Organizational learning processes in international strategic alliances
©1997
Diplomarbeit
141 Seiten
Zusammenfassung
Inhaltsangabe:Abstract:
In recent years, we have witnessed a surge of alliances among major corporations throughout the whole world; hardly a day goes by without announcements in the business press of new linkages, partnerships, or alliances. They increasingly involve partners from different parts of the world, are cross-cultural, and don´t seem to have a limit.
My curiosity for this phenomenon was captured by the course Collaborative Strategies in International Business, which I frequented at the Aarhus School of Business, Denmark in 1995. One of the articles, that made up the course literature was Gary Hamel´s Competition for Competence and Interpartner Learning within International Strategic Alliance (1991). In this influential paper he investigated which role International Strategic Alliances might play in effecting a partial redistribution of skills amongst partners. Furthermore, he found several determinants that influenced the success of interpartner learning. This study was the point of departure for my work. I just wanted to dig deeper into this topic and find answers to the following questions:
What are the motives behind the increasing number of alliance formation?
What role does the increasingly popular Resource-Based View of the firm play?
How do Organizational Learning processes take shape?
Which factors influence the success of learning processes in Strategic Alliances?
What are then the managerial implications for the management of collaborative ventures?
In the following chapters I try to find some answers to these questions. To this aim my paper will be organized in the following way:
In Chapter 2 I will try to explain what a Strategic Alliance is and put forward some definitions. We will see, that this term comprises quite a lot of different forms of interfirm cooperation, from the classical form of Joint Venture to Joint Product Development arrangements. Furthermore, I will discuss some special features of the modern forms of collaboration: They are increasingly formed between direct rivals and also across national boundaries.
Chapter 3 will give an overview of the drivers, that are responsible for the steadily increasing number of alliances. Globalization will be subdivided into four aspects, that have considerable influence on firms and their managers ways of thinking and acting. The main point of this chapter will be that Strategic Alliances are one way of coping with the challenges that are posed by the […]
In recent years, we have witnessed a surge of alliances among major corporations throughout the whole world; hardly a day goes by without announcements in the business press of new linkages, partnerships, or alliances. They increasingly involve partners from different parts of the world, are cross-cultural, and don´t seem to have a limit.
My curiosity for this phenomenon was captured by the course Collaborative Strategies in International Business, which I frequented at the Aarhus School of Business, Denmark in 1995. One of the articles, that made up the course literature was Gary Hamel´s Competition for Competence and Interpartner Learning within International Strategic Alliance (1991). In this influential paper he investigated which role International Strategic Alliances might play in effecting a partial redistribution of skills amongst partners. Furthermore, he found several determinants that influenced the success of interpartner learning. This study was the point of departure for my work. I just wanted to dig deeper into this topic and find answers to the following questions:
What are the motives behind the increasing number of alliance formation?
What role does the increasingly popular Resource-Based View of the firm play?
How do Organizational Learning processes take shape?
Which factors influence the success of learning processes in Strategic Alliances?
What are then the managerial implications for the management of collaborative ventures?
In the following chapters I try to find some answers to these questions. To this aim my paper will be organized in the following way:
In Chapter 2 I will try to explain what a Strategic Alliance is and put forward some definitions. We will see, that this term comprises quite a lot of different forms of interfirm cooperation, from the classical form of Joint Venture to Joint Product Development arrangements. Furthermore, I will discuss some special features of the modern forms of collaboration: They are increasingly formed between direct rivals and also across national boundaries.
Chapter 3 will give an overview of the drivers, that are responsible for the steadily increasing number of alliances. Globalization will be subdivided into four aspects, that have considerable influence on firms and their managers ways of thinking and acting. The main point of this chapter will be that Strategic Alliances are one way of coping with the challenges that are posed by the […]
Leseprobe
Inhaltsverzeichnis
ID 4372
Weitlaner, Thomas: Organizational learning processes in international
strategic alliances / Thomas Weitlaner - Hamburg: Diplomica GmbH, 2001
Zugl.: Innsbruck, Universität, Diplom, 1997
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TABLE OF CONTENTS
1. INTRODUCTION
5
2. WHAT IS A STRATEGIC ALLIANCE?
7
2.1 Definitions
7
2.2 Special Features of the "New Alliances"
9
3. STRATEGIC LOGIC OF ALLIANCES
12
3.1 Globalization
13
3.1.1 Globalization of Demand
13
3.1.2 Globalization of Supply
14
3.1.3 Globalization of Competition
15
3.1.4 Globalization of Knowledge
16
3.2 The Impact of Globalization on Firms
18
3.2.1 The Time-Element
18
3.2.2 The Dispersion of Technology
19
3.2.3 Cost Pressure
19
3.2.4 Need for Continuous Learning
20
3.3 The Role of Strategic Alliances
21
4. THE IMPACT OF GLOBAL COMPETITION ON CORPORATE STRATEGY
24
4.1 Porter´s Framework
25
4.1.1 The Five-Forces-Framework
25
4.1.2 The Value Chain
27
4.1.3 Generic Strategies
29
4.1.4 Criticism
30
4.2 The Resource-Based View (RBV) of the Firm
32
4.2.1 The More Useful Approach
33
4.2.2 The Concept of Core Competence
34
4.2.2 Examples of Core Competences
38
5. THE MANAGEMENT OF CORE COMPETENCES
41
5.1 Identifying Core Competences
43
5.2 Exploiting Core Competences
46
5.3 Protecting Core Competences
47
5.4 Developing Core Competences
48
6. ORGANIZATIONAL LEARNING
50
6.1 Definition of Organizational Learning
51
6.2 Levels of Learning
52
6.3 Single Loop and Double Loop Learning
54
6.4 Organizational Learning and Core Competences
55
6.5 Learning Processes
56
6.5.1 Knowledge Acquisition
57
6.5.2 Information Distribution
59
6.5.3 Interpretation of Information
59
6.5.4 Organizational Memory
60
6.6 Barriers to Effective Organizational Learning
61
6.7 Managerial Implications: Building a Learning Organization
63
6.7.1 Learning Vision
63
6.7.2 Learning Culture
64
6.7.3 Learning Structure
66
6.7.4 Learning to Learn
67
7. INVESTING IN CORE COMPETENCES AND THE ROLE OF ALLIANCES
69
7.1 A Systematic Approach towards Investing in Core Competences
69
7.1.1 Vision / Industry Foresight
70
7.1.2 The Strategic Architecture
74
7.1.3 Insourcing and Outsourcing
75
7.1.4 Four Methods of Knowledge Acquisition
76
7.1.5 Development of New Core Competences at NEC
81
7.2 Organizational Learning Applied to Strategic Alliances
82
7.2.1 Becoming Aware and Identifying New Knowledge
82
7.2.2 Interacting and Transferring Knowledge
85
7.2.3 Using Knowledge
87
7.2.4 Institutionalizing Knowledge
88
7.3 Learning Outcomes in Strategic Alliances
89
8. FACTORS INFLUENCING LEARNING IN STRATEGIC ALLIANCES
93
8.1 Motivation
94
8.1.1 Intent
94
8.1.2 Strategic Centrality
96
8.2 Transparency
97
8.2.1 Openness
97
8.2.2 Trust
99
8.3 Culture
100
8.3.1 Cultural Diversity
101
8.3.2 Organizational Culture
104
8.4 Absorptive Capacity
104
8.4.1 The Right Attitude
104
8.4.2 Effective Management
105
9. MANAGERIAL IMPLICATIONS
107
9.1 Clear, strategic understanding of the need of collaboration
107
9.2 Partner selection
110
9.2.1 Complementary Skills
110
9.2.2 Strategic Intent of the Partner
111
9.2.3 Compatibility of Organizational Cultures
112
9.3 Becoming Aware of the Risks of Strategic Alliances
114
9.3.1 Opportunism
114
9.3.2 Knowledge Leaks
114
9.3.3 Dependency
116
9.4 Structure
118
9.5 Build Trust and Openness
121
9.6 Overcome Internal Resistance
122
9.7 Emphasize Organizational Learning
124
10. OUTLOOK: THE FIRM OF THE FUTURE
125
11. BIBLIOGRAPHY
128
TABLE OF FIGURES
FIG. 1:
Range
of
Interfirm
Links
9
FIG. 2:
The
Five
Forces
Framework
27
FIG. 3: A Generic Value Chain
28
FIG. 4: Formulating Competitive Strategy: The Porter Approach
30
FIG. 5:
White
Space
Opportunities
34
FIG. 6: The Tasks of a Successful Management of Core Competences
42
FIG. 7: The
Portfolio
of
Competences
45
FIG. 8: The Relationship between Organizational Learning; Core Competences and
Competitive
Advantage
56
FIG. 9: The Four Constructs of Organizational Learning
57
FIG. 10: A Systematic Approach towards Investing in Competences
70
FIG. 11: The Elements of Vision
71
FIG. 12: The Four Stages of Interorganizational Learning and Influencing Factors
93
TABLE 1:
Core
Competences
at
Canon
39
TABLE 2:
Learning
in
Organizations 54
TABLE 3: American Firm´s Dependence on Foreign Partners
117
Organizational Learning Processes in International Strategic Alliances - 5 -
1. INTRODUCTION
In recent years, we have witnessed a surge of alliances among major corporations throughout the
whole world; hardly a day goes by without announcements in the business press of new linkages,
partnerships, or alliances. They increasingly involve partners from different parts of the world, are
cross-cultural, and don´t seem to have a limit.
My curiosity for this phenomenon was captured by the course "Collaborative Strategies in
International Business", which I frequented at the Aarhus School of Business, Denmark in 1995.
One of the articles, that made up the course literature was Gary Hamel´s "Competition for
Competence and Interpartner Learning within International Strategic Alliance" (1991). In this
influential paper he investigated which role International Strategic Alliances might play in effecting
a partial redistribution of skills amongst partners. Furthermore, he found several determinants that
influenced the success of interpartner learning. This study was the point of departure for my work. I
just wanted to dig deeper into this topic and find answers to the following questions:
·
What are the motives behind the increasing number of alliance formation?
·
What role does the increasingly popular Resource-Based View of the firm play?
·
How do Organizational Learning processes take shape?
·
Which factors influence the success of learning processes in Strategic Alliances?
·
What are then the managerial implications for the management of collaborative ventures?
In the following chapters I try to find some answers to these questions. To this aim my paper will be
organized in the following way:
In Chapter 2 I will try to explain what a Strategic Alliance is and put forward some definitions. We
will see, that this term comprises quite a lot of different forms of interfirm cooperation, from the
"classical" form of Joint Venture to Joint Product Development arrangements. Furthermore, I will
discuss some special features of the modern forms of collaboration: They are increasingly formed
between direct rivals and also across national boundaries.
Chapter 3 will give an overview of the drivers, that are responsible for the steadily increasing
number of alliances. Globalization will be subdivided into four aspects, that have considerable
influence on firms and their manager's ways of thinking and acting. The main point of this chapter
Organizational Learning Processes in International Strategic Alliances - 6 -
will be that Strategic Alliances are one way of coping with the challenges that are posed by the
ongoing globalization process.
The impact of the above discussed globalization process on corporate strategy is the theme of
Chapter 4. I will show that due to these effects a change from the Positioning Approach, as
represented by Porter´s Five Forces, Value Chain and Generic Strategies, to the Resource-Based
Approach resulted. Why is this of any importance to Organizational Learning and Strategic
Alliances?, might be the question of the reader. Well, this change provides us also with some
valuable insights why alliances have become such a popular instrument in today's business world.
Competing on Competences is the new rule of the game and alliances are one way of doing so.
Therefore, in Chapter 5 I elaborate further on the management of core Competences and will
explain, that these tasks are also of considerable importance in the management of Strategic
Alliances.
In Chapter 6 I turn to Organizational Learning, which is a very important building block of
Competences. Besides this relationship, I will discuss the most important ideas surrounding the
concept of Organizational Learning and put forward some proposals, how a learning organization
can be build.
In the course of Chapter 7 I will present a systematic approach towards investing in Core
Competences. This has to be done continuously, so that a more sustainable competitive advantage is
ensured and it is protected against imitation and erosion, dangers that are especially present in a
world, that is characterized by a situation of globalized knowledge. The basic conclusion of the first
part of this chapter will be, that Strategic Alliances are one tool of acquiring new knowledge, which
is essential for upgrading and building Competences. Then I will apply the concept of
Organizational Learning presented in Chapter 7 to Strategic Alliances.
This application will be continued in Chapter 8, where influencing factors on learning in
collaborations are put forward. These comprise: Motivation, Transparency, Culture and Absorptive
Capacity.
Resulting from this discussion some managerial implications for the management of Strategic
Alliances are deduced in Chapter 9. They should help to negotiate and lead alliances in such a way,
that the best possible learning outcomes can be reached and the intent underlying this instrument,
namely learning from the partner and enhancing Competences, can be reached. At the same time,
managers should also be especially aware of the risks, that are implied.
The paper is concluded by taking an outlook into the future in Chapter 10 and showing how ideas
that were presented throughout the paper could be helpful in managing the firm of the future.
Organizational Learning Processes in International Strategic Alliances - 7 -
2. WHAT IS A STRATEGIC ALLIANCE?
In the late 1980s and the early 1990s, one of the striking patterns in global competition was the
rapidly growing number of interfirm cross-border coalitions. And despite the problems of managing
these forms of collaborations, this trend will continue, as many experts foresee, because business
risks soar and competition grows more severe: alliances among firms are becoming one of the key
strategic responses to the emerging patterns of competition.
Therefore it should come as no surprise, that a list of companies involved in alliances reads like a
"Who's Who" of the global corporate world: General Electric, IBM, AT&T, Ford, Kodak, Philips,
Olivetti, NEC, Toshiba and Samsung are all actively involved in alliances of one form or another.
The alliances' variety and number made them a relevant management topic, and consequently they
also became a highly discussed theme in the scientific research. In my opinion, so far the real notion
of strategic alliances is much talked about, but little understood, a major weakness in what
academics and other observers have said about them.
Therefore it is my primary target in this first chapter to shed some light on the phenomenon "stra-
tegic alliance" by highlighting the most important characteristics of this form of interfirm collabora-
tion and differentiate it from other interfirm links.
2.1 Definitions
As abundant as the number of strategic alliances being formed in the last decade is also the number
of different definitions put forward by the literature. Some examples of how (international) alliances
are defined, are:
·
a "trading partnership that enhances the effectiveness of the competitive strategies of the partici-
pating firms by providing for the mutually beneficial trade of technologies, skills, or products ba-
sed upon them" [Yoshino & Rangan, 1995, p.4].
·
an "interfirm collaboration over a given economic space and time for the attainment of mutually
defined goals" [Buckley, 1992, p.91].
Organizational Learning Processes in International Strategic Alliances - 8 -
·
"the relatively enduring interfirm cooperative arrangement, involving cross-border flows and lin-
kages, that utilize resources and/or governance structures from autonomous organizations head-
quartered in two or more countries, for the joint accomplishment of individual goals linked to the
corporate mission of each sponsoring firm" [Parkhe, 1991, p.581].
Some characteristics, which are common to all of these definitions, can be identified and should
help to differentiate international strategic alliances from other forms of collaboration between firms
[cf. Buckley, 1992, pp.91; Yoshino & Rangan, 1995, p.5]:
·
Strategic alliances only cover inter-firm agreements, that is an alliance operates across the boun-
daries of a firm.
·
The two or more firms that unite remain independent subsequent to the formation of the alliance.
Thus, mergers, takeovers and acquisitions in which one firm assumes control of a new entity are
not alliances. By the same token, also subsidiary relationships, the role of which many
multinationals have come to appreciate in global strategy, do not constitute strategic alliances,
because they do not involve independent firms.
·
The venture must be collaborative in that there must be some input on a continuing basis from all
the partners; e.g., technology, products and so forth. Therefore licensing and franchising agree-
ments are not strategic alliances, because they do not request continuous exchange of technology,
products, or skills.
·
The most distinctive characteristic is probably that the partner firms share the benefits of the all-
iance and the control over the performance of assigned tasks.
·
It is strategic in the sense that it involves long-term commitments as distinct from tactical deci-
sions.
·
An alliance is formed in order to attain a strategic objective, to gain a competitive advantage vis-
à-vis competitors outside the network, but this doesn't necessarily require that all partners have
the same view of the agreed upon goals. As we will see later on, Japanese firms had a very diff-
erent strategic intent when entering strategic alliances than did their European or American coun-
terparts.
Keeping in mind these characteristics of strategic alliances, it should be quite easy to be able to
differentiate strategic alliances from other forms of collaboration. The range of possible inter-firm
links and the subset encompassed by the characteristics proposed above, are illustrated in Fig. 1.
Organizational Learning Processes in International Strategic Alliances - 9 -
Strategic Alliances
Arm's-length
Buy/Sell
Contracts
Franchising
Licensing
Cross-
Licensing
Traditional
Contracts
Joint R&D
Joint Product
Development
Long-term
Sourcing
Agreements
Joint
Manufacturing
Joint
Marketing
Shared
Distribution
Service
Standards
Setting
Research
Consortia
Nontraditional
Contracts
Contractual Agreements
Minority
Equity
Investments
Equity
Swaps
No New Entity
Fifty-fifty
Joint Ventures
Unequal
Equity
Joint Ventures
Nonsubsidiary
Joint Ventures
Joint Ventures
Subsidiaries of
Multinational
Companies
Creation of
Entity
Mergers and
Acquisitions
Dissolution of
Entity
Equity Arrangements
Interfirm Links
FIG. 1:
Range of Interfirm Links, Source: Yoshino & Rangan, 1995, p.8
2.2 Special Features of the "New Alliances"
The concept of forming alliances, in which form ever, is not new at all; "Toshiba started doing this
in 1906" [Devlin & Bleackley, 1988, p.18], but just in recent years has it come to be managerially
important and interesting for the academic world. That it became a fashionable instrument in
today's business world can best be seen by the example of two worldwide known companies:
General Motors (GM) and IBM [cf. Yoshino & Rangan, 1995, pp.7-9; for a more detailed treatment
of IBM's and GM's strategic alliances see also Badaracco, 1991].
Until the late 1970s both were equally reluctant to enter any collaborative arrangements, in which
they wouldn't have majority control. Then, however, they realized that even giants, as they
definitely
Organizational Learning Processes in International Strategic Alliances - 10 -
were, couldn't face up to the emerging global competition and the resulting competitive pressures
using going-it-alone strategies. By 1992, IBM was engaged in more than 20.000 alliance-style
relationships worldwide, including 400 equity investments. GM, on the other hand, after it gave up
its insistence on majority control of interfirm links, has formed 55 joint ventures since 1983 with
Daewoo, Toyota and Suzuki and has begun cooperative research and development with Hitachi in
the field of automotive electronics.
These examples best exemplify three striking characteristics of recently formed strategic alliances,
which also explain the increasing attention that is given to them by the business and economic
world.
First, they often cross national borders, they are international in their nature; a fact, that very often
renders very difficult the successful management of strategic alliances, because of the existence of
different national cultures, in which the partners are embedded. I will show later, that different cul-
tures are also an important factor in interorganizational learning processes.
Second, many alliances are between rival firms, which is especially true for the auto industry (Ford
and Nissan, GM and Toyota), but also for consumer electronics, computers (IBM and Apple),
semiconductors (Motorola and Toshiba) and telecommunications. Such competitive alliances
always give rise to warnings (especially from the USA, when alliances between American and
Japanese firms are about to be formed), that one partner could "outlearn" the other and leave him
behind deprived of his core Competences. This danger is definitely existent and every company
should take it into account before entering a collaborative arrangement. In this context, the
protection of core Competences (see Chapter 5.3) and the limitation of transparency (Chapters 8.2
and 9.3.2) are key themes. At the same time learning from the competitor and thus acquiring new
knowledge and core Competences are essential tasks of a successful alliance management.
Third, not only rival firms and firms in different countries, but firms in industries seeming to be
entirely unrelated, are joined by alliances. Examples include Sony and DuPont, that work on
developing optical memory storage products, and the already above mentioned alliance between
GM and Hitachi.
These characteristics have important implications for the successful management of strategic allian-
ces, not least of which is a need for especially skilled managers. This is taken into account by the
academic world and so it should come as no surprise, that most of the literature is dedicated to the
topic of how a interfirm collaboration can be managed effectively and what role top- and middle-
Organizational Learning Processes in International Strategic Alliances - 11 -
management should play in the course of the venture. Unfortunately, one of the most basic topics,
why and when strategic alliances should be considered an instrument in the competitive world, falls
short of detailed treatment. Therefore I want to deal with it in the following chapter.
Organizational Learning Processes in International Strategic Alliances - 12 -
3. STRATEGIC LOGIC OF ALLIANCES
In recent years the number of strategic alliances has risen to an enormous extent. At the same time
also research on this topic, be it theoretical or empirical, is abundant.
However, what has to be stated, is that this research concentrated mainly on questions like, how to
select the right partner for a strategic alliance or how to manage this strategic alliance successfully
and so forth. This is due to the fact, that still many managers don´t really feel at ease with
collaboration with other companies or organizations. Still the feeling "that the alliance will turn out
to be a Trojan Horse that affords potential competitors easy access to home markets" [Ohmae, 1989,
p.143] is prevailing. Sure, forming and managing a strategic alliance is not an easy task - many
authors compare it to a marriage [cf. Ohmae, 1989, p.151] - and quite often the venture can turn out
to be unsuccessful as far as the strategic intent of one of the partners is concerned. Unless managers
understand the long-run strategic value of interfirm collaboration, such a venture without success
will leave them behind frustrated and with a negative attitude towards another collaborative
arrangement.
Therefore it is my aim in this chapter to address the most basic question, that should arise before
forming a SA: Why a strategic alliance? What is the strategic logic behind the increasing number of
international strategic alliances? I will propose, that a Strategic Alliance is a critical, even indispens-
able instrument in nowadays business, when one is taking into account the rapid change of the
environment that companies are confronted with today. Once this strategic value is understood, the
commitment of each partner to the cooperation will be substantially higher and thus frustrating
experiences more seldom.
What are then the critical drivers, that make strategic alliances an indispensable instrument, that
cause "strategic alliance to be a strategic imperative for the 21
st
century" [Pekar & Allio, 1994,
p.64]?
Organizational Learning Processes in International Strategic Alliances - 13 -
3.1 Globalization
Much has been said about globalization and its impact on firms and their strategies. When I refer to
this term, I would like to divide this phenomenon into four different tendencies that all together sum
up to what is called globalization nowadays. [cf. Yoshino & Rangan, 1995, pp.52-58]
3.1.1 Globalization of Demand
The globalization of demand can be traced back to the coming into existence of what is generally
known as the Triad Power (a term coined by Kenichi Ohmae in his famous book "Triad Power: The
Coming Shape of Global Competition", 1985). The United States, Europe and Japan, after the end
of World War II, have achieved roughly the same level of welfare, of disposable income and
dispose of huge mass consumer and industrial markets. The so-called Tiger-States of South East
Asia and many other newly industrializing countries could benefit from this development and
experienced rapid growth within the last decade.
As a result of this economic convergence one could witness a growing convergence of demand for
consumer and industrial products. Formulated in an exaggerated way, "youngsters in Tokyo, New
York and Cologne demand the same walkman, the same jeans and sneakers, listen to the same
music, are part of the Pepsi generation. Industrial customers are looking for the same power-
generating equipment, machine tools [...]" [Yoshino & Rangan, 1995, p.52]. What really matters to
the global customer is not the country of origin of a product, but the product's quality, price, design
and its value to the customer [cf. Ohmae, 1989, p.144].
Which factors have caused this homogenization of consumer demand?
First, as I mentioned above, the achievement of roughly equal welfare in the Triad regions. Second,
and the most powerful force, is the technological progress, that our society experienced in the last
decades. It has reduced the cost of communication and transportation significantly, thus allowing
people and products a high degree of mobility and fostering rapid dispersion of recent consumer
trends. What is more, advances in the telecommunications sector changed the world into a global
village, which "has made isolated places [...] eager for modernity's allurements and this way every-
one everywhere wants all the things they have heard about, seen [...]" [Levitt, 1983, p.92].
Organizational Learning Processes in International Strategic Alliances - 14 -
As a consequence, Levitt [cf. 1983, p.92] forecasts the end of the multinational corporation, which
operates in a number of countries and adjusts its products and practices in each at high relative
costs, and predicts the rise of the global corporation. This type of firm operates, as if the entire
world was one single entity and thus it can realize considerable cost savings thanks to economies of
scales. Nevertheless, although this argument is striking and powerful, one should not forget that the
slogan "all business is local" should be considered as well, because local preferences will never be
the same all over the world [cf. Graber, 1994, p.13]. A trade-off between global presence and doing
business locally has to be found therefore, in order that a company can fulfill customer demands.
Fact is, that consumer demands are converging, but as an explanation for the coming into existence
of global competition the harmonization of demand falls short. Additionally, also supply factors
have to be taken into account.
3.1.2 Globalization of Supply
One of the most evident characteristics of the world economy of today is the new international
division of labour across national frontiers. Several factors can be identified, that affected the supply
side of the global market and led to this international division of labour within the last three
decades.
The most fundamental impetus is the liberal trading order established after World War II, the
General Agreement on Tariffs and Trade (GATT), which represented the basis for the World Trade
Organization (WTO), the key mechanism for policing world trade, founded as a result of the
Uruguay Round. Certainly, international trade tensions are abundant and non-tariff barriers still
exist, but nevertheless I think it can be stated, that in the course of the eight GATT rounds
international trade was liberalized to a high extent. What is more, new important domains like
agricultural exports, services, investment and intellectual property rights are covered by the Uruguay
Round as well, a fact, which represents another significant step towards free international trade [cf.
Schwab & Smadja, 1994, p.43].
Another aspect that played an important role for the worldwide division of labour was the
emergence of newly industrializing countries in Asia and Latin America [cf. Yoshino & Rangan,
1995, p.54].
Organizational Learning Processes in International Strategic Alliances - 15 -
"Countries that only 10 years ago were confined to low-tech, labour intensive economic activity are
now able to produce, at low cost, goods and services that were previously monopolies of the
advanced countries" [Schwab & Smadja, 1994, p.41]. This way firms can outsource parts of their
value chain to newly-industrializing countries and thus lower their costs.
This outsourcing, however, is only possible, because due to the above mentioned technological
advances transportation costs sunk dramatically. In addition coordination and communication costs,
which arise because offices and production facilities are scattered all over the world, have decreased
as well. This can mainly be ascribed to the fact, that more powerful computers offer cheaper
processing power and telecommunication networks permit even faster and cheaper communication.
Furthermore the "Globalization of Knowledge", a term coined by Badaracco ["The Knowledge
Link: How Firms Compete through Strategic Alliances", 1991], favours the worldwide
delocalization of production as well. This phenomenon has gained so much importance in the last
years that I will deal with it separately in Chapter 3.1.4.
3.1.3 Globalization of Competition
Much is talked about global competition and global corporations, but just too often they seem to be
pure buzzwords, that are used without being defined exactly.
"A definition of global competition is [...] best arrived at from a competitor's point of view"
[Yoshino & Rangan, 1995, p.56]. When firms nowadays move abroad, be it through licensing,
foreign direct investment etc., they have to be prepared to find the same rivals in market after
market, that will always claim to have made the latest breakthrough; what is more, at the same time
they also have to compete against a continuous stream of newcomers.
In order to counteract their competitors' moves those firms must be able to respond globally, that is
to take a global view of competition and decide to maximize profits worldwide rather than on a
country by country basis.
That is, "the globalization of competition in an industry is determined by the strategic view of the
managers of the firms that comprise it" [Yoshino & Rangan, 1995, p.56]. This statement implicates,
that managers, who recognize the possibility of competing worldwide, reshape their competitive
strategies. I will deal with the impact of the ongoing globalization process on strategy formulation in
Chapter 4.
Organizational Learning Processes in International Strategic Alliances - 16 -
3.1.4 Globalization of Knowledge
In addition to the globalization of demand, supply and competition, there can be identified another
globalization trend taking place, namely the globalization of knowledge. To illustrate this trend is
quite a difficult task because of the special nature of knowledge and the different forms it can take.
Therefore, before I continue to explain in which sense knowledge is undergoing a globalization
process, I would like to point out some of the specifics of knowledge:
·
Knowledge takes so many forms, so that it is very difficult to measure or to determine how much
exists. This is best illustrated by the fact, that many times knowledge is not or even cannot be
embodied in designs, specifications, manuals or drawings, but is embedded in the individual or
the group possessing it. Polanyi ["Personal Knowledge. Towards a postcritical philosophy",
1958] called this type of knowledge "tacit knowledge".
·
Badaracco [1991, p.7] is also following this type of differentiation and states, that there exist two
different types of knowledge: "migratory" and "embedded" knowledge. Migratory knowledge is
written down in books and manuals and thus can move from one enterprise to another or cross
national borders. Everybody, who gets hold of this package of knowledge can then use it for his
own purposes. Embedded knowledge, however, resides primarily in specialized relationships
among individuals and groups. It is a social product, the result of interactions among people. A
special feature of this type of knowledge is, that it moves very slowly or better can be moved
only very slowly, even when companies are eager to gain access to it.
It is exactly this embedded knowledge, that plays a paramount role in building and leveraging the
core Competences of the firm, as it is this type of knowledge, that makes up the difference between
a "real" core competence and a "normal" skill of a firm. It is essential for a firm, which strives to
compete for the future, to build new core Competences continuously. Unfortunately there exists no
market for this knowledge and that's why companies have to build Strategic Alliances and foster
Organizational Learning in order to acquire it.
Although there exist so many different forms of knowledge and it is so difficult to measure
knowledge, it is a fact, that knowledge is globalizing. This can be shown by the two following
propositions [cf. Badaracco, 1991, pp.20-32]:
Organizational Learning Processes in International Strategic Alliances - 17 -
1) Nowadays there exists a vast pool of knowledge, that grows larger from day to day. Of course, as
I mentioned above, it is difficult to measure the amount of knowledge, that our world can dispose
of, but, anyway, it can be said without any doubt, "that we now have more facts about the world,
more scientific theories, more engineering know-how, more branches of knowledge, and more
information about customers, costs, markets [...] than in the not-too-distant past" [Badaracco, 1991,
p.21].
·
Approximately 80% to 90% of all the scientists and engineer, that have ever lived and worked,
are living and working now.
·
The scientific work is fostered by firms and governments through rapidly expanding expenditures
for R&D. For example, those expenditures tripled in Japan, Western Germany and the Soviet
Union between 1965 and 1980 and rose by a third in the United States [cf. Badaracco, 1991,
p.24]. Those efforts were not only driven by intellectual curiosity, but also by competition among
firms to introduce the latest technology and by competition among governments (nations) to
build pools of knowledge.
·
One of the most outstanding programs to foster the pooling of knowledge, as far as the European
Union is concerned, is the ESPRIT program, which "should provide the European information
technology industry with the basic technologies it needs to meet the competitive requirements
[...]" [Devlin & Bleackley, 1988, p.20].
·
Those facts seem already efficient to demonstrate, that there is a vast pool of knowledge, but
what is even more interesting is, that this body of knowledge is growing at an accelerating speed.
This can best be seen, if one compares the time period from initial discovery to commercial
introduction and widespread adoption of different inventions. Just compare wireless telegraphy
with computers: Whereas it took almost 100 years from the first observations to the wide use of
telegraphy, the computer technology advanced to a degree unthinkable at the beginning within 40
years and within 20 years computers were in use worldwide.
·
It is exactly the computer and the advance of information technology, that helps to create new
knowledge. Due to the enormous progress in this sector information costs are falling drastically
and this way scientists and engineers from all over the world can participate in generating new
technology, theories and so on. This leads to the second proposition.
2) Globalization of knowledge also means, that an increasing number of countries takes part in the
creation of new knowledge.
Organizational Learning Processes in International Strategic Alliances - 18 -
At the end of World War II, as Japan's and Western Germany's factories, laboratories and
universities lay in ruins, the USA was more or less a knowledge monopolist, that dominated
worldwide knowledge creation until the early 1970s, when it "produced" roughly 75% of the
world's knowledge. Then, however, the rise of Japan and Western Germany, and hand in hand with
it, of Europe began and therefore nowadays all three Triad regions produce an almost equal amount
of the world's new technologies. I will show later on, that especially Japan made successful use of
strategic alliances to learn American and European technology.
Besides increasing expenditures on R&D, also the growing international mobility of scientists and
engineers fostered the rise of Europe and Japan, as far as the participation in worldwide knowledge
creation is concerned. Thus they can collect information from all over the world and based on that
push further their own technologies, skills and capabilities.
Moreover, newly industrialized countries, like South Korea, Taiwan and others, have been quick to
move down the learning curve and have become world players in various fields [cf. Lewis, 1990,
p.13].
3.2 The Impact of Globalization on Firms
The above mentioned trends, the globalization of demand, supply, competition and knowledge are
about to change the world into one single market, one single entity. As a result, the intensity of
global competition is growing sharply and raising the standards for competitive success for almost
every company. The enterprise is now confronted with a series of challenges, that have to be
overcome to be able to survive in the global market place.
3.2.1 The Time-Element
The worldwide competition, that firms face today, is a dynamic one and more and more companies
therefore come to understand, that time is a vital dimension of competition. Some even argue, that
"the ways leading companies manage time [...] represent the most powerful new sources of
competitive advantage" [Stalk, 1988, p.41].
Due to the breathtaking advances in the development of new knowledge and technologies, the
product life cycle has been compressed dramatically and firms always have to be on the lookout to
Organizational Learning Processes in International Strategic Alliances - 19 -
adopt, adapt, and circumvent their rivals' innovations, as they are forced into an ever accelerating
tempo of product development. In other words, what companies have to strive for, is to gain a first
mover advantage, to be the first one to enter a new market in order to be capable of realizing
monopoly profits, which, however, won't last long, because the competitor will react and try to
imitate the new product.
Related to time being an element of competitive advantage I would also like to mention flexibility.
The ability of a company to respond to changing market needs faster than the rivals is essential in
today's world.
3.2.2 The Dispersion of Technology
This race for innovation and new product development is even intensified by the technological
parity, that the industrialized countries have reached, a situation which was caused by the
globalization of knowledge. Thus, almost every company all over the world is able to imitate a
recently introduced product, maybe at even lower costs, and this aggravates the competition again.
The walls, that in earlier times incumbents could build around their industry, are now continuously
broken down by new rivals when imitating products and this way entering the market.
No new technology stays proprietary for long and furthermore, because today's products rely on so
many different technologies, no global player can master all those technologies alone [cf. Ohmae,
1989, p.145].
3.2.3 Cost Pressure
Even to cope with one or two core technologies and to develop new products continuously can
implicate high expenditures on R&D, which will result in even more expensive products. This poses
a dilemma for the firm, because the globalization of demand has brought with it that customers do
not care about the country of origin of a product anymore, but all they want is the best product
available at the lowest prices possible. That's why higher expenditures on R&D can be quite risky,
when the resulting products may not be competitive enough to outperform cheaper products.
What should be emphasized in this context is that not only high-tech or global firms are going to
feel cost and quality pressures, but also small and local firms. Due to the globalization tendencies
they have to compete with global players, but they won't be able to benefit from the international
Organizational Learning Processes in International Strategic Alliances - 20 -
division of labour, whereby global players can outsource activities of their value chain to countries
with low wage costs and thus further lower costs.
3.2.4 Need for Continuous Learning
In the presence of the globalization of knowledge, companies that want to be successful in the
global competition, are confronted with another challenge. As knowledge is spread more equally
around the world, there are more and more companies that are able to imitate a company's product
and by entering the market eroding the once established competitive advantage. In times of rapidly
changing market conditions, shortening product life-cycles and increasing competition, no
competitive advantage is protected from imitation and erosion for long. The resulting claim
therefore is that a company continually upgrades its competitive advantage by generating new
knowledge all the time, spreading it rapidly within the whole organization and converting it into
new core Competences, which are, as will be seen later on, at the very basis of a competitive
advantage.
This claim culminates in the statement, that continuous learning is a prerequisite for every company
in order to cope with the challenges of global competition. By learning on an organizational basis a
firm can "retain and improve competitiveness, productivity, and innovativeness in uncertain
technological and market circumstances" [Dodgson, 1993, p.378]. In the global competition to learn
continuously and faster than the competitor means to be one step ahead of him, exploit market
opportunities more rapidly, forbear the erosion of competitive advantage and reduce uncertainty to
some extent.
As I will show later on, the result of some learning processes is the establishment of core competen-
ces, on which a company can build upon in order to exploit future market opportunities or enter new
markets in a faster and more flexible way. Thus, organizational learning and core Competences play
a paramount role in the coping with the challenges of globalization.
To sum up, these are some of the most important changes, which are caused by the emerging global
integration and that both, national firms and global players will have to cope with. Already the four
aspects mentioned - time, dispersion of technology, cost pressure and need for organizational
learning- have changed the environment of every company in such a distinct way, that managers
will have to rethink totally their attitude towards doing business in the global marketplace.
Organizational Learning Processes in International Strategic Alliances - 21 -
The conclusion, that is supported by the most prominent authors in this field is, that "you can't go it
alone" [Ohmae, 1989, p.143].
3.3 The Role of Strategic Alliances
In order to start to explain the role of strategic alliances in the global competition I would like to cite
Jack Welch, CEO of General Electric, who stated, that "alliances are a big part of this game of
global competition [...]. They are critical to win on a global basis [...]. The least attractive way to try
to win [...] is to think you can take on the world all by yourself" [Yoshino & Rangan, 1995, p.3].
What is it, that makes strategic alliances such an indispensable instrument in the global
competition? In this chapter I will show, that the case for cooperation is stronger than ever and that
it helps firms to cope with the challenges like cost pressure and the call for flexibility, that are
caused by the globalization process.
Companies can benefit from strategic alliances in several ways [cf. Contractor & Lorange, 1988,
pp.10-19]:
·
Risk Reduction:
As mentioned above, more and more money has to be put into R&D, so that firms can develop new
products continuously and thus gain a first-mover advantage in the global market place.
However, each successive generation of products or technologies needed for new products will
cost more money to develop, while at the same time product life cycles might shrink and thus
even leave less time to amortize the development costs.
In a collaborative arrangement those R&D costs can be shared and by this the risk associated with a
new product development reduced. At the same time, new technology can be brought to the
market faster and therefore the firm can react to changing market needs more swiftly. That's why
building strategic alliances and thus reducing risk can be a very important benefit, especially as
time represents a potential competitive advantage.
·
Pooling of Resources
When each partner of a strategic alliance contributes a missing piece to the manufacturing,
marketing or distribution process, then each one can concentrate on his core strength and thus a
superior product should be the result of a strategic alliance, a product, which can fulfill the needs
and wishes of the global customer.
Organizational Learning Processes in International Strategic Alliances - 22 -
·
Economies of Scale and Product Rationalization
Within a strategic alliance the production of a certain component can be transferred to the lower-
cost location, by means of which production costs can be lowered. Additionally, because volume
in the more advantageous location is now higher, a further reduction in average unit cost can be
achieved due to economies of scale. Resultingly, strategic alliances can help companies to cope
with the cost pressure, that global competition exercises on them.
These are the most important benefits being delivered by a strategic alliance and they are also
mainly mentioned, when managers, whose firms participate in a strategic alliance, are asked for the
motives behind the decision to collaborate with another company.
Those motives seem sufficient to explain the growing importance of strategic alliances in global
competition and are consistent with the challenges firms face nowadays. Thus, forming a strategic
alliance is a logic response to the emerging global integration and the intensifying competition.
Badaracco [1991, p.20], however, considers those motives to be of a tactical nature and states, "that
they leave some questions unanswered". To answer those questions, one has to investigate the
pattern of strategic alliances of a firm from a strategic point of view:
·
Are there any interdependencies between the various alliances of a firm?
·
To which extent do they help managers to reach long-term goals and to gain a sustainable
competitive advantage?
If one considers the collaboration between firms from this point of view, there comes to light
another motive for the forming of alliances: LEARNING FROM EACH OTHER. One of the first to
identify this motive was Kogut [cf. 1988, pp.319-332] in his paper on Joint Ventures, where he
basically found three theoretical approaches relevant in explaining the motives for Joint Ventures:
Transaction Costs, Strategic Behaviour and finally, Organizational Knowledge and Learning.
As I mentioned above in the Chapter 3.1.4 on the globalization of knowledge, the rapid diffusion of
technology and knowledge is one of the main characteristics of the global integration. It is such a
powerful force, that to succeed in the global market place, firms have to be capable of acquiring
new knowledge and technologies all the time.
Organizational Learning Processes in International Strategic Alliances - 23 -
However, very often this knowledge is not migratory, it does not reside in packages and therefore
cannot be bought easily by other firms, but it is embedded knowledge, which resides primarily in
specialized relationships among individuals and groups.
This type of knowledge can be crucial for a firm in a strategic term, because once an enterprise has
acquired such skills, capabilities and technologies - by dint of its own efforts, by learning from
another organization or both - they can be instrumental in building up new core Competences. As it
is already suggested by the last statement, Strategic Alliances are not the only tool, by which new
activities can be learned; they can be developed internally or bought via Mergers and Acquisitions.
What is a fact, however, is that in some industries a collaboration is just the better and easier way to
acquire new knowledge. First, for some type of knowledge - the embedded type - direct relationship,
contact and interaction with the entity, which holds the knowledge, is necessary to get access to it.
Second, especially industries which are marked by exponentially rising costs of new product
development, excessive investment expenditures in R&D, high pace of technological evolution and
therefore the continuous need for applying the latest know-how and process technologies have seen
a steadily increasing number of alliance formation. Examples include the semiconductor,
automobile, power generating equipment, steel, carbon fibbers, computers and composite materials
industry [cf. Lei, 1993, p.33].
And this leads me to the main conclusion of this chapter: Strategic alliances are a logic answer to
the emerging global integration. Some firms collaborate with each other because of tactical motives,
like risk reduction and economies of scale, whereas others have come to realize the long-term value
behind the forming strategic alliances: They are a new way to learn from other organization and thus
to secure the access to knowledge, which may be decisive for the building of new core
Competences.
Before I go on to elaborate on the notion of core Competences and the learning process in and
within firms, there remains to be shown, which powerful effects the global integration had on the
concept of strategy.
Organizational Learning Processes in International Strategic Alliances - 24 -
4. THE IMPACT OF GLOBAL COMPETITION ON CORPORATE
STRATEGY
Nowadays it can be stated, that due to the consequences of global integration "global competitive-
ness is largely a function of the firm's pace, efficiency and extent of knowledge accumulation"
[Hamel, 1991, p.83]. The traditional "competitive strategy paradigm" [cf. Porter, 1980] is not able
to grasp the effects of the global integration anymore and thus we have experienced a change of the
concept of strategy in the last decade [cf. Collins & Montgomery, 1995, p.118]. It is my aim in the
next chapter, to describe the two paradigms and to show, how and why this change has come about.
Furthermore I want to make clear, that this change implicates a different point of view on how to
look at strategic alliances, too.
Approaches to strategy content are abundant, but when the research on this topic is reduced to the
bare essentials, the diversity of views can be summarized in two different perspectives on strategy
[cf. De Wit & Meyer, 1994, pp.214]:
1) The Positioning Approach places most emphasis on adapting the company to its environment.
Therefore the structure of the environment is of primary importance and the challenge for the stra-
tegist is to find a position, which is defensible against the attacks of existing and potential competi-
tors and against the bargaining power of buyers and suppliers.
2) On the other hand, there is the Resource-Based Approach, that puts much emphasis on adapting
the environment. Of course, sometimes the company must adapt itself to the environment as well,
but the basic argument put forward by the proponents of this school is that strategists have to find
and develop core Competences (unique abilities and resources), which allow them to modify the
industry structure and change the rules of the competitive game, so that they can create their firm's
own future. A recent "Fortune" cover story ["Killer Strategies", No. 12, June 23, 1997] describes
how companies like Nike, Compaq or Harley-Davidson were inventing totally new industries or
reinventing existing ones.
In this chapter I want to demonstrate that the challenges, that are provoked by the dynamic global
competition, switched the emphasis from the Positioning Approach, which was prevailing and
Organizational Learning Processes in International Strategic Alliances - 25 -
dominating in the 1980s (as can be seen by the success of Porter´s Competitive Strategy paradigm),
to the Resource-Based View of Strategy [cf. Collins & Montgomery, 1995, pp.118-119].
To make this shift evident, it seems to me to be necessary to reconsider the basic premises of
Porters's approach, which is the most important and most representative one of the Positioning
Approach. Out of the points of criticism that can be put forward against this concept, one can then
understand better the rise of the Resource-Based View of strategy and why it is a more useful way
of considering and evaluating a company's strategy in the global marketplace.
One point I would like to make clear from the very beginning and I will refer back to this time and
again: One should not commit the error to turn down Porter´s work totally. As we will see later on
during the discussion of the Resource-Based Theory of the firm, Porter´s ideas have been integrated
into the "new" theory of strategic management. What has changed is the point of departure: from the
external environment (Positioning Approach) to the internal resources and capabilities (Resource-
Based Approach).
4.1 Porter´s Framework
In the Porter approach [cf. Porter, 1980 & 1985] the essence of the task of constructing a strategy
boils down to considering the position of a firm in relation to its competitive environment. To
evaluate this position, Porter proposed two tools:
The Five-Forces-Framework to analyze the competitive environment and the Value Chain to assess
the firm's distinctive resources and capabilities. Out of these two analyses a firm should then choose
a generic strategy, that makes it possible for it to reach a sustainable competitive advantage.
4.1.1 The Five-Forces-Framework
According to Porter [cf. Porter, 1979, pp.86-93] every industry has an underlying structure or a set
of fundamental economic and technical characteristics, that give rise to competitive forces, which
determine the profitability of an industry and so are of greatest importance in strategy formulation.
Until today this instrument is very important in strategic management and also, as far as my work is
concerned, can be of considerable use, because first an analysis of the industry has to be done in
order to identify a company's core Competences and second it helps managers to get a better picture
Organizational Learning Processes in International Strategic Alliances - 26 -
of the future industry. As will be shown later on (Chapter 7.1), this is a necessary part of the
systematic approach towards investing in core Competences.
The state of competition in an industry depends on five basic forces:
·
Threat of Entry
New entrants to an industry often bring new capacity, the desire to gain market share and very often
also substantial resources. The likelihood that new companies will enter an industry will depend
on one hand on the market entry barriers, that are present. Such entry barriers are economies of
scale (which force newcomers to enter on a large scale or to accept a cost disadvantage), product
differentiation (which means, that newcomers have to invest heavily to overcome existing
customer loyalty), high capital requirements or the difficult access to distribution channels.
On the other hand, the probability of entrances is also dependent on the potential reaction of already
existing competitors.
·
Suppliers' and Buyers' Power
Both groups, in case they are powerful, which depends on a number of variables like group size, can
squeeze profitability out of an industry.
Suppliers, that dominate a market and/or offer a unique or at least differentiated product and/or are
not dependent on the industry, can exert bargaining power on participants in an industry by
raising prices or reducing the quality of purchased goods or services.
Customers, that buy in large volumes, are not dependent on the industry, because they can always
find alternative suppliers for the same product and are more price sensitive. If this is the case,
they can force down prices as well and play off competitors against each other.
·
Substitutes
Those products or services can limit the potential of an industry by placing a ceiling on the prices,
that the industry can charge for their products. Due to rapid technological developments sub-
stitutes can come into play very fast, which makes it very difficult for the strategist to forecast the
danger that is posed by different substitute products or services.
·
Industry Competitors
The intensity of rivalry within an industry depends on many factors, the most important being the
number of competitors, the growth rate of an industry and the difficulty to exit the industry.
Organizational Learning Processes in International Strategic Alliances - 27 -
Supplier
Power
Buyer
Power
Threat
of
Substitutes
Threat
of
Entry
Industry
Competitors
FIG. 4:
The Five-Forces-Framework, Source: Porter, 1980, p.4
4.1.2 The Value Chain
Once the corporate strategist has assessed the forces affecting competition in his industry and their
underlying causes, he can go on to identify his company's strengths and weaknesses. To this end,
Porter provides another tool, the Value Chain, that helps to disaggregate a firm into its value activi-
ties, the physically and technologically distinct activities a firm performs and by which a firm
creates a product valuable to its buyers.
Again, also this instrument is of considerable significance in my work: The Value Chain is one tool,
by which a company's core Competences can be identified (see Chapter 5.1). This use should be
kept in mind, when reading now a more detailed explanation of it.
The activities of a firm can be divided into two broad types: primary and support activities.
Primary activities are the activities involved in physically creating the product, selling and
transferring it to the buyer, as well as after-sale assistance, whereas secondary activities support the
primary activities and each other by providing purchased inputs, technology, human resources, and
various firmwide functions [cf. Porter, 1991, p.102].
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Erscheinungsjahr
- 1997
- ISBN (eBook)
- 9783832443726
- ISBN (Paperback)
- 9783838643724
- DOI
- 10.3239/9783832443726
- Dateigröße
- 829 KB
- Sprache
- Englisch
- Institution / Hochschule
- Leopold-Franzens-Universität Innsbruck – Sozial- und Wirtschaftswissenschaften
- Erscheinungsdatum
- 2001 (August)
- Note
- 1,0
- Schlagworte
- allianzen kernkompetenzen lernprozesse organisationales lernen
- Produktsicherheit
- Diplom.de
