Corporate Venturing or Market Entry - Assignment Example

Name Course Lecturer Date HP-Cisco Alliance Introduction The numbers of companies that are entering into alliances for purposes of corporate venturing or market entry or both have increased significantly in the past decade. There are three reasons that have been cited for these alliances namely; market access, alliance partner’s complementary resources and technology convergence (Casciaro and Darwall). Cisco Systems and HP fought over the technology business space for quite a while before they officially dissolved their 1997 partnership in February 2010. But the two giants in the technology business recently came up with a plan to put their differences aside and forge ahead with the earlier alliance for the sake of the data center in order to jointly release a product that expands the Cisco incorporated Fabric into “Blade system of the HP c-Class”. Considering the kind of relationship that has existed between the two companies since they dissolved their partnership in February 2010, their recent merger to offer a joint solution may have come as a surprise to many but according to analysts, the two companies must have recognized that they have a lot of mutual consumers including those that use Cisco networking products together with HP servers. This customer-based end of the views this paper will use to analyze the merger between Cisco Systems and HP Challenges facing Jim Heal and Mike Thomas in managing the alliance Once Jim and Mike had formed the HP-Cisco Alliance, they had a duty to ensure that it worked and one of the essential aspects of strategic alliance formation is commitment. Jim and Mike had to go through the initial period of uncertainty before the alliance could make its first delivery. HP had a challenge of outlining the true nature of the motives of Cisco, its capabilities, processes and culture and Cisco systems likewise. They therefore had a challenge of making necessary adjustments and these adjustments are what would later determine whether the alliance was going to survive or not. However, during this stage, both companies did not revisit the strategic decision and had to wait until the first deliverable. The challenge faced in this is the uncertainty about the capabilities of the other partner, considering that forming and bringing an alliance to fruition takes a lot of time and resources (Casciaro and Darwall). At this point Jim and Mike were faced with the challenge of making the alliance succeed. Secondly, Jim and Mike also had the issue of Culture to deal with. Firms can be despondent, average or even good in the design and execution of an alliance strategy. Some firms are good at customer service while other are good at manufacturing and others in technology design and yet other in organizational strategies. Cisco is a master acquirer while HP is a master in using partnerships to maximize external commercial inventions. The culture of the individual companies (sometimes referred to as “impedance mismatch”) posed a great challenge for the alliance (Casciaro and Darwall). Thirdly, when forming the alliance in question, there was the “trust factor” to deal with. It is the case in most alliances that, the motivation of the partner in entering the alliance may not be clear to the other partner all the time and sometimes even to themselves and the HP-Cisco alliance was no exception. Jim and Mike had the challenge of making those motives clear and clearing any doubt that they had both with each other and with themselves and to increase clarity and quality of partner motives hence engaging in trust, and making them widely known to the alliance personnel. The challenge of dealing with differences in motives if at all they occurred was a tough one (Casciaro and Darwall) . Fourthly, Jim and Mike were faced with challenge of responsibility balance between the two companies involved in the partnership. They had to ensure that the best way applicable was used in balancing responsibilities concerning the development projects. The challenge that often arises in the balancing of responsibilities is that the activities of the alliance may not be in tandem with those of the individual companies and this poses a further challenge (Casciaro and Darwall). For instance, Cisco Systems took pride in its rapid growth having been established only sixteen year before the alliance and attained number three among technology companies. On the other hand HP had an “Old school” garage way of doing things which in most cases means that it believed in a systematic and slow but sure ways of running its business (Casciaro and Darwall). The challenge in this is that difficulties may emerge in trying to bring both companies to be at par with the way they run the alliance considering their different cultures. Both Cisco and HP had leveraged their fiscal capital, their technological know-how in platforms, their large sales and service forces and hardware and software to enable them to be attractive alliance partners but their strategies and the outcomes of these separate strategies are different and were also likely to pose some challenges in the day-to-day running of the alliance (Casciaro and Darwall). The fifth challenge that Jim and Mike Thomas had as CEOs of the companies in this alliance was the daunting task of bringing their sales teams together to engage in the activities of the alliance considering that both companies had their individual sales backgrounds and ways of dealing with customers which is a core value in the day to day running of an alliance and any business for that matter (Casciaro and Darwall). The standards these two companies were definitely not compatible with each other and therefore there was a need to ensure that both sales teams understood why they had to engage in the activities that involved those of the other company in order to bring some sort of unity. The challenge that was involved in this is that the sales teams in most cases involving alliances do not understand or even agree with why they had to be taking part in the activities of the other company. The Cisco HP alliance was strategic which means firstly that it was intended at generating an access prospect for the individual firms to enter into a new level of industry. (Casciaro and Darwall). Secondly, it means that the alliance was aimed at possible considerable expansion and/or assortment and thirdly it means that the alliance was focused on the continued existence of the chief businesses which are also strategic. The alliance is also operational to the extent that it is intended at filling up a current line of product as well as filling a technological fissure and opening new markets (Casciaro and Darwall). All these factors posed a great challenge for Jim and Mike in the day to day running of the alliance. Challenges of talent drain and other restrictions were likely to occur. Russell and Heal’s bases of power and the influence tactics available to them. (Organizational or operational tools available to influence desired outcomes) Culture - matching the cultures of organization has been established as a means to add to the likelihood of an alliance becoming victorious. In the case of Russell and Heal, there was no chance that the cultures of the individual organizations would change by any reasonable magnitude during the initial alliance formation process or during the alliance product development project for example or any other time for that matter, but the understanding of Russell and Heal are capable of changing a great deal. If the managers of an alliance were able to consider the fact that there were any major disparities of culture amongst them, they were in a position to take action to moderate their unconstructive effects (Casciaro and Darwall). The evaluation of executive culture can be done by means of an organizational culture metric which has developed quite a great deal over the years through research although the scales available for it are not very perceptive for the management of alliances. There are 12 cultural styles identified by researchers which revolve around 3 executive matters distinctly namely; the manner in which people within organizations find fulfillment (actualization, achievement and humanly supportive relationships), how they deal with other people (evasion, conventional, reliant and approval), as well as how they carry out tasks (perfectionist, competitive, authority and opposition). The above are just examples of factors that could have helped both Russel and Heal in understanding the culture of each other company’s culture, among others. Secondly, Russel and Heal needed to build a dedicated strategic functioning unit with its own personnel and capital. The unit would be in charge of coordinating all activities related to the alliance within both organizations and be in charge of the process of organizing procedures and structure, to coach, distribute and influence any past alliance administrative experiences and skills through the firms (Casciaro and Darwall). Research shows that enterprises that have a dedicated function are able to achieve 25% more extensive success pace when it comes to alliances as opposed to those with no such utility. Research has also shown that enterprises with a dedicated function generate close to four times of the marketplace capital on every occasion they announce that they are forming a new alliance. An efficient dedicated function in a strategic alliance plays four major roles: it advances familiarity of administration efforts, increases peripheral visibility, provides interior harmonization and eliminates problems of liability and intrusion. A dedicated alliance function will help the CEOs of the Cisco-HP alliance by creating value in the following ways: -Improve knowledge management since it plays the role of a central point for leveraging lessons and learning as well as feedback in an ongoing alliance. It also establishes a sequence of routine processes that can be used to articulate codify document and knowledge about the alliance existence phase as well as its important phases. -Raising exterior Visibility- “a dedicated alliance function” will keep the market appraised on the new alliance and the successful events that are ongoing in the alliance. exterior visibility will improve the standing of the company in the market place and sustain the opinion that the alliance is accumulating and distributing some worth. The construction of “a dedicated alliance function” also sends a pointer to the marketplace and also to possible associates that the corporation is trustworthy both to its alliances and to organization of their alliances effectively. Providing Internal Coordination - One of the main reasons why alliances fail is because of the lack of ability by one or both partners to muster inner capital to sustain the enterprise. An alliance executive without “a dedicated function” experience a complicated time in sustaining the alliance inventiveness, for the reason that mostly it is the variety of capital and talent that can do that and in the case of Cisco and HP skills are very important since the alliance is a high profile one and probably has the right resources in place. -Facilitating Intervention and Accountability - Research shows that only about 51% of firms that establish alliances had some form of prescribed measures for the purposes of evaluating the performance of the alliance. Out of those, its only around 20% which had the impression that their established metrics were actually the suitable to use. Studies also show that 76% of organizations with “a dedicated alliance function” had put into practice prescribed alliance metrics. In dissimilarity, only about 30% of the organizations without “a dedicated function” had done so. This is a clear indication that every alliance needs a clear dedicated function unit for the functioning of the alliance and this is what this paper recommends for the Cisco – HP alliance. Thirdly, Russell and Heal needed to come up with a strategy for learning. Effective organizational learning enhances the individual firm alliance capability and when the individual companies have strong alliance capabilities; they are able to conduct the process of organizational learning more effectively. This way, the activities of the alliance would .have been carried out in an easier manner and the alliance would have been able to build better relational capital (esteem, joint reliance and comradeship). These three dwell at the personage level between alliance cohorts and more importantly at the senior management level. Strong relational capital is desirable for any alliance that is intended for the long term. Fourthly, Russell and Heal needed to come up with an operation portfolio or plan which would enable the alliance to establish its position within the domain of alliances of technology based alliances by defining their products development processes and establishing the roles that each company would play in the day to day running of the organization in terms of provision of goods and services. Therefore, Russell and Heal needed to decide in concrete terms the type of work and the depth of the works that each one had to perform. This is the overall structure. They also needed to decide which field would be included in the portfolio as well as the means that would be used to handle the various patterns given by the multiple number of operations. In doing so they would have needed to consider individual operation fields but of more importance, the total number of effect that it would generate. Lastly, Russell and Heal needed to consider the product development process within the organization and the threat of alternate product. They needed to understand how they would integrate their systems fully in order to come up with products that would satisfy all their customers as well as the threat of alternate product which refers to a product developed by the other industry but which is capable of providing the same functions as their own. Action Plan If I was appointed alliance manager at HP, I would take the following action plan and priorities: First, I would do an analysis of customer need and segmentation. In doing so, I would establish the type of product the alliance should make and for whom and in what manner they should be made. This would be very important for finding the proper solution to such problems. Secondly, I would do a competition analysis by establishing any likelihood of the existence of other products or brands in the market that are likely to pose any undue or unexpected competition. Any products similar to those made by the companies in the alliance that show a trend of better performance in terms of pricing and those that have been supplied by industries that have shown high yields deserve a keen attention. The presence of competition does not allow cost hikes even when the market is very demanding and this would restrict profits. Therefore joint action by all members of the alliance would be necessary in a case where the alliance faces danger of an offensive by a competing product Thirdly, I would establish means of regulating decision making for the purposes of providing guidelines for specific functions relating to decision making within the alliance. This would enhance cooperation from all members of the alliance team for better results as well as enhancing consistency in matters of decision making within the organization. Fourthly, I would establish a resource development strategy in order to guide the decisions that concern acquisition and distribution of resources that are needed for the daily running of the activities of the alliance. These resources include: informative resources such as brand image, skills and technology, and substantive resources such as money and human beings. Fifthly, I would come up with a plan to enhance communication in order to minimize friction which occurs when two companies with different organizational structure come together. The friction oftenly occurs due to different reasons such as differences oin values, cognizance , aims and even differences in alliance resources. I would therefore establish clear guidelines on the present capabilities of the alliance are and the future capabilities and study ways of managing them as well as establishing possible future alliance opportunities that would minimize such kinds of frictions. The kinds of structural interventions or operational activities that I would pursue if I was Bill Russell to enable the alliance organization to function effectively.(Organizational activities to maximize alliance goals) If I was Bill Russell, I would first of all clearly define the focal points of attention for each member of the alliance depending on their profession within the structure of the alliance. I would also create harmony in the duties of the team members for a smooth running of the alliance. Putting future directions and future imaginations of the alliance on view would promote a common understanding and a feeling of oneness. Secondly, I would define the domain of the alliance. Definition of domain simply put means making a decision on the importance of future operations of the alliance in order to come up with a view of how the alliance will be able to adapt to the industry and environment. For instance, a market oriented domain, would include the many factors which lead to the success of the alliance in the market. This would be based on the solutions of the problems of the customers “Develop, Make, Sell” (which mean, technological reforms, productivity and market share). Thirdly, I would define the level of Embodiment of the alliance’s vision. What type of an alliance I would like it to become, what level of growth I would like it to attain and so forth. This vision will be based on the changes that are happening in the Global world today and would be expressed in concrete figures. This would be accompanied by the “idea” which is another level of formation. The idea gives a clue as to how the vision and the management target are to be articulated. Fourthly, I would work at ensuring conformity and adherence to the goals of the alliance through constant monitoring of the alliance team at various levels of organizational structure to ensure that every member plays his/her part according to the stipulated rules of that role. Fifthly, I would ensure that the aspect of growth is the key to the day to day functioning of the alliance and instill this into the minds of the team members. It is only through growth that any organization can achieve profit margins that are worthwhile on a long term basis, expand, and sustain itself. Conclusion Companies that have “a dedicated alliance function” have been able to achieve more success than their counterpart who dont at being able to establish means of solving issues as far as information administration, exterior visibility, interior organization, and liability are concerned. These are the basis’ of an alliance - administrative competence. Even though “a dedicated alliance function” may have created value for the Cisco and HP alliance, success did not emerge devoid of ups and downs. First of all building up of such a function needs a serious venture from the organization’s capital and the time of its people. Secondly, making a decision on where to position the function when it comes to the alliance and how to persuade senior managers to value the role of such a function might be complicated. Finally, setting up of codified and reliable measures could mean unsuitably stressing procedure over momentum in as far as decision making is concerned. Reference Casciaro, T. and C. Darwall. "The HP-Cisco Alliance (A)." Harvard Business Review (2003): 1-21. Read More