Case 1: Importance of Strategic Alliances in Future Corporate World Before I continue, we thought it would be helpful to discuss what a strategic alliance is. Although "strategic alliance" has become an increasingly popular term, it has no standard definition, perhaps because the concept is still developing. For my purposes, today, I refer to a report by the Conference Board which gives the following three defining characteristics. Strategic alliances: 1) are strategic not tactical in intent; 2) focus on long-range goals and major economic benefits; and 3) "feature tight linkages among partners, vested interests in the allies' future, support at the highest levels of each organization, and emphasis on cooperation and collaboration" (Strategic Alliances, 1996, p. 6). According to business dictionary, “Agreement for cooperation among two or more independent firms to work together toward common objectives. Unlike in a joint venture, firms in a strategic alliance do not form a new entity to further their aims but collaborate while remaining apart and distinct.” My intention is to evaluate the importance of Strategic Alliances in future, on the basis of how IBM used their alliances in favor to gain their advantages. From the above case, there are a few points that I’ve found very interesting, in general, strategic alliance success requires cooperative behavior from all partners. Actively solving problems, being trustworthy, and consistently pursuing ways to combine partners’ resources and capabilities to create value are examples of cooperative behavior known to contribute to alliance success. Now in this case we are given to solve by our honorable teacher, Mrs. Kazi Noor-E-Jannat ma’am, ware in a bit of darkness. But let me show you a survey result on corporate alliances numbers and success to clear the clouds in our mind and finally brag about the importance.
Many large and medium scale firms of different industries engage in strategic alliances. They make sole or multiple alliances with domestic and international firms. Numbers of alliances made by some firms are shown below which shows that IBM have the highest number of successful alliances through which IBM is generating large profits.
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Many firms, especially large global competitors, establish multiple strategic alliances. As described in the Opening Case, IBM has formed alliances with Sun Microsystems, SAP, Lenovo, and Cisco, among others. The goal with each cooperative relationship is different and very specific.
Reasons Firms Develop Strategic Alliances for IBM Technology companies cannot possibly acquire the technology they need fast enough, so partnering becomes essential. Some believe strategic alliances may be the most powerful trend in American business in a century. Among other benefits, strategic alliances allow partners to create value that they couldn’t develop by acting independently and to enter markets more quickly than they could without a partner. In large firms, alliances account for more than 20 percent of revenue and are a prime vehicle for firm growth. Firms form strategic alliances to reduce competition, enhance their competitive capabilities, gain access to resources, take advantage of opportunities, and build strategic flexibility. To do so means that they must select the right partners and develop trust.
Reasons for Future Corporate World Firms to Develop Strategic Alliances Finally, in my defense and supporting the above discussions, the global competition is increasing day by day, so to improve productivity and market share strategic alliances are made which benefit firms. As a result of global competition and the constantly growing demand for new technologies, strategic alliances are becoming popular and important as its goal is to support the competitiveness of the activities concerned. This is achieved through the utilization of each other’s core competence and specialization. The most common reasons why strategic alliances are formed are often market related or technology related, or a combination of the two. From, my point of understanding there are a number of future motives/importance/necessity for Forming Strategic Alliances between Organizations, such as – I. II.
III. IV. V. VI. VII.
VIII. IX. X. XI.
XII.
Powerful motive to create alliances is to decrease entry barriers by joining forces with other organizations. An alliance helps to enter new international markets by overcoming political, economic and social barriers. Home market competitive position is protected by alliances. Entering international markets may affect domestic market but in international market, organization force foreign competitors at home divert their resources away from expansion which protects the home market. Alliances help in increasing distribution networks by acquiring new means of distribution. Alliances decrease the manufacturing costs, other costs and risks of the project, product or services by sharing between the alliance partners. Alliances in business helps to gain access to intangible assets like brand name, expertise etc. Due to alliances, potential rivals also cooperate which helps to decrease internal and external uncertainties. Strategic alliances help to broaden product line, services processes and fill product line gaps in the current products. High cost and lack of technology may force a firm to seek a foreign partner to fill their product lines. Strategic alliances allow companies to enter new markets and to attract many potential customers which expand their market share. Strategic alliances reduce the risk of future competition by entering into an alliance with another organization and it shows many future opportunities as well. Alliances allow firms to gain efficiency by achieving economies of scales and vertical integration. Resources are increased in strategic alliances. As the all partners of alliance provide resources. So the firms that have less resources of any kind they create strategic alliances. Small firms often lack in research and development resources for which they create alliances. Strategic alliance is created to gain new skills and knowledge. Gaining knowledge is one of the most important factors in creating alliances. Partners in an alliance learn from each other’s skills, expertise, technology and technical standards.
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Case 2: Strategic Focus "You press the button; we do the rest."So, went the advertising slogan coined by Kodak in the late 19th century. As the history goes, Eastman Kodak, a 130-year-old company is undergoing a radical transformation due to the rapid convergence of traditional photography with consumer electronics. Faced with the threat of worldwide decline in photographic film sales, as well as the growing popularity of digital cameras, Daniel Carp, the chairman and CEO of Kodak, had announced a new growth strategy. His focus was in the digital trinity of image capture (cameras), services (online photofinishing sites, kiosks and minilabs) and image output (printing paper). As a business student, we all know about the famous economic theory of opportunity cost. To gain something we must sacrifice something. In this case of Kodak, it has sacrificed it’s a product line of golden history traditional photography (Film Cameras) and gained new competitive advantage through diverting its strategic focus on the digital trinity of image capture (cameras), services (online photofinishing sites, kiosks and minilabs) and image output (printing paper). Success that we mean is actually money, in other words profit. Well, Kodak may have lost its once fame for the film cameras, but with their new strategic focus they really have good numbers in their balance sheet. So, from this perspective, their strategic focus was really fruitful.
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