Institutional Approaches in Strategic Management - Essay Example

Running Heading: INTERNATIONAL MANAGEMENT RESEARCH REPORT INTERNATIONAL MANAGEMENT RESEARCH REPORT [Course] INTERNATIONAL MANAGEMENT RESEARCH REPORT Executive Summary Business alliances in today's world aren't a new terminology and organizations are merging into bigger companies in order to achieve new targets and milestones. International business alliances are formed at a bigger level and companies day by day are expanding their approach towards business through this phenomenon. Companies have to search for viable options in forming an international business alliance and they must ensure that the external environment and their current customers should benefit from this alliance. Focusing on the right market and following a forward looking approach is the right approach in this phenomenon. People believe that all the alliances on international level work efficiently and effectively. However, that's not the case because if certain factors like legal, political, social, customer preferences are not focused efficiently then alliance of any nature might not work effectively. INTERNATIONAL MANAGEMENT RESEARCH REPORT Organizations are getting bigger and stronger day by day and their area of operations is expanding. Organizations are changing their methodology of working and newer terms like employee empowerment, mergers, acquisitions, motivation and business alliances are changing the conventional methods of working. The span of control is widening up and they are enhancing their profits and entering into newer contracts with the diversified approach. Organizations besides achieving short term targets are stressing on long term objectives too. Since they are expanding therefore they are merging other companies into their own horizon and forming new strategies in order to achieve the overall goal. An agreement of mutual consent between businesses that initiated for cost reduction, improved service or for any other strategic factor is known as a business alliance. In the current century alliances are considered as a sign of victory and they are treated as an element of growth. Business alliance is actually working with your competitors and this strategy is favorable when two or more organizations view the bigger picture and thinks in terms of favoring the industry and their our profits too. In today's world fierce competitors are becoming business partners just to earn more profit and reduce their costs. Usually alliances are mostly on 50-50 basis and mutuality is considered to be the important factor besides the ratio. Besides bigger organizations smaller organizations are also benefiting a lot from this strategy and they are combining with other small organizations and enlarging their vision and objectives (Daft, 2008). There are numerous alliances on national and international basis in order to earn strategic advantage. Dell computers are considered to be the largest sellers of Pc's world wide and they firmly believe their customer-centric approach and their alliances are the main reason of this success. Dell computers are extensively in touch with their suppliers and they some times follow the acquisition strategy and buy out the supplier. Same is the case with retail giants Wall mart and K-mart that they either buy out their suppliers or some times outsource certain areas to them in order to obtain better results. Managers and decision makers are facing a paradoxical situation that whether to opt for international business alliance or not. Some mangers believe that sharing the resources might be a dangerous strategy on international basis. This is a definite challenge because managers have to risk their resources and a huge amount of dollars are at stake when an international business alliance is formed (Phatak, 2008). Managers can form alliances in different forms and the examples of business alliances can be joint ventures, licensing, equity partnerships, etc. In certain scenarios mergers and acquisitions also come under this category. In the current era international business alliances are growing at an extensive level. Some of the international business alliances that are considered as the merging of giants are mentioned below: Three giants of the computers industry combined their resources and formed an alliance. IBM with dell and Cisco computers is considered as one of the biggest international business alliance of all times. Toyota and General Motors are considered to be the leaders in the vehicle industry and they were fierce competitors but they have ultimately formed an alliance for bigger goals. Business Alliances also took place between the research and development departments of Merck Shipping Corp. Certain other scenarios are evident in the case of international business alliances like sales alliance, investment alliance, Joint venture alliance, Solution-specific alliance and geographic-specific alliance (Deresky, 2007). Viability of International Business Alliances An effective business alliance requires decision making ability to identify whether to form an alliance or not. Similarly, on international basis the situation gets much stiffer and organizations spends hefty amount of dollars and expertise in just finding out whether to form an international business alliance or not(Knight and Cavusgal, 2007). This spending of dollars and human resource is just to find out that whether we are forming a viable business alliance or not and whether this alliance favors our mission and the overall goal of the organization. There are certain conditions why organizations form international business alliances these are: Reaching new markets Organizations are expanding their operations and for this reason they want to reach newer markets. A newer market means more customers and boost in profits. On international basis when companies form alliances they share cost of research and development, advertising, supplies etc. They work on combined basis and develop a strategy to share profits in newer markets. Viability in such a scenario can be indentified in such a way that if company A posses research and development expertise and company B posses expertise in selling and advertising then both the companies can form an international alliance. This alliance is viable only in a scenario when the external forces of the targeted company are identified and they are handled properly (Hodgetts and luthans, 2005). Cost Reduction Organizations share facilities like plant and equipment, research and development and other production facilities. It results in the phenomenon of cost reduction and its very beneficial in the long run and to attain competitive advantage. International business alliances would be feasible in such scenarios when two or more companies are looking forward to reduce their costs. For e.g. Company A and B are combining their production facilities in order to compete with the leader in the business. This alliance can be of international nature and though proper planning companies can definitely reduce their costs (Cullin and parabooteah, 2007). Favorable regulatory treatment Legality of operations, religious consent, political scenario, instability of the economy is considered to be the basic factors for organizations that enter into contracts and mergers. An organization might experience a confusing situation in which forming an alliance looks to be favorable and customer base can be improved but due to instability in the economy or because of any other regulatory factor companies would not prefer an international alliance. The alliance in such a scenario is not favorable and it might affect both the organizations badly (Thomas, 2001). Acquisition The process of taking over another firm is known as acquisition. It might be a viable option for international alliance because firms can acquire their competitors in order to earn new customers or to face the biggest rival in the industry. In the recent scenario banks are following this option and many international banks are either merging together or they are acquiring other banks (McFarlin and Sweneey, 2005). Measures to make these alliances work IBM is treated as the king of alliances and it has more than 20,000 such relationships internationally. IBM is continuously enhancing its strategy and when competitive edge is needed and where customer base needs to extend then IBM quickly forms a relationship either with an international organization or with a local vendor. It's a critical point that how easily IBM forms a relationship and mostly mergers and acquisition favors IBM (Mead, 2004). These giant organizations follow a simple strategy that they just inquire that whether these organizations that are willing to be acquired or merged with IBM are feasible enough to follow this strategy or not. IBM extensively checks the external factors in order to merge with international companies. Financial aspect, human resources, mindset of the employees and the overall strategy of the firm must be kept in mind in order to experience a constructive acquisition or merger (Druker, 2008). Trust and Commitment Trust and commitment is an integral tool in making business alliances work. Mergers and acquisitions that take place are solely based upon trusts and they demand utmost commitment in order to be successful. Business alliances are built on trust and dedication and theses alliances require interaction of people in the organizations and their belief on these business alliances. Both the parties must develop a sense of mind that both of them are giving something in and they are getting something out in return. If an organization develops a prejudicial behavior about another organization regarding profits or return then an alliance can't be created. Once an alliance is created both the parties should trust on it and must wait for the right time to seek results because these strategic business alliances take time to develop and grow (Stengal Solutions 2001). Commitment in business alliances is also important for achieving favorable results. The business alliance must be important for both the partners and both of them must be willing to take care of it. The top management of both the organizations must be supportive and members of the top hierarchy must trust the alliance and give all of their efforts to make the alliance a viable one. Committed partners would make the alliance workable and it would be favorable for both the organizations. Conflict Handling Misunderstanding and confusions are considered to be the part and parcel of business alliances and since alliances are not made on heaven therefore it's highly possible that conflict occurs in business alliances. Conflict must be resolved quickly for the betterment of the business alliance. Both the organizations must develop a neutral territory to resolve the conflict (Stengal Solutions 2001). It is highly desirable that both the organizations must end up in win-win situations because loosing might not be acceptable by both the parties and the conflict might split the alliance (Gaughan 2007). Both the parties must train their employees and especially the senior management to deal with these situations and both the organizations must strive hard to resolve the conflict rather than blaming it to one another. Both the organizations must consider that it's difficult to create a business alliance but it's easy to break it. Organizations spend a hefty amount of time and money in creating these alliances and by splitting up the alliance both the organizations would suffer. Conflict in business alliances are usually because of factors like cultural differences, strategic differences or disagreements in corporate ethics and values. One of the strongest ways in dealing with differences is to identify the fact that who actually are the stake holders involved in the decision and then organizations must inquire what are the hopes and fears of those individuals or groups (Larraine D 2008). Stability of alliance Business alliances that are weaker can affect the organization in a negative way. When alliances are created it must be considered that stronger and stable alliance can only produce desired outcomes. The best possible option for making alliance feasible and stronger is to dedicate certain managers for dealing with the alliance factor (Steidlmeier 1993). The core responsibilities of alliance manager are to manage the conflict and other issues that are directly related with the alliance. The alliance manger along with the relationship manager must develop an action plan that what's the best possible approach for the alliance and what can be done best to achieve efficiency and effectiveness through business alliances (Larraine D 2008). Although stability of business alliance matters effects the short term operations of the organizations but in the long term the stability is the key issue of business alliance and if an alliance is effective and efficient then it becomes easier to produce the desired outcomes. Conclusion Thus, in a nutshell we can say that international alliances are essential in terms of international growth and they might produce staggering results in the form of profits and expansion of business. It was considered as a conventional phrase that "If you can't beat them then you have to join them". This phrase is transformed due to the advent of powerful international business alliance and in the current era its like "Join them and you can beat anybody. BIBLIOGRAPHY Deresky, H. International Management: Managing Across Borders and Cultures (Prentice Hall, 2007). Steidlmeier. "Institutional approaches in strategic management ." Journal of Economic Issues, 1993. Gaughan, P. Mergers, Acquisitions, and Corporate Restructurings . Wiley, 2007. Larraine D, S. "Making business alliances work." Management Quaterly, 2008. Stengal Solutions . www.stengelsloutions.com. 2001. http://www.stengelsolutions.com/tips_4.htm (accessed January 16, 2009). Mead, R. International Management: Cross-Cultural Dimensions (Wiley-Blackwell, 2004). Thomas, D. Essentials of International Management (Sage Publications, Inc, 2001). Phatak, A. International Management: Managing in a Diverse and Dynamic Global Environment (McGraw Hill Higher Education, 2008). McFarlin, D and Sweeney, P International Management: Strategic Opportunities and Cultural Challenges (South-Western College Pub, 2005). Cullen, J and Parboteeah, K. Multinational Management (with Map) (South-Western College Pub, 2007). Hodgetts, R and Luthans, F International Management: Culture, Strategy and Behavior w/ OLC card MP (McGraw-Hill/Irwin, 2005). Knight,G and Cavusgil, T International Business: Strategy, Management, and the New Realities (Prentice Hall, 2007). Austin, J. The Collaboration Challenge: How Nonprofits and Businesses Succeed Through Strategic Alliances (Jossey-Bass, 2000). Drucker, P Management Rev Ed (Collins Business, 2008). Daft, Richard Management (South-Western College Pub, 2008). Read More