Lojack and Micrologic Alliance - Assignment Example

? Lojack and Micrologic Alliance by 15/10 Executive Summary Alliances in business are a common practice. These alliances are intended to benefit both the partners involved. The alliances are done in order to gain strategic or operational benefit by the companies. This paper will discuss about the alliance between Lojack and Micrologic. The alliance between the firms was done in order to leverage the technical expertise of Micrologic and the distribution network of Lojack. The paper will evaluate the success of this alliance and the challenges which lies ahead in the relationship between the 2 partners. The paper also analyses the difference in partnerships between public sector firms and private firms. Introduction The alliance between Lojack and Micrologic is an example of upstream vertical (supplier) alliance. Alliances between companies can be horizontal and vertical. Direct horizontal relations are those in which the company reaches a tactic understanding with its competitors. This understanding might be related to price or other factors. Indirect horizontal alliances are often done with industry outsiders – these alliances help both the companies in research or other factors and do not create a conflict of interest between them. Upstream vertical alliances are done with suppliers. Lojack did not produce the theft detection system. Most of the production and technological work related to the product was done by Micrologic. Thus the alliance is an example of upstream vertical alliance along with the supplier. The other type of vertical alliance is the downstream alliance which is done with buyers. (David Besanko, 2009) The stolen vehicle recovery system (SRV) had to involve political and regulatory actors such as FCC (Federal communication system as well as various law enforcement agencies. It also involved the partnership with car dealers as well as the technology provider – Motorola. Thus the alliance between Lojack and Micrologic also involved a number of other relational actors. The initial objective of the alliance between the 2 players was intended to develop the necessary base software and equipment and to obtain FCC approves technology for the SVR system. However over a period of time the two have changed strategic objectives – Micrologic now wishes to use the alliance in order to use the marketing network of Lojack. This shows that the objectives of an alliance can vary over a period of time. As the strategic objectives of the firms involved changes, the nature of partnership between them also changes. (George Stonehouse, 2004) They tend to leverage sources or integrate activities with other firm which tend to maximise their value proposition. Evaluation of the Partnership Making partnership is not a very difficult phenomenon. In this age of various multinational companies there are numerous opportunities available for collaboration. However the important thing to do is to evaluate the different collaborations. Evaluation helps both the firms to consider what are the objectives of the partnership, what they have done to achieve them and how do they want to move ahead. Evaluation helps the firm to understand how they need to work in the partnership; it helps both the partners to improve management processes and procedures. They are able to analyse the objectives which had been set by the firms initially and allows for a revision in this objectives if the need arises. Effectiveness of partnerships is important at three levels – input, output and impact. Input factors involve the partners working with each other. Both partners may bring different inputs to the partnership. In the case we are analysing the input from Micrologic was technical expertise whereas the input for Lojack was distribution and marketing strength. Output is the result of the work done by the partners together. The input and output factors both combine in order to create an impact. We will use the life cycle model of evaluating the partnerships in this case. The Partnership Life cycle Model The various stages of the life cycle model and their application to the case in question is presented below – (Andreas Eggerta, 2006) Forming This is the initial stage of the relationship between the firms in which the enthusiasm level as well as the uncertainty level is quite high. The roles and responsibilities of each firm are not defined. Both the partners are still exploring what is needed and what is possible .They both agree on a common cause which arises out of shared interests, opportunities or threats. (T, 2007) In the Lojack Micrologic case we have seen this stage of the relationship twice. Regan and Sheldon Apsell – the founders of Lojack and Micrologic were both passionate about an idea and it led to the start of the relationship between the firms. The relationship between the two firms was informal and a formal contract was signed only after Micrologic had refined the product specification, designed the system and worked with various government agencies to get the approvals. At the end of the case with a change in strategic objectives of both the firms they are again at a position of forming. None of them are sure about the role to be played by each of them in the future and the nature of relationship. However it is not a complete new relationship as the history of past success is with them. Frustration This is the most unproductive part of the relationship. In this stage both the partners feel tension over priorities and the methods which need to be employed to attain these priorities. Partners may fight with each other for credit of success and control of the partnership. They may even have hidden agendas and start doubting about the benefit of being in the relationship. This part of the relationship will be experienced in the relationship between Micrologic and Lojack very soon. Both the partners have changes their strategic objectives. Lojack wants to enter the commercial market which is highly competitive and cost sensitive whereas Micrologic wants to move away from its core competency – technology. This has already made Lojack question the nature of the relationship. The failure of Micrologic to produce Lojack unit 3 has led to further doubts among both the partners. Functioning Functioning is marked by renewed vision and focus in the relationship. Roles and responsibilities are clearly defined for both the partners. Both the partners are responsible to each other for their actions. Flying This part of partnership is marked by shared leadership and successful achievement of partnership goals. Partners try to work for each others success. (D. BESANKO, 2008)They also change the way they function in order to ensure that targets are achieved. This part of the relationship was achieved by Lojack and Micro jack after the initial success of their product. The technical specifications in entirety were taken care of by Micrologic; the marketing and distribution was handled by Lojack. Both the firms were working perfectly and in harmony to achieve the goals of increasing the market share of the project. Failing This part of the relationship is marked by disengagement between the partners and lack of commitment between them. This stage occurs when tensions between the partners cannot be resolved as they are recurrent in nature. It makes sense at this stage to end the relationship and focus on their own goals then to try to find a common ground between the two firms. Lojack Micrologic Strategic Alliance SWOT analysis SWOT analysis which is also called as SLOT analysis is a strategic planning method which is used to evaluate strengths, weaknesses, limitations, opportunities and threats which are involved in a business project, venture or relation. It involves identifying the internal and external factors which are favourable or unfavourable in order to achieve the objective. This technique has been developed by Albert Humphrey. Strength of the alliance The alliance between Lojack and Micrologic has helped both the companies over the past 2 decades. They have gained competitive advantage in private owned vehicle tracking market. (Darrin Grimsey, 2007)Both companies have brought different things to the table. Lojack has a strong distribution network, marketing strategies and relationship with law enforcement agencies. This relationship with law enforcement agencies helps them to create an entry barrier to the competition which does not have such alliances. Micrologic brings technical expertise to the relationship. Micrologic is an important contributor to the success as all new technical designs are made by the company.  The major strength of the alliance lies in the strong relationship with Lojack has with the law enforcement agencies and the sales force. It’s sales force is highly motivated and trained and has good relationship with car dealers. Lojack also provides a greater margin to the car dealers when compared to other competitors. Lojack also has sufficient cash available in order to ensure that Micrologic will be able to smoothly enter into construction equipment market if both the companies decide to further this alliance. Lojack new strategy is to enter the highly competitive commercial fleet market which is accounting for 30% of new vehicles in US. When compared to private cars this segment presents a lot of economic and technical constraints such as automated vehicle location strategy.  Lojack require a low cost, light weight and self-powered product to enter the commercial fleet market as well as the trailer market and Micrologic has expressed its inability to provide it. Due to this Lojack had to involve Motorola right from the design phase of the project. Opportunities & threats Both the companies have resources which can be leveraged by each other. Since alliance can be compared to partnership of individuals, some resources the company has can be used by the other company for its own benefit. The alliance would provide both companies the chance to share the individual resources that they have. Another opportunity of the alliance is for both companies to brainstorm new products that can provide better services to their clients. The alliance can produce newer ideas for products that can help in providing customer satisfaction .Lojack has a strong opportunity of growth in the international market in its traditional business. Focus on private cars in the international market will ensure strong growth for both the companies. There is also scope for growth for Lojack in the US market as Lojack is only installed in 10% to 15% of new vehicles. The fleet and commercial market is a lucrative proposition for both companies in spite of the technical and costing constraints this segment poses.30 % of the new vehicles sold belong to this segment.   A threat to the alliance is the competitors of both companies. The competitors they have might find a way to equal or exceed the performance of the companies in the future. This could cause them problems or major hindrances to achieve their goals. The competitors may discover or create better products in the future. The biggest threat at present is the change in strategy of both companies. Micrologic is moving away from producing technical products for others and want to launch products of it’s own. This is a giant leap forward and requires huge amount of cash as well as marketing experience which can be provided by Lojack. However if Micrologic shifts from its core competency of technical expertise Lojack might not consider the relationship fruitful as it requires cutting edging technology for the commercial fleet which is also cheap. Conclusion The relationship between Micrologic and Lojack is at crossroads now. It had its share of success when the objectives of both the firms were complimentary to each other. Micrologic was simply a technological firm which took care of all the technical needs whereas Lojack simply kept its focus entirely on distribution and marketing. However both the firms are now trying to enter the other’s domain. This may lead to either failing of the relationship or re-defining the relationship for another success story. Partnerships in the Public Sector Partnerships are no longer a phenomenon of the private sector alone. There has been increased need of partnerships among public sector firms. These partnerships may be forged with citizens, private firms or two public sector firms. The major difference between a partnership in the public sector and the private sector is the difference in the objective of the relations. Public sector also presents challenges in the form of bureaucratic hurdles and a greater reluctance to change among the employees. (Akintola Akintoye, 2004) As we have seen in the Micrologic and Lojack case the first step in the success of any partnership is the development of a shared strategic vision between the partners. In the case of partnership between private firms as well as pubic firms the partnerships are successful if both of them share a passion for a goal. In private organisations; these visions can be the visions of two individuals. The partnership between Lojack and Micrologic was formed by the personal bonding between Reagan and Apsell .Public organisations are much more complex than private organisations. Even if there is an understanding among leaders at the top level; their vision may not percolate down easily and quickly. (Link, 2006) It will be much easier to foster a public private relationship then a relationship between two public firms due to the reluctance on both sides to accept the vision. Clarity of strategic goals and objectives is very essential in both type of partnerships – either they are between private firms or involve a public firm. Both the partners should have a clear understanding of the roles they have to perform and their responsibilities. In the case we have studied Lojack was responsible for marketing of the product whereas Micrologic was responsible for the technical specification of the product. The partnership was most effective when there was clear demarcation of duties among the two; problems and confusions start to arise when this demarcation becomes fuzzy and the responsibilities of both the firms overlap. (Efraim Sadka, 2006) Relative dependence of partners in the partnership is a very important criterion for the success of partnership. (Yescombe, 2007) As we analyse the Micrologic and Lojack case; we see that at the start of the relationship both the companies were positioned equally. Lojack had a mastery over distribution and Micrologic had the technical expertise. However over time Lojack developed its own technical expertise. At the end of the case Micrologic required the relationship more as it required the marketing experience of Lojack but was not able to provide the technical knowhow for Lojack Unit 3.This lead to feeling among Lojack management on the benefit of the relationship to them. Some public sector units may consider themselves to be more important whereas bureaucrats always consider their work to be more important than private organisations. In order to establish a relationship of equality; this attitude needs to be changed. The performance management process needs to be in place in both public firms as well as private firms. This performance management process is used to analyse the objectives that have been set by the firms, evaluate the performance till now and rethink about the processes or the objectives in order to reach the goals. An agreed framework for evaluation and measurement of both operational and strategic performance. One of the major differences between a public firm and a private sector is funding. Funding in public sector needs to follow various rules and regulation and is a very lengthy process. The sharing of funding between different firms may also have to follow various legal obligations. These legal issues would have to be dealt with in order to fulfil funding needs. These limitations are not there in partnership between private firms. As we have seen in the Lojack and Micrologic case analysis; the funding between the 2 firms was not even discussed and the work was done even without any formal contract. This kind of understanding between public firms is not possible sometimes due to the size and at other times due to legal obligations. Maintaining motivation and commitment is essential in both private partnerships and public ones. It is essential to ensure that employees remain motivated throughout the tenure of the project. Private firms have the option to provide additional benefits in the terms of money or stock options in order to motivate their employees to go the extra mile. Public sector firms cannot change their compensation structure just to suit a particular project. This motivation has to be maintained through other means other than pay structure. 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