Business-level,Corporate-level, and International Strategies
Business-level,Corporate-level, and International Strategies
Globalizationis a process of interaction between people of different nations,companies and governments that is facilitated by informationtechnology and driven by investment and international trade. Advancement in the transport and communication sectors coupled withthe advent of the internet and mobile phones has spurredinterdependence of cultural and economic activities.
Internationalstrategic alliances are cooperative relationships between a firm andanother which enhance the effectiveness of their competitivestrategies by exchanging resources that will mutually benefit both ofthem. Such resources include technology and skills. However, theparticipatory firms remain independent even after the alliance theyshare the benefits and the control have specific areas where theycontribute on a long-term basis in a key strategic area.
Cooperativestrategies are business agreements whereby firms combine some oftheir resources and capabilities in order to create a competitiveadvantage. These firms try to realize the objectives by cooperatingwith other firms through partnerships, joint ventures and strategicalliances as opposed to competing among themselves.
Liabilityof foreignness (LOF) is a concept employed in an internationalbusiness that enables firms in foreign markets to overcome social andeconomic costs. It is the cost of doing business in a foreign market.On the other hand, originalism is an expression of a common purposeand a sense of identity that is combined with the formation andimplementation of institutions that promote specific identity andhave collective action within a certain geographical area. It is oneof the three arms of the international commercial system alongsideunilateralism and multilateralism. Liability of foreignness is afactor that promotes strategic alliances among foreign firms in orderto reduce their collective cost of operation. On the flipside,regionalism is an element that facilitates mutual and beneficialcommercial relations among firms in a specific region, which seeks toreduce or eliminate competition posed by other local firms or foreignfirms.
Cooperativestrategies, as stated earlier, are business agreements whereby firmscombine some of their resources and capabilities in order to create acompetitive advantage. These firms try to realize the objectives bycooperating with other firms through partnerships, joint ventures andstrategic alliances as opposed to competing among themselves. Acooperative strategy offers a very important advantage for firms thathave insufficiencies in particular competencies, resources orknowledge. This enables them to have links to other companies, whichhave the complementary resources and skills or assets for mutualbenefit. It also provides an easier access to new markets andopportunities for learning and synergy. They are very important inpromoting international expansion.
WhyStrategic Alliances Fail
Lackof good governance has been listed as one of the primary reasons whystrategic alliances fail. According to Whitler (2014, n.p) only 33%of strategic partnerships have a formal strategy. While strategicalliances assume collective controlling capacity among the firmsinvolved, there has to be a leader responsible for developing thestructure measurement systems and processes of how the firms willapproach, assess, form, develop and manage the partnership. Without aleader, there is no strategic plan and thus mismanagement ofresources.
Lackof trust and the reluctance to share ideas and support each other isanother primary reason. This might be due to the fact that thesefirms in the strategic partnerships are strangers to each other.Alternatively, there might be a previous negative history related toone of the firms that make the other firms hesitant to trust them.
Lackof resources is another primary reason. A strategic alliance mighthave great ideas, but the lack of the required expertise, time orfunds may limit their dreams. Additionally, inability to prioritizeprojects may lead to misuse of resources.
Thefour fundamental issues that affect trust between partners are thelack of a mutual connection, previous negative history, unclearcommunication and previous individual differences among firms. Theseissues allow the acquisition to be more favorable than strategicalliances because, after an acquisition, the parent company runs on asingle strategy, common goals, common leadership and with nomistrust.
Businesslevel strategies involve actions that are taken in order to providevalue to the customers. This enables the partnering firms to gain acompetitive advantage by exploiting important competencies in aparticular service or product market. On the other hand, cooperatelevel strategies involve strategic decisions made by a business thataffect the whole organization. Acquisitions, financial performance,allocations of resources, mergers and human resource management arecore parts of corporate level strategies (Bradley, 2015, n.p).
Cooperativestrategies are best developed when firms have limited resources,cannot afford to waste the resources on trying new commodities thatmay be unprofitable and when eliminating unhealthy competition.However, when a company is trying to avoid potential changes incustomer preferences or their commodities being rendered obsoletebecause of new technology, cooperative strategies are a threat.
StrategicManagement of Cooperative Strategies
Thisinvolves the provision of an overall direction to the enterprise andspecifying the partnership’s objectives. Also important aredeveloping policies and strategic plans aimed at achieving theseobjectives and careful allocation of resources for implementation ofthe plans.
Typesof Strategic Alliances
Horizontal strategic alliances: They are formed by firms that are in the same business area. Their aim is to improve their market position and power in comparison to their competitors. This type of alliance is appropriate for Research & Development collaborations of firms in high-tech markets.
Vertical strategic alliances: Collaboration between a firm and its lower ranked partner in the supply chain, i.e., between a company and its distributors. It intensifies their relationships and enlarges their network in order to offer lower prices. This partnership is appropriate when the two firms need to improve their market coverage when dealing with competitors.
Joint ventures: These are two companies merging to form one new company that is a separate legal entity. This is aimed at improving their resource and capital base. This form of partnership is appropriate when both firms are struggling in terms of capital base.
Bradley.,J. (2015). Typesof Corporate Level Strategy.Demand Media.
Whitler.,A., K. (2014). WhyStrategic Alliances Fail:New CMO Council Report. Forbes.