Effective Strategic Alliance

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Introduction

Human life has two levels — individual & collective. The individual level of life is evaluated on two grounds — mindset or thought-pattern & behaviour or work-pattern. A stable existence of positive mindset and right behaviour shapes wise individuals. On the other hand, the collective aspect of life is assessed on interactive behaviour of individuals. The collective life has three aspects — social, economic, and political. An individual plays multiple roles in his collective / interactive life. The interactive roles of an individual can be grouped into two categories — natural & voluntary. A relationship between parents and children is natural, while a relationship between husband & wife or entrepreneur & worker or politician & follower is voluntary. A voluntary relation is not permanent and can be broken apart any time. A voluntary relation can take three shapes — cooperative, competitive, and independent. Ideally, a relation between husband and wife is cooperative; however, it may take some hostile shape due to certain social, economic, or psychological reasons. A link between two opposing support teams is competitive; the very purpose of the link is to defeat the other team. And, a relation among participants walking on a jogging track is independent or autonomous.

The economic aspect of life is shaped by economic agents, i.e., entrepreneurs, investors, professional, workers, & consumers. Mutual interaction of economic agents may take three shapes — competitive, cooperative, and autonomous. A voluntary cooperative attitude of economic agents shapes multiple economic alliances. The frequently prevalent cooperation in business life is occurred at strategic level, it is called strategic alliance. The less frequent phenomena of organizational cooperation are mergers / takeovers. A strategic alliance is made to create / achieve something that neither party could do/get themselves, independently.

The ultimate motive of Strategic Alliance is to enhance efficiency and effectiveness of venture. The economic rationale of strategic alliance is to reap economies of scale. An alliance avoids wasteful duplication of resources/efforts and gives rapid growth to business due to synergy benefits. A synergy benefit means that the economic addition of two institutions would create/bring more than double benefits.

Strategy

A strategy is a rational and stable move to materialize the business mission/vision with available resources. An entrepreneur makes countless strategies in his business life in order to give a fillip to his business. A strategy is based on multiple factors, i.e., innovations, customer’s tastes and needs, market structure, available human resources, capital availability, and government policies. A business cannot flourish or sustain without strategy or strategic management.

The ultimate motive of a strategy is materialized through setting certain economic goals and objectives. Goals make the system effective while objectives are necessary to improve efficiency level of a system. The twin outcomes of successful business strategy, i.e., efficiency & effectiveness maximize the benefits of a business. In addition, a strategy directs towards right start of a business venture.

A strategy can be grouped into three categories: — Individualistic, Cooperative, and Competitive. In individualistic strategy the institution is indifferent towards other institutions (e.g., 5-S, 6-Sigma). In cooperative strategy, the institution develops cooperation with other institutions; cooperation would be fruitful if it is based on some common values (e.g., Benchmarking, Strategic Alliance, and Merger). In competitive strategy, institution competes with other institutions (e.g., Media War and Price War). On different occasions, an institution may adopt different strategy; it may be a composition of any two or three (mix strategy approach) or may be separate strategy (dominant strategy approach).

Ingredients of Fruitful Strategic Alliance

It is a hard fact of economic life that most of the alliances are failed. The alliances are started generally with high-sounding words but ends in low-pitched excuses. The very basis of failure is misconception, miscommunication, micro-management, and mismanagement. Moreover, an irrational — unstable collaboration may create some mutational traits in institutional struggle, consequently the whole structure of institutions may damage. There are three ingredients for stable or fruitful strategic alliance.

Entrepreneurial Harmony — A conceptual understanding and sincere/honest/just cooperation between the concerned entrepreneurs is vital for fruitful strategic alliance. A valueless approach towards an alliance gives rapid but skewed growth that is shattered ultimately. Moreover, a value driven alliance is convergent to any external — internal shock or threat.

Institutional Harmony — A positive correlation of success factors / performance indicators of the concerned institutions is indispensable for fruitful alliance. For example, the growth-pattern of software house and management consultancy is mutually reinforcing, an institutional harmony can be developed between these two entities. Institutional harmony may develop at conceptual level or structural level or operational level. Institutional harmony is achieved slowly, gradually and painfully.

Natural Harmony — It is Natural Law that a right effort produces results slowly, while a wrong effort produces results quickly. Bad human nature chase quick results but these are not deep-rooted or sustainable. An alliance based on Natural Rules / Scientific Methods would be deep-rooted, sustainable, and fruitful. Quality Management is based on scientific rules. It shapes / develops natural harmony among individuals / institutions.

It is noteworthy, a cooperative right effort is fruitful than individual right effort but cooperative wrong effort is more disastrous as compared to individual wrong effort.

Critical Areas of Strategic Alliance

A strategic alliance is assessed generally on two grounds — rationality & morality. Rationality is necessary condition for fruitful alliance but it is not sufficient, morality towards sharing is also essential for stable alliance. An unjust attitude or approach is the critical hurdle that may arise in the future course of time and one or both parties may be enslaved of greedy/lusty behavior. Anyhow, in strategic alliance, we judge multiple things to evaluate strength/weakness of institutions. The vital concerns are: Economic Rationale Of Alliance, Financial Analysis, Ownership And Control, Legal Bottlenecks, Marketing & Operational Issues, Structural Constraints, Areas Of Possible Risks/Uncertainties, Areas Of Conflicts/Cooperation, Insurance Coverage, Defining Some Conciliatory Body To Avoid Possible Conflicts, and Alliance Termination.

Another critical area of strategic alliance is its social dimension. A strategic alliance with social dimension is much fruitful and beneficial to concerned parties. For example, a strategic alliance of economic and social entrepreneur may create multiple benefits for both. It is noteworthy that social values, economic viability, and profitability are mutually reinforcing but it takes a bit longer time for maturity as compare to a valueless and non-social strategic business alliance.



Muhammad Ilyas Qadri