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| Why Form Strategic Alliances? |
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In the past 10 years, companies in all types of industries and in all parts of the world have formed strategic alliances and partnerships to complement their own strategic initiatives and strengthen their competitiveness in domestic and international markets. This is an about-face from times past, when the vast majority of companies were content to go it alone, confident that they already had or could independently develop whatever resources and know-how were needed to be successful in their markets. But globalization of the world economy, revolutionary advances in technology across a broad front, and untapped opportunities in national markets in Asia, Latin America, and Europe that are opening up, deregulation, and/or undergoing privatization have made strategic partnerships of one kind or another integral to a firm’s competitiveness.
Many companies now
find themselves thrust in the midst of two very demanding competitive
races:
(1) the race to build
a market presence in many different markets and to establish an
attractive position among the market leaders and
(2) the technology
race to capitalize on today technological and information age revolution
and build the resource strengths and business capabilities to compete
successfully in the industries and product markets of the future.
Even the largest and
most financially strong companies have concluded that simultaneously
running the races for global market leadership and for a stake in the
industries of the future requires more diverse and expansive skills,
resources, technological expertise, and competitive capabilities than
they can assemble and manage alone.
Indeed, the gaps in
resources and competitive capabilities between industry rivals have
become painfully apparent to disadvantaged enterprises. Allowing such
gaps to go unaddressed can put a company in a precarious competitive
position or even prove fatal. When rivals can develop new products
faster or achieve better quality at lower cost or have more resources
and know-how to exploit opportunities in attractive new market arenas, a
company has little option but to try to close the resource and
competency gaps quickly; the fastest way to do this is often with the
capabilities and strengths of new strategic allies.
In today’s rapidly
changing world, a company that cannot position itself quickly misses
important opportunities, whether they be in cyberspace or foreign
countries. More and more enterprises are concluding that well-chosen
alliances can allow them to bypass the comparatively slower and more
costly process of building one’s own capabilities internally to access
new opportunities.
Strategic alliances
and collaborative partnerships have thus emerged as an attractive and
timely means of breaching the technology and resource gaps that firms
now commonly encounter Alliances have, inflict, become so essential to
the competitiveness of companies in many industries that they are a core
element of today’s business strategies.
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| Why And How Strategic Alliances Are Advantageous? |
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Strategic alliances are cooperative agreements between firms that go beyond normal company-to-company dealings but fall short of merger or full joint venture partnership with formal ownership ties.
But the value of an alliance stems not from the agreement or deal itself but rather from the capacity of the partners to defuse organizational frictions, collaborate effectively over time, and work their way through the maze of changes that lie in front of them—technological and competitive surprises, new market developments (that may come at a rapid-fire pace), and changes in their own priorities and competitive circumstances. Collaborative alliances nearly always entail an evolving relationship, with the benefits and competitive value ultimately depending on mutual learning, effective cooperation over time, and successfully adapting to change.
Competitive advantage emerges when a company acquires valuable resources and capabilities through alliances that it could not otherwise obtain on its own and that give it an edge over rivals—this requires real in-the-trenches collaboration between the partners to create new value together, not merely an arm’s-length exchange of ideas and information. Unless partners value the skills, resources, and contributions each brings to the alliance and the cooperative arrangement results in win-win outcomes, it will amount to little or fail.
The most common reasons why companies enter into strategic alliances are to collaborate on technology or the development of promising new products, to overcome deficits in their technical and manufacturing expertise, to acquire altogether new competencies, to improve supply chain efficiency, to gain economies of scale in production and/or marketing, and to acquire or improve market access through joint marketing agreements. A company that is racing for market leadership needs alliances to help it do what it cannot easily do alone:
A company that is racing to stake out a strong position in an industry of the future needs alliances to:
Allies can learn much from one another in performing joint research, sharing technological know-how, and collaborating on complementary new technologies and products—sometimes enough to enable them to pursue other new opportunities on their own.
Not only can alliances offset competitive disadvantages or create competitive advantages but they also can result in the allied companies’ directing their competitive energies more toward mutual rivals and less toward one another. Potential rivals can sometimes be effectively neutralized by engaging them in a collaborative alliance.
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| Key Building Blocks to Business Success |
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In a business environment marked by unprecedented complexity and the most volatile markets condition, why are some companies able to increase shareholder value while others must struggle to survive?
Traditional explanations are no longer adequate - and the answer no longer lies in simply finding new ways to reduce costs or boost technology spending. Experience shows that strategies built around these quick-fix measures fail to deliver long-term positive results. Worse yet, the result is often a return to business-as-usual, with a few new buzzword bandages to cover the bleeding red ink on the balance sheet.
Like hemlines, the conventional wisdom about what works best shifts with the times, observes Nitin Nohria, the Richard P. Chapman professor of business administration at the Harvard Business School, and one of the authors of the breakthrough business book, "What Really Works."
Prof. Nohria has studied more than 200 well-established management models as they were employed over a 10-year period by 160 companies to look for common management practices that succeed. The findings took him by surprise.
Successful businesses have a balanced understanding of the three building blocks of high performance:
MARKET FOCUS AND POSITION High-performance businesses seek unique insights into drivers of current and future value, anticipate changes and translate rapidly into differentiated operating models and business architectures.
Moreover, high-performance businesses focus continuously on business model and service innovation, making markets rather than just riding them.
MASTERY OF CAPABILITIES
The research has thus far identified five areas of functional mastery: information technology; human and organizational performance; marketing; finance and performance management; and supply-chain management.
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HIGH-PERFORMANCE ANATOMY If distinctive capabilities can be thought of in terms of functional mastery, performance anatomy is about the organizational characteristics that underpin these capabilities. High-performance businesses unleash the organization's energies and core competencies; accelerate insight into action to out-execute competition; and manage the balance between today and tomorrow.
Performance anatomy is not just a fancy term for culture. It is determined by the mindset top management brings to such diverse areas as strategy, planning and financial control, leadership and people development, performance management and use of information technology. Each company's performance anatomy is unique and needs to be closely tied to its market focus and position and chosen capabilities.
For example, the research shows that there is a clear correlation between high performance and finance functions that have a mindset that goes beyond financial control and effective risk management and embraces accountability for fostering a value-centered culture across the organization.
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