strategic alliances.
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