Introduction
Business organizations have recently shown inclination towards extending their operations onto the global scene. This internationalization of business organizations develop into the current globalization. Globalization is has been regarded simply as the ‘spread and connectedness of production, communication and technologies across the world’ (Smith & Doyle, 2002). As the business organizations extend their operations across borders, there is exchange of skills and techniques. The modern means of communication has enhanced coordination of these global business operations.
There has been a significant shift from the nation states to multinational corporations (Smith and Doyle, 2002). A number of ways exist through which business organizations can globalize their operations. One common method is through global alliances that involve different large organizations from different parts of the world linking together in research and development. Global strategic alliance involves business organizations operating together in an agreement that is more than business-to-business dealings but less than a complete merger of the organizations (Elmuti & Kathawala, 2001, p.205).
Unlike globalization through foreign direct investments, these alliances enables organizations to access global knowledge and the innovation systems that are specific to a give region in the world (Vasudeva & Almeida, N.d, p.7). The alliance mainly promotes inter-learning between firms.
Reasons for failures in many global alliances
The strategic global alliances are made by organizations in order to improve their operations and penetrations into the global market. Researches have indicated that a greater percentage of the alliances are formed to enhance joint marketing and product promotions ((Elmuti & Kathawala, 2001, p.206). If a successful strategy is adopted for the alliances, then the management of the companies can connect the alliance to their overall objectives and goals, maximize the outputs of the individual partners, and improve on the overall portfolio of the alliance (Hollerbach & Morgan, 2009).
However, developing such a strategy is often difficult and intended benefits of such global alliances are not obvious due to certain factors. As a result, many global alliances often fail. It has been observed that half of the failures in alliances result from poor management strategies (Elmuti & Kathawala, 2001, p.211). Some of the managers of the organizations that have engaged in a strategic global alliance may retreat after the alliance has been formed (Hollerbach & Morgan, 2009). The companies get into an alliance but the management fails to establish team that monitors the alliance to its success. Similarly, the political, cultural, demographic differences across different countries can be a distracting factor in developing a common objective for an alliance.
The other failure for the alliances is caused by different organizational structures, management systems as well as the different business goals and objectives. It is often difficult to communicate to the different stakeholders of an alliance the quality and benefits of such an alliance (Hollerbach & Morgan, 2009). It may be difficult o develop a common objective or goal that suits all the stakeholders and all the partners in the alliance.
The other important factor that may hinder success of global alliances is inclusion of several partners. As the number of partners in an alliance increases, the differences in political, economic, and social factors also increase impeding the harmonization of the operations in the alliance. Besides, alliances can fail due to unwillingness of some of the partners in the alliance to share their resources with the other partners. The alliances are formed to facilitate knowledge exchange so that one company can learn the marketing systems as well as technologies that are applicable in some other areas. The alliance becomes ineffective if some of the partners do not which to share their knowledge resources with the others.
The appropriate steps to manage these issues
Dealing with the alliance issues simply requires proper management of the alliance. An important step to ensuring the success is to manage the alliance as a portfolio. Through this, the management of a business organization can ensure that the different alliances provide complementary efforts to the company’s strengths so that all the members of the alliance are beneficiaries (Hollerbach & Morgan, 2009).
It is also important to reduce the number of individuals in the alliance. It has been pointed out that political, economic, social, cultural differences among regions of the world and the possible differences in the structure and management systems in organization contribute to such failures. The management of organizations that need to go international through alliances should examine and evaluate the resources of organization to ensure that they ally only with the organizations that can benefit them. In this regard, some of alliances will be of greater value to an organization than the others are.
Knowledgeable and effective leadership will help identify the partners with these great values to the company and develop a proper alliance portfolio (Hollerbach & Morgan, 2009). Besides, the firms should consider the willingness of these partners to share their resources; otherwise, such an alliance would not be beneficial. Some companies may have useful resources and yet they are not willing to share with their partners in the alliance.
In case a company has to involve several partners in an alliance, probably due to their potential and willingness to share their resources, the management should exhibit strong leadership ability (Hollerbach & Morgan, 2009). Conflicts are likely to arise in such alliances and only effective leadership can promote a spirit of teamwork to resolve such issues. The management of the different partner companies has to develop goals that are aligned towards the needs of all the partners. Similarly, there should be a mechanism for measuring the level of achievement of the objectives and goals of the alliance. This can be achieved through monitoring and evaluation of the performance right from the implementation process through some metric (Hollerbach & Morgan, 2009).
Some example
One of the alliances that have failed is that between KLM and the Northwest Airlines. The alliance was faced with constant clashes; being the European versus the American way of doing business (Elmuti & Kathawala, 2001, p.211). The partner organizations had philosophical differences that were partly derived from the cultural differences. They also had conflicting business management policies and objectives. While KLM believes in a discreet and long-term investment and rejects high leverages, the Northwest Airlines believes short-term deals and high leverages can boost stocks fast under good operational strategies (Elmuti & Kathawala, 2001, p.211).
In order to succeed in an alliance, the leadership of either of the organizations (KLM or Northwest Airlines) should show commitment to the alliance. They should form partnerships with companies that have similar management philosophies and operational strategies. For instance, KLM should look for an organization that believes in long-term investment. The other differences can be minimized by developing an alliance agreement that outlines the differences and how they will be accounted for. As in this alliance, KLM should not go for multiple alliances, as it would aggravate the differences. The companies have to develop rules that govern the alliance and state the intended objectives. They then establish an alliance group to manage the alliance and ensure that the objectives are met as intended.
References
Hollerbach, K., & Morgan, S. (2009). Root Causes of Alliance Failure (II) – Alliance Management. Web.
Elmuti, D., & Kathawala, Y. (2001). An overview of strategic alliances. Management decision, 39(3); 205-217. Web.
Smith, M. K., & Doyle, M. (2002). Globalization theencyclopedia of informal education. Web.
Vasudeva, G., & Almeida, P. (N.d). Globalization through Alliances: Portfolio Configuration and Knowledge Positioning. Web.