Strategic Management Case of Volkswagon and Suzuki - Essay Example

Strategic Management al Affiliation Strategic Management Business alliances provide great business opportunities and even a competitive advantage over other competitors. For instance, a strategic alliance between two organizations may double the market share of the organizations as well as their profits. However, these strategic alliances are not very easy to plan and maintain. This is because the objectives, goals, cultures, and dynamics of both organizations have to be synchronized for an effective partnership. In this essay, we will explore a case study between Volkswagen and Suzuki, which is one of the best examples of a strategic alliance that did not work because of reasons that we will review and analyze. Firstly, the essay will briefly define strategic management especially from a strategic alliance standpoint. Secondly, it will summarize the case between the two companies, proceed to analyze the company’s actions, and highlight the specific global strategies illustrated in the case. Finally, it will examine the findings from the company’s initiatives and expansion strategies and give a conclusion. Strategic management can be defined as a bundle of strategies that managers in an organization adopt and implement to positively influence the direction of the organization. These strategies will normally affect the performance of the company, and are desired to give the company a competitive advantage over other industry players. A global strategic partnership involves two or more organizations coming together and pooling resources in a bid to reach a wider market and strengthen their competitive advantage (Jeschke, 2008). In today’s business environment where there is massive competition from various players in the market, strategic management becomes a very important tool for survival. Strategic management gives an organization a fresh way to look at the existing business environment to remain both profitable and relevant amidst competition. In a bid to achieve relevance, organizations also link up together in strategic alliances to jointly pursue opportunities either in the same operating environment or in a different one. The case between German carmaker Volkswagen and Japanese’s Suzuki is a classical case of how organizations pursue the concept of strategic alliances for gaining competitive advantage in their operations. The partnership between Volkswagen and Suzuki has been described by many analysts as a straightforward venture. This is because each organization had clear objectives that would easily be met upon the completion of the partnership. After achieving success in the European market, Volkswagen wanted to venture outside its primary market. It decision to enter the Indian market via a strategic alliance with Suzuki is also attributed to a report published by the Wall Street journal at the beginning of 2014. The article forecasted that India would become the third largest market for cars after the United States (US) and China over a period of 5 years (Hacker, 2013). The report also shed doubts on the automobile makers in the US regarding their ability to offer the desirable vehicles, to a growing demand in India owing to a slowdown of their economy. Volkswagen’s objective upon entering India was to take advantage of a growing demand. However, in its partnership with Suzuki, its goal was to provide Suzuki an enhanced vehicle technology. On the other hand, Suzuki had also successfully managed to carve a market niche in the Southern Asian country. However, Suzuki lacked the kind of advanced technology that other carmakers in other parts of the world were using. In the partnership, Suzuki agreed to provide Volkswagen with the presence in India through its wide and established networks. It also gave Volkswagen access to its range of motor vehicles that were of a great demand in India, the small-displacement vehicles (Hacker, 2013). This issue was in return for the technology they needed. The success stories that either company displayed in their respective countries, combined with the need to replicate this success in other business environments, led to the desired partnership. Strategic partnerships, as earlier stated, are difficult to set up and maintain (Jeschke, 2008). The partnership between Suzuki and Volkswagen is actually used as a case study of how difficult such partnerships are, and how easy it is for them to disintegrate. Communication breakdowns were the very first reason the strategic alliance never materialized. In the partnership agreement, many issues were discussed and drawn up. However, there lacked proper communication and empathy between the two parties. For instance, Suzuki remained rigid to cooperation. The second reason that led to a break-up was a lack of transparency between the two (Nadkarni, 2010). Volkswagen shared its automobile technology to Suzuki even before they were officially granted access to the latter’s market ignoring the possibility that the same information could land into the hands of a third party and ruin any projected plans. Suzuki, on the other hand, had already signed a diesel technology arrangement with Fiat and would not need such kind of technology from Volkswagen (Jeschke, 2008). Suzuki’s need of technology from Volkswagen was thus partial. The third reason was differences in culture between the two organizations. The Germans and Japanese portray dissimilar cultures. While the Japanese emphasize a great deal on cohesion and politeness, the Germans subscribe to careful planning according to laid down procedures in everything they undertake. This aspect affects the spirit of togetherness, as individuals remain cautious about their actions. The two cultures collided in the execution of the partnership between Volkswagen and Suzuki as the Germans would quickly make decisions about plans while the Japanese desired a slower pace. Finally, a deviation from the agreed terms and conditions led to the disintegration of the alliance. Volkswagen in a statement to its shareholders said it could largely and easily influence Suzuki’s policies. This issue contradicted the initial agreement of being equal and independent partners in the strategic partnership (Nadkarni, 2010). Suzuki thus felt aggrieved by Volkswagen statements. The above sentiments led to a disintegration of the alliance. Having summarized the case between Volkswagen and Suzuki, it is pertinent to analyze the actions of both companies. The actions that led to the initial startup and later on the collapse of the partnership agreement can be described as inappropriate. Either side of the partnership displayed action plans that did not consider the other. Most importantly, those actions did not consult the other party before they were executed. For instance, the action of Suzuki’s engagement with Fiat in an engine technology venture was inappropriate in the sense that they did not honor the initial agreement on technology sharing with Volkswagen. Additionally, Mr. Suzuki, the founder of Suzuki, posted on a blog that none of the technologies that Volkswagen presented were interesting (Hacker, 2013). The action by Mr. Suzuki was in bad taste. On the flipside, Volkswagen’s statement to shareholders that it could easily influence the policies of Suzuki was also inappropriate and out of line. Their action of sharing their technology plans even before the roll-out of the partnership was also against the spirit of working together. In a partnership agreement, the actions or inactions of either party may make or break the partnership. Therefore, it is prudent that either side sticks to agreed action plans. The alliance between the two carmakers, though short-lived, displayed a number of global strategies. Global strategy refers to decisions or blueprints that an organization wants to pursue and implement in business environments different from its current one. It is a combination of various strategies such as marketing and customer focus. Global strategy is a just but a part of strategic management (Nadkarni, 2010). In this case, there are global strategies that come out. The first is cooperation between the two companies through a strategic partnership. Cooperation between two international organizations is a global strategy employed to widen each other’s markets and competitive advantage. The second global strategy is customer focus. In this case, Volkswagen responded to the growing demand for cars by the middle class in India by collaborating with Suzuki. This is a customer-focused strategy (Jeschke, 2008). The third global strategy illustrated, in this case, is that of resource-based strategy. In this type of global strategy, companies enter into partnerships with others based on the resources that they are bringing to the deal. This aspect strengthens the partnership. In the case, Suzuki offered a wider presentation of Volkswagen in the Indian market while Volkswagen offered its advanced technology. The case between the two organizations initiatives and expansion strategies draw many lessons. Firstly, partnership engagements should be carefully thought of before adoption and execution. The cultures and strategies of either party should be considered in the formulation of such a plan (Nadkarni, 2010). In the case, either party ignored the cultures and strategies of the other. This issue resulted in tensions between the two. Secondly, clear and concise communication and transparency concerning each company’s initiatives and expansions plans is paramount. In the case, there were communication breakdowns, with either party making inappropriate decisions or statements that were contrary to the initial agreement. Thirdly, the creation of a flexible agreement is also very important as companies plan their expansion strategies. A flexible agreement details a mutual understanding of each other’s expectations and objectives and greatly reduces misunderstandings (Jeschke, 2008). In the case, it is clear that either side was rigid only focusing on their strategies. In conclusion, strategic management refers to decisions managers adopt to influence a company’s direction. Strategic partnership, a form of global strategy, is also a strategic decision a firm undertakes to increase its earnings and competitive advantage. However, alliances such as the Suzuki and Volkswagen are not easy to set up and maintain because of differences in culture and organizational strategy. However, proper communication, transparency and flexibility can help foster a successful alliance. References Hacker, J. (2013). Automotive Management. Hamburg: Oldenbourg Verlag Jeschke, N. (2008). Gaining Competitive Advantage Through Strategic Partnerships in the Supply Chain. Munich: GRIN Verlag. Nadkarni, V. (2010). Strategic Partnerships in Asia: Balancing Without Alliances. New York: Routledge. Read More