What is the difference between horizontal and vertical alliances?
Horizontal and vertical alliances are two different options of cooperation with other companies. Horizontal alliances are formed by companies operating in the same business area. A vertical alliance, on the other hand, occurs between companies operating on different levels. Therefore, the key conceptual difference between horizontal and vertical alliances is the position of companies that form the partnership. In addition to that, the two forms of alliances differ in their goals and consequences. By building a vertical alliance, the company can strengthen its distribution or supply chain, whereas a horizontal alliance can help in reducing competition. The case of Unilever presents an example of a vertical alliance. The corporation forms vertical alliances by developing a long-term partnership with preferred suppliers. This strategy helps the corporation in maintaining a high quality of products while remaining cost-effective.
Considering Unilever as a focal business, explain what is strategic alliances concept.
A strategic alliance occurs when two or more companies enter a partnership while remaining independent entities. In a strategic alliance, all parties agree on the terms of their cooperation and enter the agreement voluntarily. There are various forms of strategic alliances, depending on the needs and relationships of the parties. Diversifying strategic alliance is a type of partnership where companies share knowledge and resources to enter a new market. As evident from the case, in the 1930s, Unilever pursued this strategy to expand its share in the food market.
What mutual forbearance means?
Mutual forbearance refers to the reduction of competition between companies. Mutual forbearance typically arises when the loss due to competition would be too high for the competing parties, and thus, it is more efficient for them to reduce rivalry and avoid aggressive competitive strategies to continue existing in the same markets. Mutual forbearance is especially prominent among companies operating in various markets, as rivalry in one market could lead to retaliative actions of the competitor in a different market. The concept can be exemplified using the case of Unilever. Unilever’s principal global competitor is Procter & Gamble, a corporation that operates in similar markets. Nevertheless, as both corporations have a wide range of brands and a long history of success, the aggressive rivalry would produce more losses than gains. Thus, the two companies apply mutual forbearance strategy to co-exist in their chosen markets successfully.
Explain what is collusion and the difference between tacit collusion and explicit collusion.
Collusion is a practice of two or more companies entering a secret agreement to take actions affecting the market in which they all operate. A tacit collusion is a form of collusion that occurs naturally, without an agreement between the parties. In the case of tacit collusion, the actions of one company lead to similar acts of another company. Price leadership is an example of tacit collusion, as the leading company determines the price of a particular product, and other companies in the market set similar prices to stay on the same competitive level. Explicit collusion, on the contrary, is an agreement between two or more companies to follow a specific strategy. For instance, two large competing firms could collude to raise prices of their products simultaneously to generate higher profits while maintaining their competitive positions.
Considering the resource-based view, what is the advantage of building strategic alliances?
The resource-based view refers to a managerial practice where companies identify resources that could benefit their growth and development. From a resource-based view, strategic alliances can be used to acquire resources, such as expertise, supplies, or workers, required to advance a firm’s position in the market. As reported in the present case, Unilever has formed a strategic alliance with Accenture. While both parties remain independent entities, cooperation is beneficial to Unilever as it provides access to preferred suppliers, which are a valuable resource for the corporation.