Strategic Alliances and Globalization - Assignment Example

MANAGEMENT Question 2 The choice of a business portfolio through which to compete with other businesses is a very essential part of the corporate strategy employed by any firm or business entity. In order to discuss firm diversification in depth, it is very important to establish exactly what firm diversification is. Given a situation where the portfolio decision being considered by any given firm involves more than one business opportunity, diversification strategy becomes necessary in the operations of the firm. In essence, diversification strategies involve a firm deciding to choose more than one business option in its portfolio. The question thus remains as to the exact motivations behind the diversification of firms. The main driving factor behind firm diversification is perhaps the need to make profits. It is a known fact that more profit can be tapped when a number of business options are tapped as opposed to focusing all of the efforts of a given firm on a solitary business opportunity (Aaker, 2000, p.50). A good example is a textile-manufacturing firm, which deals with the manufacture of linen in addition to textile. This firm can venture into diversification by also engaging in fashion design and clothes manufacturing. Thus, instead of only focusing on textile manufacturing, the firm can also tap profits from fashion design and the sale of clothes. Profits remain perhaps the main driving factors as far as firm diversification is concerned. This is because the aim of any given firm is to generate profits, which will enable efficient running and maintenance of the firm. Another factor that tends to incline firms towards diversification is the number of different market segments, which are occupied by the firm. If a firm has the capacity of occupying more than one market segment, this acts as an enticing factor towards diversification of the firm’s operations. A good example of this can be extrapolated from the third world countries where mobile service providers are also venturing into data provision and internet service provision (Aaker, 2000, p.61). This diversification was enabled by the technological breakthrough of the internet modem, which in essence fused mobile service provision and internet provision. Because of this technological breakthrough, mobile service providers found themselves occupying another segment of the market, which was internet and data provision. As discussed earlier, profits are a major enticing factor as far as firm diversification is concerned. This is, however a proverbial double-edged sword. Contrary to the previous assertion, losses and inadequate profits are also a major determining factor as far as firm diversification is concerned. This is clear from the perspective that the operations of any given firm are firmly hinged on the profits generated by the firm in question. Inadequate profits are very likely to hinder smooth running of the firm in question. Thus, if the section of the market occupied by a given firm is not generating enough profits or is even leading to losses, the firm might consider diversification. This is from the point of view that diversification might help to harmonize the different sections occupied by the firm in terms of their cumulative profits. Thus, instead of garnering inadequate profits from just one section of the market, a given firm can choose to venture into different sections of this market. Another factor that tends to motivate firms towards diversification is the issue of market security. This in essence deals with market conditions in terms of stability and sustained growth. If a given section of the market, which is occupied by a given firm is unstable, the firm might operate with a lot of discomfort keeping in mind that the market might collapse and in the process take the firm down with it. It is therefore easier for firms operating in such environments to diversify their operations (Aaker, 2000, p79). This will give the firm a sense of stability because if a given unstable section of the market collapses, the firm is still covered in terms of its operations and profit garnering because the firm occupies other sections of the market as well, which might in actuality be relatively stable. Good examples are the firms that deal with the supply and delivery of oil. Due to the unstable conditions in the Middle East, for example the rise of the Islamic state, such firms are now realizing that though profitable, their area of specialty may be in jeopardy due to the rise of radical Islamism in the Middle East. Such firms are now venturing into the provision of clean energy as well an exploration of alternative sources of oil. Question 4 Globalization refers to the proverbial shrinking of the globe from a very large planet to a rather small global village where there are no distance limits as far as communication and service delivery are concerned. Globalization also refers to a scenario in business where expansion occurs on a global basis. Globalization has been viewed by scholars in the field as the slow but certainly sure erosion of individual governments and state lines. This erosion paves way for a more global arena or as the conspiracy, theorists name it the new world order. Under this point of view, individual nations as opposed to being decision makers are increasingly being perceived as decision takers, when it comes to the most pertinent issues of modern mainstream life such as trade (Waters, 2008, p.74). Globalization has primarily been aided by the levels of interaction and connectedness that are in existence today. A few hundred years ago, it would take approximately an entire year for a message to be passed from Europe to America and vice versa. Today it only takes a matter of seconds to pass a message to the furthest corners of the globe. From this perspective, it can be argued that technology is one of the biggest boosters of the globalist agenda. This is because many of the liberties that have enabled globalization to become a realizable prospect, all stem from technology based innovations especially in the telecommunications sector. Technology has literally enabled the entire planet to communicate simultaneously. A person may be familiar with a certain part of the world without ever visiting that part all due to technological innovations (Waters, 2008, p.34). A good example is the Great Wall of China, which is well known throughout the planet even by people who have never personally set foot in China or even in Asia for that matter. This is because the great wall of China is a well-publicized historical landmark and there are a lot of conversations about it on the global scale. Globalization can also be viewed under the paradigm of sharing of ideas with people from different corners of the world. In the process, one is able to gain different perspectives of any given matter, and in the process deal a great blow to ignorance in its entirety. The sharing of ideas, which greatly contributes to globalization, is well embodied in the social media platforms available today. A good example is the inter university platform. This platform links students from different universities all over the globe and gives them a chance to share ideas with each other. In the process, they gain different perspectives. The business community is perhaps the biggest beneficiary as far as globalization is concerned. This is because globalization has morphed the business world from a locality-based entity to a global juggernaut. As a result, corporations and firms are opening up subsidiaries all over the world (Water, 2008, p.97). There are vast regions choosing to adopt the same business policies in order to streamline business running in the entire region. Two valid examples are the European Union and the east African community. These reigns have gone as far as developing a common currency and similar policies governing business activities in the region. Thus, a European from London could start a successful business in any part of the continent with relative ease because the rules that will apply in London are still the same rules that will apply all over the continent. There are, however, factors that appear to be inhibitory in nature as far as globalization is concerned. These are factors that either work to slow down our entirely stop globalization. One such factor is politics. This is because globalization tends to shy awash from individuality politics to a universal political body (Waters, 2008, p.57). This move has been met with a lot of resistance from many of the current governments from individual countries all over the globe. Primarily, these governments view globalization as threatening to their individual sovereignty. This is because globalization tends to take the power away from any given individual government and transfer it to a more cohesive a globalist entity. Thus, most governments on the planet find the concept of globalization rather threatening as oppose to inviting. Another factor that ends to inhibit globalization is the level of technology available in some parts of the world. A good example is the African countries. These countries are relatively lagging behind in terms of their infrastructure development and technological prowess. As a result, people from this part of the world might not be up to date with the current goings of the world. They may also have a harder time linking with people from the rest of the world and sharing ideas with them. Because of these setbacks, globalization cannot take off completely because a very large chunk of the world’s population cannot be left out of the process (Waters, 2008, p.201). Question 6 Strategic alliances are increasingly on the rise in the business community all over the world. A strategic alliance refers to a professional business arrangement in which two or even more firms act in cooperation all aimed at their mutual benefit. In essence, firms tend to coalesce their efforts aimed at a higher performance and achievement for all the firms involved. In essence, strategic alliances can turn once bitter rivals and competitors into allies, working hand in hand to achieve a certain common goal that is desired by all of the firms involved in the strategic alliance. There are a number of factors which contribute to strategic alliances and have in fact made strategic alliances, one of the most surgical business tactics employed by firms today. One motivational factor that leads to strategic alliances between firms is the sharing of expenses (Price, 2004, p.86). There are certain business ventures that may prove to be rather costly for firms if they pursue them alone. These ventures may be costly not just in terms of their financial implications but also in terms of the infrastructure necessary for their execution. This is an ideal situation, which might lead to a strategic alliance between different firms. Instead of incurring all the expenses alone and overstretching its manpower, a given firm can go for a strategic alliance with another firm. This will ensure that the firms in the strategic alliance work hand in hand to ensure that no single firm is overwhelmed by the necessities of the given business venture in question. Strategic alliances between firms are also motivated by the need to share expertise. A give business venture may require a large background of expertise, which may not be all readily available in any solitary firm. In such a situation, firms can enter an expertise sharing strategic agreement. Under the terms of this agreement, these firms will agree on the technicalities and exact mechanics of sharing their rellative expertises with one another, to ensure that there is no knowledge lacking which is necessary for the accomplishment of a given business task (Price, 2004, p.18). Entry into a new and maybe unfamiliar market can be very challenging to any given firm. This is despite the obvious research and field study done by the individual firm in question. This is one scenario where firms more often than not tend to enter into a strategic alliance with each other. This strategic alliance is aimed at covering aspects of the new market right from its simplest technicalities to its broadest perspectives. It is much easier for firms to enter into a new market with backing and cooperation from other firm as this tends to ensure a form of insurance for the firms involved in the undertaking (Price, 2004, .22). Gaining a competitive edge in any given market is one of the major challenges faced by firms in any sector of the market. This is due to a number of reasons among them customer preference and ever evolving tactics being used by the competition. Firms can therefore enter a strategic agreement aimed at gaining a competitive edge over all other competitor in the sector. This strategic agreement may be aimed at forming a monopoly and effectively locking out the rest of the competition from the market. In such a scenario, firms in the strategic agreement, come up with means to tactically subdue their competition. These tactics are strictly aimed at ensuring superiority in the market of the firms involved in the strategic agreement. It is clear that these agreements at times stem exclusively from necessity as opposed to will. Strategic alliances may also be born out of necessity as opposed to will. This refers to a situation where firms are forced by the current market conditions to enter into a strategic agreement. These market conditions may be hostile and in effect demand that firms work together or otherwise endure great losses. One such case is a situation where a given firm is on the verge of bankruptcy. Instead of liquidating all of its assets, the firm in question might enter a strategic agreement with another firm. This agreement might help to bail out the firm that is facing bankruptcy and in the process lead to better profits for all of the involved firms. This can also help to save the firm in question from being bought completely by other firms. This is because despite the firm being saved by strategic partners, the firm maintains its autonomy. Reference List Aaker, D. A., 2000, Developing Business Strategies. New York: Wiley. Price, R. W., 2004, Roadmap to Entrepreneurial Success Powerful Strategies for Building a High-profit Business. New York: American Management Association. Waters, M. 2008, Globalization. London: Routledge. Read More