Strategic Inter-Organizational Partnerships: Trade Bank of Iraq - Case Study Example

Running Head: STRATEGIC INTER-ORGANIZATIONAL PARTNERSHIPS Lecturer: Introduction The engagement in inter-organizational partnerships is a significant practice in business that is usually aimed at accomplishing the strategic objectives in a business, through the use of a supportive approach whereby the core competences of partners are used to reinforce an organization’s capabilities. Such strategic partnerships are significant in maintaining long-term sustainability in business as well as helping it to maintain focus in regard to accomplishment of its mission. Businesses intending to engage in partnership are required to carefully assess their needs to ascertain that the partners selected add value to the organization’s operations. Moreover, the capabilities and competences of the business so that the partner selected does not hamper the progress of the organization. This paper presents an analysis of the rationale for the Trade Bank of Iraq to pursue strategic inter-organizational partnerships with partners in more than 30 countries. The rationale is grounded in the evaluation of the organization’s needs, capabilities and competences, as well as a strategic analysis of the organization’s operating environment. These are the factors that may influence the future of the organization as well as that of the partners. Organizational Needs With the ever increasing competition in the banking sector, the Trade Bank of Iraq (TBI) needed to develop strategies for sustainability and maintenance of competitiveness. Consumer demands are ever increasing and it requires innovativeness for the organization to remain efficient in its operations. For example, clients are tending to use the emerging technologies in financial operations, which are more convenient and are widely applied globally, such as online banking, ATM and Visa cards that help clients to transact business with much ease. The bank has accomplished product differentiation through partnership with organizations offering information technology products, which have significantly contributed to its ability to offer online services and highly computerized services in 39 states globally (Goode, 2009). Kaplan & Hurd (2002) observe that organizations need to focus on engaging in the partnerships that match their needs. This requires understanding its strategic focus and the underlying models that have to be applied to accomplish the organizational goals. Failure to understand the appropriate strategies necessary for organizational growth may hamper the establishment of a fruitful inter-organizational partnership. The potential partners need to possess unique competences that are supportive to the organization for it to accomplish its objectives. The rationale behind pursuing inter-organizational partnerships in regard to the organizational needs is therefore to help a firm to cope with the major drawbacks that can hamper its success. The Trade Bank of Iraq needed significant support for it to accomplish its mission. Morgan & Hunt (1999) argue that organizations that are able to source partnership are capable of coping with emerging crisis. The ability of the Trade Bank of Iraq to cope with the current financial crisis confirms this fact. It has maintained competitiveness even at the height of the financial crisis, and has been capable of expanding its client base in foreign markets. Inter-organizational partnerships are significant in exposing a firm to foreign markets as well as new opportunities for trade, which are needed to a large extent for improvement of an organization’s productivity and competence (Colombo, 2003). For example, the partnership between the Trade Bank of Iraq and Thomson Reuters is one of the most significant relationships that have contributed to the success of the organization. The bank is able to enter in the worldwide Foreign Exchange society, which has opened up many opportunities for investment in the money market. The organization’s performance is facilitated by its partnership with Thomson Reuters, which is also one of the organizations that contribute to the bank’s Information Technology needs. Organizational Capabilities and Competences For an inter-organizational partnership to be effective there is need to ensure that the capabilities of the potential partners match with the competences that lack in an organization (Das & Teng, 2000). The rationale for an organization’s efforts to enter in to a partnership is to benefit from the relationship. For this reason, it is important to assess and compare the capabilities of a firm with potential partners to ascertain that there are attached benefits that will be accomplished from the relationship. Organizations seek the capabilities and competences in others and evaluate the applicability of a partnership. For example, the Trade Bank of Iraq seeks partnerships with organizations in the U.S, U.K, Asia as well as other countries in the Middle East, which are significant sources of human resource skills that are important in the improvement of organizational performance. They are essential in the improvement of organizational capabilities through knowledge transfer. Establishment of a brand name requires time, efforts and resources to be sacrificed by an organization. In many cases, due to high competition and inadequate organizational capabilities to sacrifice resources, the anticipated brand may fail to attract clients in the market. For this reason, organizations with less capability enter in to partnership with well established ones to take advantage of the strong brand name to market their products (Ettlie & Pavlou, 2006). Clients view the new products as an extension of the brand that they know and therefore the costs associated with the establishment of a new brand may be avoided. The Trade Bank of Iraq is a new institution in the market having been established in 2003. It requires time for such institutions to expand its operations to a global scale and win the confidence of clients. Inter-organizational partnerships therefore serve as the stepping stones towards accomplishing the goals of operating in a global scale. For example, Thomson Reuters is a strong brand name that is renowned for its vital information regarding business issues worldwide. The Trade Bank of Iraq has accomplished a foundation for its foreign exchange operations through the brand name. Seeking inter-organizational partnerships to improve on organizational capabilities yields positive results in many cases as the organization is able to predict the possible outcome of future alliances on the basis of past partnerships (Jordan, 2004). On the other hand organizations share their vision and strategies, which is a significant step towards improvement of competitiveness. Trade Bank of Iraq also pursues inter-organizational partnerships for the purpose of financial assistance. The bank receives finances from the partners, such as Citi Bank and ING among other partners. Operating Environment The operating environment of a business is a significant determinant of the appropriateness of its strategies. Morgan & Hunt (1999) observe that the major factor that needs to be considered in strategic planning is the possibility of the organization to thrive in the current conditions within its operating environment. There are usually various threats, with competition being among the most adverse for the survival of a business. It is usually unfavorable for emerging businesses. To cope with the competition, emerging organizations need to develop strategies to fit and become efficient in the competitive market. Pursuing inter-organizational partnership can help the new organization to overcome the trade barriers originating from the long-standing organizations. The Trade Bank of Iraq is a 7 year old organization and needed to establish strong inter-organizational partnerships that would help it to emerge successfully. It is regarded as the most reliable financial institution in Iraq in regard to creditworthiness. This is one of the factors that have contributed to the achievements of the institution. When in a partnership, Gadman & Cooper (2005) observe that organizations are likely to be supportive of each other rather than compete. Furthermore, they are likely to form a cartel that they can use as a tool to bar other organizations from establishing in the market. It is therefore logical for an emerging organization to form alliances with the existing ones in the market to reduce its competitors. Iraq has numerous investment opportunities and other strong financial institutions may be willing to make their investments to utilize the opportunity. However, the partnership between TBI and strong institutions in foreign countries helps in maintaining its capability to cope with competition. Moreover, the operating environment for the bank was not stable due to political issues, which could lead to losses especially in the case of unexpected occurrences such as war, which can not be insured against. In case of such occurrences, the losses incurred as a result of clients being unable to repay their loans can not adversely affect the bank as it has many income sources from the foreign partners. Conclusion It is important for organizations to assess their needs and evaluate the usefulness of a partnership in solving the needs. The Trade Bank of Iraq has been successful in establishing strong inter-organizational partnerships with firms in foreign countries. These associations have been significant in establishing in foreign markets. It is important for the partnering organizations to possess competences that match organizational needs. The Trade Bank of Iraq has improved its capabilities in regard to human resources and information technology among others through the partnerships. The use of the strong brand names of partners is an important strategy for accomplishing competitiveness. When organizations are in a partnership, they are unlikely to compete and therefore new organizations in the market tend to counter a competitive operating environment through engaging in partnership. Bibliography Colombo, M. (2003). Alliance from: A test of the contractual and competence perspectives. Strategic Management Journal, Vol. 24(12), pp 1209-1229.  Das, T., & Teng, B. (2000). A resource-based theory of strategic alliances. Journal of Management, Vol. 26(1), pp 31-62.  Ettlie, J., & Pavlou, P. (2006). Technology-based new product development partnerships. Decision Sciences, Vol. 37(2), p 117.  Gadman, S., & Cooper, C. (2005). Strategies for collaborating in an interdependent impermanent world. Leadership & Organization Development Journal, Vol. 26(1/2), p 23.  Goode, L. (2009). TBI Joins International FX Community. The Wall Street Journal, Vol. 21(1) pp 8-23 Jordan, J. (2004). Controlling knowledge flows in international alliances. European Business Journal, Vol. 16(2), pp 70-77.  Kaplan, N., & Hurd, J. (2002). Realizing the promise of partnerships. The Journal of Business Strategy, Vol. 23(3), p 38. Morgan, R. M. & Hunt, S. (1999). Relationship-Based Competitive Advantage: The Role of Relationship Marketing in Marketing Strategy, Journal of Business Research, Vol. 46(3) pp 281-290 Read More