Emerging Business Themes: Strategic Alliance

Strategic Alliance

Strategic Alliances have become an increasingly important aspect of business activities. The term strategic alliance means an agreement between two or more organizations/parties to pursue common set goals or to achieve important business need even though the organizations maintain their independence (Kanter, 1994, 6). The time frame for which the alliance is to last is agreed upon by the partners. Partners in a strategic alliance may agree to provide resources which include manufacturing capability, knowledge or expertise, products, as well as, intellectual property. In most cases, the partners may agree to collaborate in providing capital equipment or project funding. As such, each partner in the alliance aims to benefit from the cooperation or collaboration more than it could have benefitted on its own. Strategic alliance could either be a global strategic alliance or joint venture. It may also be equity strategic alliance or non-equity strategic alliance. A business organization may form a strategic alliance with customers, competitors, suppliers, institutions of higher learning, as well as, divisions/departments of government.

Reasons for formation of strategic alliance

Business organizations form strategic alliance for varied reasons. Some of the reasons include improving competitive advantage; entering new markets; sharing costs plus risks of major projects and achieving economies of scale; increasing knowledge and access to new technology; and improving quality (Mowery, Oxley & Silverman 1996, 78). Some companies ally to improve their research, as well as, development efforts while others ally to reduce cycle time.

Many companies have often formed alliances to increase their access to and improve their technological capability. Most technological innovations may sometimes be inter-industrial and sometimes interdisciplinary. As a result, it becomes hard for a company to own all the necessary capabilities or resources to accomplish all their business projects or processes on their own. Product life cycles are increasingly becoming shorter and therefore companies and business have to strive to remain competitive through innovation. Such an alliance was formed by Microsoft and Nokia in February 2011. Nokia and Microsoft have entered partnership that would allow them to use their complementary expertise as well as strength to develop a new global mobile system. Each of them will focus on their core competencies while jointly creating market-leading mobile products as well as services. According to Microsoft News Center (2011), Nokia would employ its Smartphone technology to adopt Windows Phone. The partnership will benefit from Nokia’s imaging technology and would bring on board Nokia’s expertise in hardware design as well as language support. Microsoft development tools would be employed to develop applications which will run on Nokia Windows Phones.

The partnership between Nokia and Microsoft will allow the two companies to share costs of production and marketing, expertise and capabilities, and as a result, achieve economies of scale. Under this partnership agreement, they will cooperate on joint marketing initiatives. Each company is to use the partner’s marketing channels to market the mobile phone products. For example, Microsoft adCenter is to offer search advertising services for Nokia’s devices as well as services (Microsoft News Center 2011). They will integrate Nokia’s Maps with Microsoft’s Bing to achieve unique advertising service and search experiences. Thus, customers will be able to experience advanced search capabilities and advertising services. This partnership also allows the two companies to develop Window Phones with different price points targeting various market segments as well as geographies. This implies that Nokia and Microsoft and Nokia will combine their technology and resources to develop a new mobile phone technology and as a result be ahead of other telecommunication companies in the global market.

Pooling resources together in this partnership enables Nokia and Microsoft to achieve economies of scale as they reduce the cost of production. This also enables them to keep up with the technological trends and remain relevant in the market. According to Bartett (2009, 35) companies have realized that global market competitions can only be better achieved through strategic partnerships. Companies, especially mobile phone manufacturers have to form strategic alliances if they are to remain competitive in the global market. Companies, especially those that have established themselves in the market need to form strategic alliances to isolate other players and exclude potential entrants since this allows them to build sophisticated value chains which act as barriers (Bartett 2009, 35).

Companies have to keep being innovative to achieve sustainability in their businesses. Thus research and development have become a vital part of companies’ strategic developments. Companies which had previously kept their unique skills and knowledge secret are today adopting strategic alliances to improve their innovation capacities. They have to depend on the knowledge as well as skills of other companies in the alliance to develop their unique capabilities. As most companies, Huawei Technologies invest more in research and development to enable develop competitive products as well as solutions.

Motorola and Huawei telecommunication companies entered a research and development partnership in 2006. The two partners established a joint research and development center in Shanghai to jointly develop 3G UMTS as well as HSPA mobile technologies by combining their expertise. Motorola is expected to provide its expertise in network design, integration as well as deployment (Reynolds 2006). In addition, the company has expertise in network management, performance and security. On the other hand, Huawei brings in its expertise in research and development as well as technology innovation (Reynolds 2006). Employees from both companies are expected to work together in developing and maintaining these technologies. Under this contract, Motorola distributes as well as installs Huawei’s 3G equipment (Huawei 2006). This partnership allows both companies to shorten the timeline for their products, improve their services and quality of their infrastructure and satisfy their customers. The partnership enables them remain relevant in the competitive telecommunications environment and achieve economies of scale.

Companies entering new markets in other countries or continents often form partnerships with related companies or suppliers to enable them establish their businesses in the market. Huawei Technologies being a Chinese company, formed a joint-venture with Symantec, an American security in May 2007 to help it enter the US market. Under this joint-venture, the two companies were to establish Huawei-Symantec Inc., where Symantec was to own 49% and Huawei 51% stake of the company (Huawei 2006). Huawei-Symantec was to develop security as well as storage appliances which they would market to telecommunication carriers. Although this new company was to be based in Chengdu China, it would help Huawei easily market its products in the US market.

The joint-venture also enables the two companies to jointly develop new technologies and as a result improve their technological capabilities. It also allows Symantec to expand its market into the Chinese market. Huawei’s knowledge of the Chinese market enables Symantec overcome the competitive conditions and trade barriers of the country. Huawei understands the culture and language of the local population as well as the business system of the country. This benefits Symantec as they can use Huawei’s already established market channels to market their products. These advantages are also replicated to Huawei when they sell their products in the American market.

Impact of climate change on the future direction of business decisions

The increasing climate change is very much likely to create complexities in the environment which will impact on natural resources and man-made actions. This will certainly be a driver for change in business strategies. It is hard to accurately assess the impact of climate change on business. According to Dawson (2011, 1) temperatures are likely to increase by about 2-30C annually for the next 50 years. This is likely to increase risks in businesses as parts of the world could experience flooding as glaciers melt and due to rising sea levels, disruption of water supply, decline of raw materials especially agricultural or natural resources, and increased deaths from tropical diseases. This means that businesses will be compelled to adopt strategies which will enable them respond to climate change, although this will largely depend on the sector/industry in which the company is operating in. This implies that adaptation would involve taking various measures with varying costs. For example, deaths are likely to increase due to exposure to heat, while the cost of refrigeration and air conditioning is expected to increase. Consequently, companies which offer such products and services have to develop new technologies to respond to such risks.

The monetary value of these future costs will increase and this will undoubtedly lower value of money. Since businesses are likely to experience increased risk due to extreme weather events, they will have to make business decisions that take into consideration substantial investment in responding to these climate change related risks. Companies have to find alternatives to maintain their supply of raw materials, reduce the impact of environmental hazards on their business operations and customers, limit their carbon emission and lower their water usage. These will enable them take advantage of the resulting opportunities and help them evade potential dangers.

Aviation is of the major industry which will be directly affected by the climate change. In most climate change conferences and debates, airlines have always been blamed for their contribution on climate change. Aircraft engines emit greenhouse gases such as carbon, nitrogen dioxide as well as nitric oxide and particulates which cause global warming. It is estimated that the airline industry contributes about 2% of the global carbon emission. Major airline companies such as Virgin Atlantic Airline have to adopt strategies and technologies which reduce the environmental impact of their operations. As one of the leading companies in the industry, it has to develop practical as well as technical solutions to meet this challenge. It has to evaluate more efficient strategies of operating fleet of aircrafts that it currently owns as they engage aircraft manufacturers to develop technological solutions that will enable them reduce carbon emissions by improving aircraft design. They have to adopt sustainable alternative fuels as well as commercially viable aircrafts.

According to Virgin Atlantic (2011) the company is working on ways to reduce extraneous weight from its aircrafts. Nevins (2010) affirms that carbon emissions from aircrafts are relative to the number of passengers and other weight on board, the size of the aircraft, and the altitude of flight. Again carbon emissions are higher per passenger for long distance aircraft travels. The weight of the aircraft determines the fuel needed to fly it to the destination. This is a key consideration that Virgin Atlantic is making in developing its new onboard products as well as services. This means that they have to collaborate with manufacturers to develop lighter-weight aircraft. The existing materials can increase emissions over the years. According to Virgin Atlantic (2011) the company has set to reduce the weight of its aircrafts by one tonne in 2011 alone, and this is set to continue for some time until the target is met.

Another major area that company is set to work on is reducing its fuel consumption. Currently, the company has A340-300 model aircrafts which consume relatively much fuel. Subsequently, it has ordered 15 new Boeing 787 Dreamliner which are expected to burn about 27% less fuel for every passenger as compared to the existing ones. They will reduce the greenhouse gas emissions due to their new engine technologies, less weight, advanced aerodynamics as well as efficient systems. This initiative is supposed to continue with time. The target for the program is to improve the fuel efficiency of its aircrafts per revenue tonne for every kilometre by around 30% in 2020. This means that Virgin Atlantic has to make real investment in purchasing energy efficient aircrafts. However, on long-term, they will also be able to reduce the cost on fuel consumption. They also have to explore more on the viability of biofuels and its cost-effectiveness. Earlier this year, Virgin Atlantic had conducted biofuel demonstration by running it with Boeing, Virgin Fuels as well as GE Aviation which is an engine manufacturer. Such projects require strategic alliance where the related companies; Virgin Atlantic (Virgin Fuels), Boeing and GE Aviation contribute resources, share expertise and technology to produce sustainable biofuels. Biofuels will enable the airline reduce emission as well as environmental footprint.

Virgin Atlantic is currently working in partnership with other companies within the industry to develop best models which can be implemented globally to operate aircrafts efficiently. They are considering several initiatives which will enable the company and others in the industry to operate efficiently in the near future. Climate change has forced Virgin Atlantic to collaborate with other companies and institutions including governments to adopt strategies will enable it and other related companies reduce greenhouse gas emissions. For example, the company has introduced a Gold Standard Offset Scheme where air passengers will have the opportunity to offset their travel on flights. In this programme, Virgin Atlantic partners with MyClimate to make this scheme available onboard, as well as, online. The programme aims to attain positive impact on the environment. In addition, it is reaching out to other stakeholders within Europe to allow for a Single European Sky to allow for more direct flights across Europe. This will reduce carbon emissions significantly. However, this will require international cooperation for this to be achieved.

Virgin Atlantic also has to adopt renewable sources of energy in their ground operations to achieve energy efficiency. Its 2020 target is to reduce its energy consumption by about 10% (Virgin Atlantic 2011). The company is also planning to reduce its natural resource consumption. It targets to reduce its paper and water consumption by 25% and 10% respectively by 2012 (Virgin Atlantic 2011). In addition its future operations will consider recycling its off-aircraft waste. Again, it also targets to dispose 50% of its waste in landfills by 2012 (Virgin Atlantic 2011). Finally, its future business operations will have to involve empowering its customers to understand the impacts of climate change and play their role in combating its effects.

Managing the process of change in business environments

Globalisation has led to increasingly complex and rapidly changing business environment. New policies are being implemented to integrate economic, cultural, political, technological, and human resource changes in the business environment. Changes in the business environment could have significant impact on business and therefore the change process has to be managed carefully to achieve growth and sustainability of the business. The business environment today comprise advancing technologies and product innovations, changes in government and economic policies, customer trends, demographic populations and business ethics. Competition in the business has increased the need to effectively manage such changes in the business environment.

Managers of companies have to evaluate the company’s existing operations framework/capabilities and challenges using a self-assessment tool against the expected complex, expensive or seemingly incompatible business challenges. The assessment has to focus on enhancing the performance of the company and its personnel. Change preparation has to be validated with readiness practices by defining the changes to be made as well as problem management procedures. An improvement roadmap has to be developed respond to the identified improvement areas. The improvement plan has to be evaluated to develop an operational improvement plan that is feasible and can help achieve sustainable business operations. Different groups of stakeholders have to be involved in developing the roadmap or changes. New policies have to be made or existing policies adjusted, and processes put in place to manage the change in the business environment.

These new changes in policies, practices or technologies have to be communicated to all users and those expected to operationalise the whole change process. It is also important to implement a comprehensive support strategy. This will allow the organization to detect any problems in the process and provide solutions by implementing all alternative solution. During the implementation process of the expected changes in the business/organization, the management has to use tools to manage and monitor the change implementation process. It has to put in place strategies and ways of managing and countering problems that may occur during the change process. The change process may sometimes be best management by retaining the services of management consultants with enormous experience in the particular sector or business direction. It is necessary to hire higher management as well as technical expertise to manage the change process.

Microsoft is one the companies which have been able to manage the processes of technological change to enable it remain relevant in the highly competitive information technology industry. One such area of Microsoft’s technological advancements has been in the cloud computing. After achieving the status of market leader in windows technology, Internet Explorer browser and other software, the company decided to embark on developing a technology that would enable companies manage and provide backup to their data and information systems. It became essential to help companies manage their online services and provide storage for their data. The building of cloud computing technology began back in 1994. The management assigned Microsoft’s Global Foundations Services Division to develop the technology and manage the infrastructure. Today, over 200 companies’ Web portals as well as online services are hosted on its cloud computing infrastructure (Microsoft Global Foundation Services 2009).

Whenever new information technologies emerge, Microsoft Inc normally has a framework or strategy that allows it to capture their benefits in a mode that is compatible with its available component base. The company employs software component model that allows it to interact with its development partners and customers. Effective management of its technological transitions allows it use some of its critical resources coupled with its capabilities to design and develop required technologies. The management provides conceptual motivation to its staff and each person is required to come up with a new technological idea or improvement of an existing technology at the end of every year. These innovative ideas and evaluated and integrated to develop programmes. Microsoft has the required competencies to manage a transition which allows them dominate the market. The management has instilled into its personnel a culture that is aware of what the different groups of customers need and that highly values security. Therefore the management supports the manufacturing teams and other teams in the company to come up with technologies which best meet different customer needs.

Reference List

Bartett, C. A., 2009, Transnational Management: Text, Cases and readings in cross border management, 5th Ed. New York: McGraw-Hill Higher Education. pp.35.

Dawson, G., 2009, The impact of climate change on business. QFinance. Web.

Doz, Y. L., & Gary, H., 1998, Alliance advantage. Boston: Harvard Business School Press. p. 6.

Huawei, 2006, History. Web.

Kanter, R. M., 1994, Collaborative advantage: The art of alliances. Harvard Business Review, pp. 96-108.

Microsoft Global Foundation Services, 2009, Securing Microsoft’s cloud infrastructure. Web.

Microsoft News Center, 2011, Nokia and Microsoft announce plans for a broad strategic partnership to build a new global mobile ecosystem. Web.

Mowery, D. C., Oxley, J. E., & Silverman, B. S., 1996, Strategic alliances and interfirm knowledge transfer. Strategic Management Journal, 17, Special Issue: Knowledge and the Firm. pp. 77-91.

Nevins, Joseph (2010), Kicking the habit: Air travel in the time of climate change. Web.

Reynolds, M., 2006, Huawei, Motorola plan joint R&D in China. Electronics Weekly. Web.

Virgin Atlantic, 2011, What is Virgin Atlantic doing to combat climate change? Can you give specific details? Web.

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