The paper "International Strategy Pursued by Volkswagen and Suzuki in Their Partnership" is a great example of a management case study. With the changing business environment, businesses across the world are forced to target international markets to expand their operations and maximize profits (Besanko, Dranove, Shanley & Schaefer 2013, p. 148). Getting into a new market is not easy and businesses and corporations use different strategies to make their entry. Some of these strategies include Exporting and importing, licensing, franchising, Joint Venturing and direct investment and Strategic alliances (Burdon, Chelliah & Bhalla 2009, p.
43). Every strategy has its benefits and shortcomings. The competition and globalization shaping up in the auto industry, both Volkswagen and Suzuki were forced to look for new markets. Volkswagen which is a German automobile maker was looking to looking into Japan to give them a new test of cars, while Suzuki which is a Japanese carmaker was looking German market to also offer new brands of cars. Since each was going into the opposite direction they entered into a strategic alliance as their international strategy. According to Kale & Singh (2009), a strategic alliance is a word employed to explain a range of joint agreements between different companies, to benefit from formal, joint ventures, shared research, and minority equity contribution.
The contemporary type of strategic alliances is turning out to be more and more popular and has three distinctive attributes which were also evident in Volkswagen-Suzuki partnership. Kale & Singh (2009) state that this cooperation normally takes place between companies in most developed countries and their emphasis is frequently to make new products as opposed to dealing with the current ones. Just like any other technology swap normally remains one of the major objectives for numerous strategic alliances (Burdon, Chelliah, & Bhalla 2009, p. 47).
This is because technological innovations represent some progress and it is hard for a single company to be in possession of abilities to do its own Research and Development effectively. Such is encouraged by a short-term life cycle of a product and the necessity for numerous firms to remain viable throughout the innovation process (Besanko, Dranove, Shanley & Schaefer 2013). This situation also happened between Volkswagen and Suzuki. In 2009, Volkswagen bought a stake at Suzuki; the agreement also held that both would share their distribution network and technologies with one another (Icmrindia 2013).
Icmrindia (2013) claims that whereas Volkswagen agreed to offer its electric and hybrid technologies together with access to international markets to its counterpart Suzuki, Suzuki contracted to offer Volkswagen access to Indian presence and small-displacement motors. Just like many situations of shortcomings in strategic alliances, the two automaking firms did not reach an agreement on all of the proposed objectives. Suzuki gave notice of violation of the contract to Volkswagen in 2011 claiming that Volkswagen was not allowed access to its hybrid technology that they had promised.
Equally, Volkswagen pointed the finger at Suzuki of breaching the contract by acquiring diesel engine from Fiat Company (Icmrindia 2013). This strategic alliance was further stimulated by the cultural diversities and botched joint business plans. Advantages of a strategic alliance In a simple perspective, strategic alliance simply reflects the need of businesses to attain their independent business goals cooperatively (Burdon, Chelliah & Bhalla 2009, p. 45). However, the issues of modern globalized and complex market compel companies to make such arrangements so as to gain competitive edges amongst the stiff rivals in the market.
Burdon, Chelliah & Bhalla (2009, p. 44) asserts that firms which get into strategic alliance generally anticipate benefiting in many ways. Some of the prospective benefits which Volkswagen and Suzuki could have achieved if the deal went through were increase capabilities, access to various target markets, sharing the economic risks and getting competitive edge (Kale & Singh 2009). Suzuki wanted to enquire and gain from resources such as technology and know-how while targeting the German market.