Forming Strategic Alliance Essay Example

Globalization has generated a polarization of wealth and power by concentrating it in the highly developed countries, who are the main beneficiaries, to the detriment of the economic capacity and development possibilities of the countries in the world. The fundamental problem of small companies, which are immersed in the process of globalization, is not in itself its size but its isolation. That is why public policies and action programs that link them to the new business environment are necessary. The Micro, Small and Medium Enterprises in Saudi Arabia have great importance because they contribute highly to the Gross Domestic Product of a state. Despite this great importance, with the change in the orientation of the economy towards globalization, SMEs face macro-economic problems, in their creation and in their operation, which makes them uncompetitive and puts their own existence at risk. This situation imposes the need to adopt new forms of business integration to consolidate the strengths and eliminate the weaknesses of the smaller business organization (Hamel, 1991). These forms of integration are strategic alliances.

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Forming an Alliance with European business organizations will play a big role in transforming the economic face of the organization. Very often these alliances occur between large companies, with which small and medium-sized companies are displaced from the market, or when the alliance is made between a large company and small companies, usually the small one is subordinated to the large company, with which no significant benefit is achieved, in addition to the fact that small businesses lose their freedom in decision-making, because their bargaining power is minimal. A current trend in business integration for Small and Medium Enterprises (SMEs) is based on the concept of a network that mostly occurs in SMEs with distinctive competences and access more favorable to certain markets (Zineldin and Bredenlow, 2003). Promoting business alliances between Asia and Europe will yield mutual benefit as the resources in the two blocks will be combined, encouraging healthy business competition.

The formation and sustaining of strategic alliances is a delicate process that it is necessary to allocate effort, time and varied resources (Eisenhardt and Schoonhoven, 1996). Despite their advantages, alliances bring with them challenges that must be addressed: rivalries, disagreements regarding the objectives, competition for resources, loss of autonomy, disparities between organizations of different size and specific weight, difficulties in taking and / or implementing decisions, barriers in communication, duplication of tasks.

One major potential challenge of strategic alliance is the cultural and language barrier. The cultural problems include ego, language and varying attitude towards the business. Language barriers can sometimes cause delay and frustrations (Zineldin and Bredenlow, 2003). Job definitions in Saudi Arabia and Europe are totally different and this may bring communication problems. Poor communication lowers the productivity of any given business organizations.

In case of uneven distribution of the decision-making powers may act as a big problem in realizing the objectives of the alliance. The weaker alliance in this case is forced to act in line with the decisions of the stronger party. This may lower the self-esteem lowering productivity. The success of any organizational strategic alliances depends on specialized decision-making techniques.

The starting point should be the reflection on the vision and the mission of the organization, that is, about its identity and its role in the society it integrates, its forms of interaction with other actors, and the way in which the formation of an alliance will have an impact on its objectives, vision and mission. Although alliances tend to evolve and change shape over time, it is convenient to start the process with a clear idea of what is the final format you want to obtain. In other words, each organization must start by reviewing its own identity and defining the strategic value that the collaborative alliances are in their case.

First, it must be examined whether the alliance complied with the objectives set at the time of its formation, or perhaps made significant progress in that direction. For it is necessary that said objectives were clearly explained from the foundational moment, and that they were accompanied by a series of expected results in the short, medium and long term, as well as indicators measurable results. Otherwise, it is difficult if not impossible to know if the objectives were achieved, or which is more frequent, to what extent progress was made towards objectives and how much is missing to achieve them, or what objectives they were reached and which were not.

Second, it is necessary to assess whether the impact on society is greater than that achieved the members of the alliance have continued your activities separately. Thus, for example, it must be established to what extent the alliance managed to generate synergies, expand scales and reduce costs.

Third, the effects of the alliance must be observed about the organizations that make it up: What have you got from the collaboration? Do they emerge from the experience more strengthened or weakened as organizations? Expected results must therefore be a guide in sound decision making. In this sense, it is important to consider whether, for example, they could continue to provide the same services to their users while extending themselves to new areas of action, acquired technical capabilities that they previously lacked, they achieved new contacts and access to financing (El Mallakh, 2015).

The selection of potential allies is essential. If the common denominator of agreements between partners is very low, the alliance will hardly work. Of equal way, it will be very difficult to make it work if the cultures organizational or partner work styles are not compatible. If the suitability of its prospective partners is not carefully consider, an organization can be found associated with public or private entities of questionable reputation, which will have important costs for her in terms of image and credibility.

All this must be taken into account; however, It must not be forgotten that the formation of an alliance is based on similarity (of goals, visions, missions, objectives) and on complementarities (of resources, abilities, abilities) rather than on identity. In others words, if the prospective partners were identical they would not seek the alliance but the fusion.

Admission to an alliance implies the realization of a good previous analysis of its own strengths and weaknesses and the aliens'. Thus, each organization must estimate its installed capacities and the resources it can contribute to a alliance, as well as the strengths and resources that can come from its potential partners, and the benefits that each of them can derive from belonging to the alliance. The time it takes and the staffs dedicated to the alliance are important resources to consider in the cost-benefit analysis. For many organizations, and in particular for small and low-income organizations, joining an alliance can mean an important loss of autonomy; hence the importance of weighing

The recognition of the added value of the collaborative alliance supposes, on the one hand, the presence of leadership convinced of the virtues of the alliance; for the other involves progressive processes of involvement and appropriation of the alliance by its members. A phenomenon that can lead to competitive frictions and reduce the added value of the alliance is the overlapping tasks developed by this and by the member organizations (Soekijad and Andriessen, 2003). Hence the importance of delimit the activities of the alliance in a productive way, avoiding duplications.

It is important that the expectations deposited in the alliance be realistic; however, the balance between contributions and results, equity and reciprocity are also fundamental values. Thus, if from the perspective of its members the alliance does not provide enough added values, or if some of them perceive that the benefits are distributed unequally, it's time to introduce modifications.

Independent of its resources and relative sizes, the business organizations should think of each other as peers. This form of relationship is facilitated by the development of spaces and mechanisms for exchange and learning reciprocal. Barriers to communication (generated, for example, by disparities in access to digital technologies) can lead to exclusions regarding the decision making: hence the importance of finding the way to raise all partners above a minimum connection threshold that allows them to participate actively of the management of the alliance.

Conclusion

With an efficient organizational alliance with a European business organization, companies will maximize their output improving the country's gross domestic product. With vision 2030, Saudi Arabia aims at reducing dependence on oil by diversifying the economy through developing public service sector (El Mallakh, 2015). Through forming strategic alliances, business organizations will be able to engage in new foreign strategies improving all corners of the economy.

References

Kale, P., Singh, H., & Perlmutter, H. (2000). Learning and protection of proprietary assets in strategic alliances: Building relational capital. Strategic management journal, 21(3), 217-237.

Hamel, G. (1991). Competition for competence and interpartner learning within international strategic alliances. Strategic management journal, 12(S1), 83-103.

Eisenhardt, K. M., & Schoonhoven, C. B. (1996). Resource-based view of strategic alliance formation: Strategic and social effects in entrepreneurial firms. organization Science, 7(2), 136-150.

Zineldin, M., & Bredenlow, T. (2003). Strategic alliance: synergies and challenges: A case of strategic outsourcing relationship "SOUR". International Journal of Physical Distribution & Logistics Management, 33(5), 449-464.

Eisenhardt, K. M., & Schoonhoven, C. B. (1996). Resource-based view of strategic alliance formation: Strategic and social effects in entrepreneurial firms. organization Science, 7(2), 136-150.

El Mallakh, R. (2015). Saudi Arabia: Rush to Development (RLE Economy of Middle East): Profile of an energy economy and investment. Routledge.

Soekijad, M., & Andriessen, E. (2003). Conditions for knowledge sharing in competitive alliances. European Management Journal, 21(5), 578-587.

Leseure, M., Shaw, N., & Chapman, G. (2001). Performance measurement in organisational networks: an exploratory case study. International Journal of Business Performance Management, 3(1), 30-46.