The Concept of the Strategic Alliance - Coursework Example

STRATEGIC ALLIANCES” by Student’s Name Code + Course Name Professor University City/State Date “Strategic Alliances” Introduction Today, globalization and emerging technologies in the business environment have resulted in many economical, social, political, cultural, and policy challenges that organizations have to deal with. These issues influence the demand for increased efficiency, improved quality, as well as, lower cost. As a result, attaining sustainable competitive advantage in the business environment has become a problem (Al Khattab & Talal 2012, p.222). For sure, any one organization, by itself, does not possess adequate resources and skills to compete effectively. Strategic alliances provide an alternative to such firms. Strategic alliances help an organization to join forces with other organizations in order to attain quality management that would otherwise be beyond the current organization capacity. Currently, businesses all over the globe are entering into alliances (Vikas & Lather 2014, p.4). For instance, Starbucks hotel has partnered with Barnes and Nobles, PepsiCo, and United Airline among other and these alliances have sold its brand in different nations. Strategic alliances are beyond simple tools, which are helpful in attaining collective goals directly profiting all collaborators. Today, alliances have emerged as key instruments in organizations, especially in the hospitality industry that are enhancing and maintaining competitiveness in the industry (Czaj 2015, par.2). This paper studies an international hospitality strategic alliance and ways in which the strategic alliance has assisted in creating better brand recognition on different continents. The Concept of the Strategic Alliance In the business environment, the concept of the strategic alliance is defined in a different perspective. “Strategic alliance refers to the different kinds of partnership arrangements between two or more firms that follow clear strategic joint goals with different levels of possible incorporation among the members” (Elmuti & Kathawala 2001, p.23). On the other hand, Gomer-Casseres (2003 p.329) defined “strategic alliance as any form of governance structure to control an incomplete agreement between distinct organizations and in which every partner has limited control”. In addition, the author adds that the “strategic partnership is a process of sharing control and governance of future decision and negotiations between the organizations”. In view of this definition, “strategic alliances can rather be defined as continuing, inter-firm, cooperative agreements that involve flow and relationships”. These linkages utilize resources or/ and governance structures from independent firms for the mutual achievement of individual objectives connected to the business mission of every sponsoring organization. Strategic alliances “involve two or more partners, and they range from equity alliances to non-equity ones”. Both equity and non-equity alliance constitutes two modes of partnership that defines the nature of arrangements that are either formal or informal (Webster & Chathoth 2008, p.503). In the hospitality industry, informal alliances are very common. They are considered as the most effective ways of attaining the twin goals of escalating firm`s capacity to satisfy, serve and reach consumers whereas concurrently striving to minimize cost (Vikas & Lather 2014, p.4). Informal collaborations are applicable when; 1) there is work uncertainty that exist partnering companies. 2). There is a need for flexibility to sustain success of the partnership. 3) There are no separate boundaries between partnering companies (Webster & Chathoth 2008, p.503). Todeva and Knoke (2005, p.3) continues to stress that strategic alliances build interdependence between separate economic units. They convey new benefits to the partners in the form of intangible assetsand compel them to make lasting support to their collaboration. The term strategic alliances, partnership, joint venture and relationships all define the union or coming together of two or more organizations into a connection that has synergistic value (Vikas & Lather 2014, p.4). However, Wakeam (2003, p.1) states that not all alliances are strategic some are conventional. For an alliance to be truly strategic, it has to meet one of these five criteria (Aurifeille &Tisdell, 2007, p. 180). They are: 1) critical to the achievement of a major business aims or goals; - although almost all alliances are formed to generate revenue in a cost effective manner, not all alliances that generate revenue or reduces cost are truly strategic. Nevertheless, a true strategic alliance has an underlying organizational goal like attaining an industry – leading cost structure and has a great bearing on the opportunities for attaining revenue growth objectives. 2) Play a critical role in the development or protection of organization's major competencies and competitive advantage. 3) Hinders a competitive threat;even when an alliance falls short of developing a competitive advantage it can be strategic. This happens when a firm brings competitive equality to a secondary segment of a market it competes when the absence of equity develops a competitive disadvantage in the allied primary market of that segment. 4) By building or protecting the future strategic options of the firm. 5). When analliance is fueled by the objective of mitigating major risk. Nevertheless the nature of the risk and its probable effects on the business goals are the ones that define whether that alliance is truly strategic. According to Wakeam (2003, p.1), the critical issue is firm to understand which of these criteria, the other partner views to be strategic. If the either of the party misinterpret the other party's anticipation, that alliance is likely to fall apart. An example of a Successful Strategic Alliance in the Hospitality Industry and its impact on Brand Recognition Starbuck limited is an example of an organization that has formed different alliances that are successful. In essence, Star Buck is an excellent example of a firm in the hospitality industry that has efficaciously embraced a differentiation strategy focus through brand alliances (Lingley 2009, p.3). The core objective of Starbuck is to roast and sell quality coffee with sand wishes and other related accessories and equipment whereas maintaining quality and customer experience (Enz 2010, p.569). Starbucks is currently employing porter`s differentiation focus strategy with an objective of capitalizing on a brand`s equity. This strategy offers products or services to a particular market segment and differentiates it from competition in particular areas such that the value of the firm is marked as high-cost competitor. Starbucks use this strategy to market and advertize its products. As a leader in both product quality and industry segment, it does not aggressively market its brand through traditional means. Nevertheless, it focuses entirely on the high-level marketing, word-of-mouth branding, and strategic alliances (Webster & Chathoth 2008, p.512). Starbucks has formed several alliances with organizations and social groups across the world. These alliances have resulted in broadening exposure, enriched the brand`s name and reputation and exposing the company product often to consumers wherever they are (Lingley 2009, p.4). Some of successful collaboration includes; in 1993, Starbucks partnered with Barnes and Noble bookstore to offer in-house coffee shop and in this partnership they all benefited (Czaj 2015, par.2). In 1994, Starbucks a developed a new brand of coffee called Frappuccino which draw many non-coffee drinkers into the coffee store. Due to its popularity, Starbuck formed a joint venture called North America coffee partnership with PepsiCo to sell and distribute the bottled version to grocery stores. Such collaborations have made it possible to distribute and sell coffee to Nordstrom, Barnes & Noble, at the cruise line in Holland America and at several hotel chains (Enz 2010, p.569). A strategic alliance with United Airlines has brought more achievements their coffee is offered on flights with Starbuck logo on the cups. An alliance with Kraft foods in 1998 has resulted in Starbucks coffee being marketed in more than twenty thousand in grocery stores in the U.S. Furthermore, it has partnered with Nestle Dreyer and Beam Global Spirit to market its gourmet ice cream and coffee flavored liquor. The company has as well collaborated with NAACP in 2006 to advance its goals and the NAACP's aims of social and economic justice. Finally, it is apparent that these alliances have a positive effect on brand image. For instance, these alliances can;1) activate the transfer of clientele’s impacts from a high-quality brand to a low quality band. 2) Enhance partner’s reputation and quality management. 3) affect consumers positively in terms of quality perception and contribute to the establishment of favorable attitudes towards brand integration (Webster & Chathoth 2008, p.512). Conclusion Today, achieving sustainable competitive advantage in the business environment has become a challenge. Since no firm can possess adequate resources and skills by itself and compete effectively, firms are join forces instrategic alliances.Strategic alliances refer to where two or more firms involves in relationships thatutilizes resources from independent firms for the mutual achievement of individual objectives connected to the business mission of every sponsoring organization. There are two types of Strategic Alliance equity and non-equity alliances. In hospitality industry especially hotels, strategic alliances mainly have taken the non-equity form such as franchise arrangements. The franchise arrangementinvolves sharing both intangible and tangible assets. These strategic has affected the brand image due to their broadening exposure, which enriched the brand`s name and reputation through brand recognition as in the case of Starbuck hotel above.Through Strategic collaboration Starbucks has created brand image across the globe, and its brand remain the most recognized and cherished worldwide.However, it is important for a firm tokeep watch over the industry and their competitor’s strategies as relying solely on building the brand awareness can jeopardize the future. Reference List Al Khattab, S &Talal, H 2012, ‘Marketing strategic alliances: The hotel sector in Jordan’, International Journal of Bu siness and Management , vol. 7, no.9, pp. 222-233. Aurifeille, J.-M, Svizzero, S & Tisdell, CA 2007, Globalization and partnerships: Features of business alliances and international cooperation, Nova Science Publishers, New York. Enz, CA 2010, Hospitality strategic management: Concepts and cases, John Wiley & Sons, Hoboken, New Jersey Gomes-Casseres, B 2003, ‘Competitive advantage in Alliance Constellations’, Strategic Organization, vol. 1, no.3, pp. 327-335 Elmuti, D & Kathawala, Y 2001, ‘An overview of strategic alliances’, Management Decision, vol. 39, no. 3, pp. 205-18 Je' Czaja 2015, Examples of successful strategic alliances, viewed 20 March 2015 http://smallbusiness.chron.com/examples-successful-strategic-alliances-13859.html Lingley, RJ 2009, ‘Marketing strategy and alliances - Analysis of Starbucks Corporation’, School of Business at Digital Liberty University, vol. 10, pp. 1-10. Vikas, S & Lather, AS 2014, A study of various alliances in travel and tourism -developing a strategic partnership model for success, viewed 20 March 2015 Wakeam, J 2003, ‘The five factors of a strategic alliance’, .IVEY Business Journal - Improving Practice of Management, pp. 2-5. Webster, K & Chathoth, P. K 2008, Chapter 18- Strategic Alliances, viewed 20 March 2015 Read More