Strategic Alliance

Strategic Alliance getting more Activated

One more typical enterprise activity which is prevalent now a days is the strategic alliance like merger and capital participation, besides M & A. This type of strategic alliance among multiple number of independent organisations is very widely prevalent among diversified organisations and in diversified form.

· Form of strategic alliance : …… providing licence, joint development, collaborating operations etc.

· Partner of strategic alliances: ……competitive enterprise, suppliers, Govt instructions, universities, workers’ unions etc.

The competition among the enterprises has become more severe and there have been speedy changes in the view point of the customers as well as in the technological reforms. Further, the technological reforms have progressed day-by-day and have become composite. The scale of capital investment has also expanded and risks have also become larger.

In contrast, the accomplishment of all management resources from within, as required to meet the diversification and reform requirements from the existing operations has become extremely difficult in the present management environment for all the companies, howsoever, big or rich the company may be in management resources.

Even in Europe and America until the middle of 1950’s the companies used to depend mainly on the in-house management resources for the development of products or services. This is how the companies posted growth. However, from 1960’s onwards, the M & A became a strong tool for the growth of enterprises and in 1980’s the strategic alliance among the enterprises, like joint ventures were seen more frequently along with M & A. Today, it is well known that various big houses like G.M. and I.B.M are engaged in making positives efforts in strategic alliances.

The concept of strategic alliance has grown in Japan also. According to the survey conducted by the Head Office of Kansai Seiansei in 1990, the total number of strategic alliances by the enterprises with overseas enterprises till 1984 (collaboration and equity participation etc) were about 27% and this percentage increased to 38% in a period of 5 years after 1984. This survey was conducted for some enterprises listed on Tokyo and Osaka stock exchanges and some which are not listed, but are similar “Keiei jittai chosa” (Survey of actual state of management).

Further, the percentage of enterprises that had strategic alliances with other domestic enterprises was also 23% till 1984 and it increased to about 30% in 5 years since then. These figures are substantially high when compared to the percentage of those enterprises which have executed M & A. In addition, the percentage of enterprises that have undergone strategic alliances, has also shown the increasing tendency.

In this way, the traditional image of the enterprise has changed. Even in the large business houses, which had so far tried and achieved the development using the necessary management resources from within, there is a major change in the strategy.