The Difficulties and Problems in Business Partners - Assignment Example

What might be the difficulties and problems with business partners and the practice of shared services? The management of relationship between entrepreneurs and business partners can be a challenging task; business partners have a key role in the development of organizational activities – depending on the form of their cooperation with the organization – and they can influence the organizational performance; at this point business partners are differentiated from the employees or the vendors. The above issues are highlighted in the study of Bly (2004) where it is noted that the relationship between entrepreneurs and their business partners is close and must be managed carefully (Bly 2004, 177) aiming to avoid conflicts and cooperate effectively towards the development of organizational performance. By its nature, business partnership is a complex scheme; this complexity can be identified primarily to the fact that ‘there is no single contractual agent but several agents capable of contracting on behalf of each other’ (Ricketts et al. 2003, 108). The problems that can appear in a business partnership can be many; the specific fact has been identified in UK quite early – by 1830s; at that period, two were the major issues occurred in a business partnership – these problems can be also identified in modern business partnerships: a) it was quite difficult for third parties to sue a partnership – mostly because the retrieval of information on a transaction developed with a business partner could take many years – ever decades – to be completed, b) difficulty existed ‘in one partner in suing another’ (Ricketts et al. 2003, 108) – the difficulty in this case derived mostly by the lack of clear legal framework; moreover, in such conflicts also it was quite difficult to retrieve the information required in order to support the relevant case. The most common problem faced by organizations regarding their business partners is the identification of channels of communication and cooperation; in fact, the needs of organizations in terms of their business partnership are often difficult to be understood by their business partners; the latter may focus on the financial prospects of a joint effort – referring to initiatives developed by the enterprises and their business partners; however, business goals are usually related to non-financial targets; of course, the increase of a firm’s profitability allows the specific organization to effectively develop any of its strategic schemes – including those referring to non-financial targets. Friedman et al. (1999) highlight the importance of cooperation between the enterprise and its business partners; in accordance with the above researcher, the lack of cooperation between the business and its partners can lead to the decrease of the organizational performance; moreover the following problems are reported as most common between the business and its partners: ‘channel conflict, dissatisfied partners and sales opportunities that are missed while being processed trough the firm’s communication channels’ (Friedman et al 1999, 136). In other words, business partnership can be related to a series of problems – as indicatively mentioned above; these problems may be difficult to be resolved especially within a high competitive environment. On the other hand, the role of business partners within the organization need to be carefully set and justified aiming to reduce the resistance in regard the specific schemes; conflicts cannot be totally avoided both in the internal and the external organizational environment. Business partners have a specific role within each organization; however, in certain organizations the framework of this role is not clearly explained; as a result a conflict may appear between the employees and the business partners regarding the distribution of tasks and responsibilities among them; as explained previously the role of business partners is differentiated from the role of employees but it is at this point that a risk is developed regarding the potential effectiveness of a business partnership. It is perhaps for this reason that Harrison (2005) emphasized on the need for using an appropriately customized plan when having to develop a business partnership; in this way, the terms of participation of business partners in the organization are defined and any resistance in the internal organizational environment is eliminated. On the other hand, the number of the business partners can influence their cooperation with the enterprise; in firms with extended operational activities – referring especially the multinational firms – the number of business partners can be significantly high leading to the following problem: which would be the most appropriate tools available to the business for cooperating effectively with its partners? The answer to this question cannot be standardized; Iansiti et al. (2007 7) refer to the example of Enron as a firm with a vast network of business partners; the failure of the firm to develop its relationship with its partners has been one of the reasons that led to the termination of the business activities. The fact that the number of business partners was extremely high – compared to the size of the business -cannot be used as a justification for explaining the failure of Enron to build a proactive relationship with its partners. This view is verified by referring to the case of IBM; the specific firm pays particular attention to the development of the network of its business partners; in fact, in accordance with Iansiti et al. (2007 7) ‘the IBM’s innovation strategy is depended more on influencing the behaviour of the millions of free software developers’ rather than changing the practices used in the internal organizational environment; in IBM business partners are considered as having a more important role even from employees – referring especially to the development of the business activities by introducing innovative products – a strategy necessary in order to survive in the particular industry – which is characterized by a strong competition. Another common problem of business partnership is the time required for the identification of business partners; commonly, the time required for the establishment of an effective business partnership can be significant; for this reason, the specific strategic plan is not suggested in cases where there is an emergent need for financial support – referring to those enterprises that are forced to proceed to a business partnership under the pressure of their market; however, if the relevant plan is not appropriately designed it is quite possible that it will be led to a failure; the lack of time availability for the development of a business partnership can have severe consequences, as the following ones: a) the business partner may force for important differentiation in the organizational practices/ plans; such power would be extremely high when the financial support provided by the business partner to the firm is important, b) the business partner may asks for the resolution of the company and the formulation of a new one – the chances for such event are limited but they exist, especially if the percentage of the partner’s participation in the firm is such that offers him the right to control the organization; the above practice can be developed through a different mechanism; if the business partner decides to terminate his participation in the partnership the radical decrease of the organization’s profits – as a result of this event – may lead even to the resolution of the organization – see the case of Looksmart and Microsoft as analyzed below, c) the relationship between the organization and its customers may be negatively affected because of a business partnership – this is especially the case when the business partner is well known in the market and the customers are likely to believe that the success of the products’/ services’ of the organization has been achieved because of the partner’s contribution – the influence of the customers can reach such levels that certain of the customers choose to buy the products/ services involved directly by the partner; this fact could have irreversible effects on the organizational profitability, d) the risk of insolvency’ (Ricketts et al. 2003, 109) is increased – especially in cases where the dependency of a firm from its partners has reached such levels that the terms and the progress of the specific relationship are not easy to be checked and monitored. In many cases, the criteria used by firms in order to select their business partners are not appropriate; an ineffective business partnership is then unavoidable; Kurtz et al. (2009) emphasize on this problem and note that building an effective business partnership can be a challenging task for businesses in all industrial sectors; however, it is suggested that by evaluating appropriately the partners’ capability to support the business activity – reference is made to the ‘financial resources, technology and contacts’ (Kurtz et al. 2009, 304) available for the realization of the business plans – it is more likely that a proactive and effective business partnership will be established. On the other hand, the human factor involved in a business partnership cannot be ignored. In accordance with Pride et al. (2009) human factor is of a critical importance for the success of business partnership; it is further explained that the most common form of involvement of this fact in the business partnership is the development by one of the partners of initiatives that ‘disturb the other partners’ (Pride et al. 2009, 114); the example of ‘bringing a relative to work in the organization or withdraw a high amount of money from the business’ (Pride et al. 2009, 114) are mentioned by Pride as common examples of such type. From a similar approach, Kenton et al. (2005) note that the form and the scope of a business partnership need to be defined in advance – i.e. when the specific partnership is initially established; in this way, the role of the business partner within the organization will be clear, a fact that can guarantee the effectiveness of the relevant scheme – referring to the business partnership. Furthermore, four different models of business partnership are suggested – addressing different organizational needs. In this context, reference is made to the following business partnership models: ‘a) business partner act as business consultants, b) business partners are process and specialist providers, c) business partners act as process consultants and d) business partners use a process consulting approach’ (Kenton et al 2005, p.44-47); all the above models require that business partners participate actively in the daily organizational activities – ‘working alongside the line’ (Kenton et al 2005, p.44). Kenton et al. (2005) mention the example of Barclays –which has introduced the first of the business partnership models presented above – in order to indicate the potential value of pre-defined business partnership schemes; these schemes have the advantage that can reduce the risks in regard to problems and conflicts related to business partnerships. At this point it should be made clear that even when the terms set for the development of a business partnership are clear and well-tested, still there are chances for the specific partnership to fail; in other words, the performance of a business partnership cannot be considered as guaranteed or standardized; the continuous increase of competition in all industrial markets can lead firms to ignore their obligations in regard to an existing business partnership under the influence of interests of major importance; the case of Looksmart, a firm operating in the media industry, is used by Kurtz et al. (2009) as an example in order to highlight the above problem. Looksmart operates online and had developed a partnership with Microsoft aiming to beat its rivals; despite the fact that the specific target has been achieved – the firm managed to increase its profits by 50% in just one year; however, the strong dependency of Looksmart on Microsoft has been proved to be a major strategic mistake. When the issue of the renewal of the contract on which their partnership was based was set, Microsoft refused to consent – with no previous warning; the consequences of this fact had been immediate and severe; the value of the stocks of Looksmart was reduced by 52% within a day (Kurtz et al. 2009, 304). In accordance with the issues discussed above, the over-dependency of firms on their business partners can lead to severe organizational damages and failures; extended networks of partners should be preferred than to rely on one or two business partners. On the other hand, the use of specific criteria when establishing a business partnership could help to the limitation of the risks of the particular business agreement. Despite its problems – which can be many, as explained above – the business partnership remains a valuable form of business cooperation providing the necessary standards for a significant business growth. (Words: 2043) Works Cited Bangemann, Olavi. Shared services in finance and accounting. Gower Publishing, Ltd., 2005. Beaman, Karen. Common Cause: Shared Services for Human Resources. Rector-Duncan, 2007. Bly, Robert. Websters New World letter writing handbook. Websters New World, 2004. Contractor, Farok. Cooperative strategies in international business: joint ventures and technology partnerships between firms. Emerald Group Publishing, 2002. Friedman, Lawrence, Furey, Timothy. The channel advantage: going to market with multiple sales channels to reach more customers, sell more products, make more profit. 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