Last Updated 28 Jul 2021

Network Level Strategy

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In the recent period, strategic alliances have become a popular means of international expansion (Koza & Lewin, 2000). Strategic alliances allow firms to share the risks and resources required to enter international markets. Moreover, strategic alliances can facilitate the development of new core competencies that contribute to the firm’s future strategic competitiveness. Most of the strategic alliances are formed with a host-country firm that knows and understands the competitive conditions, legal and social norms and cultural idiosyncrasies of the country, which should help the expanding firm manufacture and market a competitive product.

It is usual for each partner to bring knowledge or resources into the partnership. Indeed, partners often enter into an alliance with the purpose of learning new capabilities and common among those desired capabilities are the technological skills. Many companies enter into strategic alliances with their suppliers for the actual manufacture of the entire product or some of the components of the product on behalf of them. Strategic alliances have been found to be the effective ways for the easy diffusion of technologies and to enter into a new market easily.

Strategic alliances also enable the firms to bypass the governmental restrictions and the process of learning from the leading firms in specific industry is speeded up. However, the most important point about strategic alliances is that they are not easy to create and develop. It is not also easy to support the strategic alliances because of several intricacies involved in the functioning of the alliances. It is not that all strategic alliances become successful and most of them fail. The main reasons for failure include the incompatibility among partners and conflicts among them.

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International strategic alliances are difficult to nurture. There are at least four fundamental issues, which affect the trust among the partners. They are:

  1. the initial condition of the relationship,
  2. the negotiation process to arrive at an agreement,
  3. the interactions among partners, and
  4. some external events affecting the relationship.

The culture of the country involved in the alliance or joint venture is another factor, which influences the trust among the partners and ultimately the success of the alliance.

However, research suggests that alliances are more favourable, in the face of high uncertainty and where cooperation is needed to share knowledge between partners and where strategic flexibility is important. In line with this, the central aim of Rolls-Royce is to establish a trusted supply source so that the company can deliver excellent products and services to its customers who are spread across various geographic locations. The company with its objective of having excellent supply chain has entered into a number of strategic alliances with various firms worldwide.

It is not only the technical excellence in the manufacture the company is looking for with the alliance partners, but also excellence in several other functional areas like data management, engine leasing, project support, manufacture of castings, repairing and overhauling and manufacturing of components. Strategic alliances have been formed by Rolls-Royce in the form of subsidiary companies, and joint ventures, depending on the location and requirements of core competencies and skills. The regulations of the host country have also played a role in the determination of the form of arrangement for the strategic alliance.

There are various functional areas where Rolls-Royce needed support from competent supply chain partners like in the areas of repairing and overhauling and engine leasing. Especially since the repairs are to be undertaken in the countries in which the aircrafts are held, it became necessary and convenient for Rolls-Royce to enter into strategic alliances so that the company was able to serve the customers efficiently and swiftly.

Conclusion

This paper analysed the industry context and strategic developments of UK grocery industry with particular reference to the achievement of corporate objectives of the UK supermarket major Tesco.

The industry context becomes relevant in view of the fact that any strategic decision towards further expansion of the firms can be taken only after taking stock of the relevant industry context and the scope for further developments. When there are enhanced opportunities available due to globalisation initiatives, it is for the firms to assess whether globalisation would really help them to improve their competitive strengths. This paper analysed the impact of globalisation on the outsourcing of Boeing and Airbus and concluded that globalisation has not effectively helped these companies in augmenting their sourcing strengths.

The paper also discussed network level strategies in the form of strategic alliances and joint ventures and the advantages of such moves.

References

  1. Bedier, C., Vancauwenberghe, M. & Sintern, W. v. , 2008. The growing role of emerging markets in aerospace. [Online]. Available at: http://www.mckinseyquarterly.com/The_growing_role_of_emerging_markets_in_aerospace_2117 [accessed 04 April 2009]
  2. Child, J. & Yan, Y. , 2003. Predicting the performance of international joint ventures: An investigation in China. Journal of Management Studies, 40(2), p. 283-320.
  3. Harvey, D. , 1999. Innovation and Competition in UK Supermarkets. [Online]. Available at: http://www. cric. ac. uk/cric/Pdfs/bp3. pdf [accessed 04 April 2009]
  4. Hill, J. S., 2002. Chapter 10: Global and Multi-Market Strategies. [Online]. Available at: http://www. authorstream. com/Presentation/aSGuest10343-136925-ch10-business-finance-ppt-powerpoint/ [accessed 04 April 2009]
  5. Hitt, M. A. , Ireland, R. D. & Hoskinson, R. E. , 2005. Strategic Management Competitiveness and Globalization. Versailles KY: Thomson South Western.
  6. Johnson, G. & Scholes, K. , 2002. Exploring Corporate Strategy. London: Prentice Hall.
Network Level Strategy essay

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