1.0 Introduction:
Strategic alliance is one of the most rapidly growing trends in the construction sectors. Bierly and Coombs (2009) marked strategic alliance as an effective method for neutralising the competition and also ensure sustainable future business prospects. Gulati (2009) argued that strategic alliance is an agreement for sharing common goals that would benefit all the parties to the agreement. Dussauge and Garrette (2008) explained the nature of strategic alliance by comparing it with joint ventures which is a more stable form of alliance. Hofstede (2008) described that apart from proving scope for new business opportunities strategic alliance maintains the identity of the firms in the alliance. Reuer (2011)noted that organizations are entering into strategic alliances because organic growth alone is insufficient to accomplish desired growth for the organization. All these definitions reflect different characteristics of strategic alliance. The construction industry has witnessed extensive merger procedures throughout its duration in the corporate sector.
This study will focus on evaluating the reasons behind the growing trend of strategic alliances. The research will understand the concept thoroughly and discuss the benefits and disadvantages of strategic alliance. The case study selected for the research include two companies specialised in construction business and well known as Shaca Construction and Urban Fabrik. The researcher will connect the research questions with the case study for analysing the practical implications of strategic alliance on the organisational growth and development. 2
1.2 Background of the study:
Strategic alliances have gained importance in the corporate sector as they have comprehensively reduced the effects of geographic boundaries in the business operations (Sim and Yunus, 2007). The necessity of strategic alliances is different for each organisation. For few, strategic alliance is a weapon to attain competitive success by effective utilization of the resources of both the companies, while most of the business firms consider alliance as a superior method of investing corporate resources (Todeva and Knoke, 2005). Studies have shown that there is a steady increase in the number of strategic alliances between 1979 and 1985 (Mockler, 2009). The period between 1980 and 1989 marked the increasing trend in strategic alliances between companies. However, more strategic alliances between global companies were noted 1981 and 1990. However, Hamel (2007) opined that there has been a noticeable lesser number of UK companies venturing into alliances in the early 1980s.
The U.K. construction industry after being badly hit by the recent economic recession is on a state of recovery. However, as per the Construction Industry Forecasts published by the Construction Products Association, U.K. the output of construction sector may fall by 6% in the following two years. The decline in growth is due to slash in the capital budget as well as lack of revival from the private sector.Despute several government initiatives, the contribution of the construction industry to the U.K. economy will remain negligible until the first phase of 2014.Output in the public sector construction was increased by 11% in the last 5 years but private sector experienced a loss of 15%. Housing and non housing projects in the private sector collapsed due to withdrawal of finance as a result of credit crunch [Available fromhttps://www.academia.edu/170677/ Accessed on 3rd May 2013].
In the words of Seaden et al. (2011), the construction industry is a very competive and high risk business. In order to sustain in a volatile economy, firms form strategic partnerships to differentiate from the competitiors, access to better organisational innovation and technology and for better strategic planning. Slaughter (2008) adds that creating efficiency through economies of scale, capitalize on the use of facilities and build complementary competencies. Egan (2008) believes that construction firms enter into partnerships in order to spread financial risks and cost sharing.The proposal to establish strategic alliance between Shaca Construction Construction Construction and Urban Fabrik is perceived to be for pooling the resources and achieve common objectives.
Strategic alliances for purchasing cooperation have enabled the companies to act as global purchasing organizations taking optimum advantage of joint expertise, volume, platforms and standard parts. Shaco would get the benefit of sourcing raw materials at the right time through the alliance with Urban Fabrik. Combining the best practices of both the companies, it would bring improved efficiency and value to their purchasing operations.
1.2.1 Background of the chosen organisations (Shaca Construction and Urban Fabrik):
Shaca Construction Ltd was founded in the year 2002 by Spencer Heydon and Anthony Carr. The company offers a range of contruction services and is well known for aligning their activities with clients needs. Shaca Construction Construction Construction is specialised in groundwork and structural alterations. The company has carried out structural alterations while doing refurbishements within the House of Lords, construction work at the Palace of Westminster, including underpinning and pile caps at Westminster Hall. Shaca Construction Construction Ltd has also carried out the concrete framework, basement excavation, groundwork and other external work for a new residential complex at 144 Ilford Lane, U.K.
Urban fabrikis a London based company, specialised in construction business. An effective combination of knowledge, experience and adaptability is reflected in their projects that they deal in hotels, residential and commercial sectors. Some of the best projects they dealt with are ShoreditchRooms and Spa, Rochester Place, Pizza East, Eccleston Square hotel, Soho Hotel, Berlin etc. Urban Fabrik considers itself to be a traditional contractor that utilised its own in house tradesmen, plant, equipment, workshops and site offices. The company is able to manage its costs, quality and time and carry on with a sustainable business.
1.3 Rationale of the study:
Mockler (2009) mentioned that strategic alliance is aimed to create opportunities for growth in the intentional market; on the other hand, the alliance could have certain disadvantages on the working of both the companies. Dussauge and Garrette (2008) stated that alliances could be costly, not only because of cash leaving the concern but also due to division of returns between the partners. Alliances in the construction sector reduce the possibilities of generating financial viability by cooperating with competing companies. Alliances require involvement of managerial time resources needed for developing an alliance, managing it and resolving potential conflicts between firms.
Hofstede (2008) opined that often failure of the parties to act simultaneously might hamper in alliances success and operations of the other company. Poorly defined goals such as return on investment, market expansion, cost attainment leads to potential difficulties on the company’s operations. Finally, poor choice of partner could also result in Shaca Constructionand Urban Fabrik unable to reach the desired target or vice versa. To ensure success through strategic alliance it is necessary for the companies to form disciplined, structured and systematic alliance with each other. The author selected this topic because evaluating the positives and negatives of strategic alliances in the corporate may give rise to a new era of sustainable business practices.
1.4 Problem Statement:
Strategic alliance is effective for developing the business status in the industry but there are certain critical issues related to it. Gari (2008) focused on the impact of strategic alliance over the workforce of the organisations and stated that strategic alliance initiates changes in the organisational structure and culture which may have positive as well as negative influence over the employees. However, strategic alliance has reflected the growth for the majority of the firms opting for it. It has brought a new revolution in the corporate industry by unifying the business houses and reducing the competition in the market. Mockler (2009) explained that the influence of strategic alliance on reducing the competition may hamper the quality of products and services produced by the firms.
Faulkner (2009) stated that longevity of an alliance depends on the viability of the conditions on which the alliance was formed. Change in market situations and business stature may also hamper the alliance. Issues like change management, business growth, goal setting, etc. are influential in the developing an alliance. The alliance between Shaca Construction and Urban Fabrik has taken place mainly on the basis of business expansion and revenue earnings. The terms and conditions of the alliance have to be honoured by both the parties for sustaining the alliance and making fruitful. Strategic alliance without doubt comes with added advantages for the firms in the treaty but the organization should ensure that the firms are capable of holding up the alliance for a prolonged time to reap the full benefits of the procedure. Hofstede (2008) explained that increasing alliances among the corporate players, particularlyin construction industry are creating a global community that aims to develop a stable economic condition in the world. The problem is their diverse cultures and structure which may create dispute and hamper the entire process.
1.5 Research Aim:
The study aims to reveal the causes that are urging the construction industry towards creating strategic alliances. The benefits and disadvantages of the alliance process and its effect on the stakeholders of the firms will also be discussed in the study through a case study of the impact of the alliance of the firms i.e. Shaca Construction and Urban Fabrik.
1.6 Research Objectives:
- To study the effectiveness of strategic alliances in the international market.
- To critically analyse the rationale behind adopting strategic alliance techniques.
- To assess the impact of strategic alliance between Shaca Construction and Urban Fabrik to evaluate the benefits and pitfalls for the firms.
1.7 Structure of the Research:
Introduction: The chapter deals with brief introduction of the topic to the reader. The chapter includes the aims, objectives, research questions, rationale, and purpose and study background.
Literature Review: It deals with the studies and the theories of previous authors on the present topic. Various models on the present topic are studied in the chapter.
Research Methodology: It involves the philosophy, approach, and sample size and data collection process of the study.
Presentation of Data: This chapter presents the raw data collected from the respondents via survey.
Analysis of Data: The chapter involves analysing the data collected through primary research.
Discussion and Interpretation of the Findings: This chapter deduce information from the primary data and discuses about the possible outcomes of the study.
Conclusion, Implications and Recommendations: in the final chapter of the study, the researcher connects the objectives with the data collected and provides suitable recommendation in respect to strategic alliance process.
1.8 Conclusion:
The chapter follows a brief introduction of the topic. Aims, objectives and questions would help in conducting the research methodically. The chapter also includes the rationale and purpose behind conducting the study. It can be concluded that strategic alliance between the two construction companies (Shaca Construction and Urban Fabrik)would help to recover from the recent credit crunch and achieve strategic goals.
Chapter 2: Literature Review
2.1 Introduction:
Literature review analyses the secondary data collected by the researcher and evaluates the historical development in the research topic. The evaluation process also includes analysis of the theories and the issues not covered by the existing models and concepts. The literature review provides the analyst an overview of the situation and proper background knowledge (Gulati, 2009).The researcher has focused on the alliance of Shaca Construction and Urban Fabrik for evaluating the process of strategic alliance and its impact on the global business industry.
Strategic alliance in the construction business provides a useful means for cost sharing, risk allocation, pooling of resources, technology transfer, organisational innovation and earn economies of scale. It also assits the construction managers, particularly in the public sector to evaluate tenders and build cooperative relationships with the other construction stakeholders. The current literature focuses on the theorical underpinnings relating to strategic alliance benefits and drawbacks, particularly in the construction sector.
2.2 Conceptual Framework:
The conceptual framework connects the different variables of the study and forms an outline of the research. Hakim (2007) stated that conceptual framework defines the flow of the study and the link between the contents of literature review and the subject topic. The framework of the study is reflected below:
Figure 1: Conceptual Framework
(Source: Created by Author)
2.3 International Strategic Alliance:
Harbison and Pekar (2008) explained that strategic alliance is based on the belief that two is better than one. With the growing competition, organisations are trying to extract any and every benefit that the industry offers. The business houses aim to gain a competitive advantage in their activities such as doing research development at a decreased cost or getting most of the customer base without dispensing too much into market research projects or trying to assess the customer behaviours and psychographs. Strategic alliance evolved to satisfy this need of the business organisations and help them in attaining superior position in comparison to their competitors (Reuer, 2011). As the demands for forming strategic alliances grew, the role of the concept also enlarged.
Hamel (2007) defined strategic alliance as a relationship between two parties for achieving a set of agreed goals and develop the business status in the market. In the words of Das and Teng (2006), strategic alliances are an agreement made between two or more companies who have agreed to share their resources and achieve mutual benefits in the process. Dussauge and Garrette (2008) stated that strategic alliance is the process of joining hands for achieving common goals and objectives. Again Faulkner (2009) highlighted that the strategic alliance builds a relationship between two or more companies that would pursue common objectives in their own ways. All these definitions convey the same meaning that strategic alliance is the formation of an agreement or relationship for improving the business conditions. However, the differences lie in the features briefed in these definitions. Hamel (2008) pointed strategic alliance as a relationship between two parties to which others disagreed. Again Hamel (2008) also acknowledged that the parties in an alliance pursue a set of agreed goals rather than common goals. Pek-Hooi (2008) supported that firms contribute in forming strategic alliance to achieve benefits and the beneficial terms for the parties may differ which results in agreeing on set of objective for each company.
Figure 2: Increase in numbers of Strategic Alliance in the last 7 yrs.
2.4 Theories of Strategic Alliance:
2.4.1 Knowledge based theory:
The collaboration between independent companies is the rising trend seen for the past quarter century. The cross border diversifications of the companies have increased the cooperation between the companies (Narula and Hagedoorn, 2006). This kind of cooperation is needed to share the resources both within and also outside the boundaries. There are cooperative relationships involved in such inter-firm alliances formed either by the help of contractual agreements or by ownership (Humphrey et al. 2010). There is absolute and true distinction between the two types of strategic alliances which are mainly made either for long term alliances or for short term period.
There are particularly two distinct dimensions of knowledge management as identified by the knowledge based literature. The first sets of activities are those that increase an organisations knowledge stock. While the second set of activities are those that utilizes and transforms the stock of knowledge into real values (Coombs and Deeds, 2008). These alliances as explained by knowledge generation principle are nothing but vehicles of learning in each and every one of the member firm uses the alliance to transfer and absorb the partner’s knowledge base (Kuratku et al. 2009).
The real challenge in estimating the efficiency that can be achieved from such strategic alliances with respect to efficiency achieved from acting as single disparate entities (Doole and Lowe, 2008). For this reason, it is always a persistent problem trying to figure out the circumstances under which alliances will be most beneficial. Since unlike problems revolving around figuring out the right situation for going for a strategic alliance, it is relatively very easy to figure out the transaction costs associated with markets and the kind of agency problems currently present in the firms (Malmgren, 2010). So depending upon the type of inherent problems present in the firms, the strategic alliances are formed likewise. Either they are formed in a hybrid like model or the other type of alliance like the normal strategic alliance is formed.
2.4.2 Resource Based Theory:
Unlike knowledge based strategic alliance, the resource based strategic alliance is not yet put into applied system methodically. Das and Teng (2006) stated that the roles of a firm are examined in the light of strategic alliances and then an attempt is made to come up with a general resource based theory of strategic alliances, where the various findings on the literature of strategic alliances are synthesized from the point of view of resource based theory. Here the theory which is put forward covers four major aspects of strategic alliance which are rational, structural preference, formation and performance (Sturgeon and Florida, 2009). The resource based strategy explains that a firm is equal to the number and types of resources it owns.
Slaughter (2008) explained that resources based strategy focuses on analysing the strengths and weaknesses of various resources of the company instead of analysing the competitive environment. Das and Teng (2006) states that as business houses have resources that are immovable in nature, firms are diverse in their nature, type and structure which act as a competitive advantage and a unique quality of the firm.
Figure 3: Steps in establishing Resource Based Alliance
(Source: Das, T. and Teng, B., 2006, p-43)
2.4.3 Transaction cost alliance:
Transaction cost alliance is the type of alliance where the alliance occurs to minimize the cost of production and also minimize the cost of operations (Judge and Dooley, 2006). The types of costs that organisations try to reduce through strategic alliance are costs rendered due to exchange, production cost coming from in-house co-ordinating activities. As well as costs that are incurred for imparting training, learning, organising. Since the process of internalization controls the transaction cost effectively, so the internalization is preferred more when the transaction cost of an exchange is very high. Whereas exchanges done at the rate prevailing at that point of time in the market, lead to transaction costs but at the same time avoid production costs (Harbison and Pekar, 2008). This is done keeping in mind the rationalization that they will be utilized when the transaction costs are low and at the same time the production costs are high.
Das and Teng (2009) mentioned that transaction cost line alliance focuses on reducing the cost of production and transactions of the firm allowing them to retain more profit on their products. However, firms with low frequency of transactions should avoid this type of alliance as operational cost control may not be much more effective in this process. Transaction cost alliance analyses the internal as well as external factors affecting the business operations. Coombs and Deeds (2008) stated that the transaction cost alliance describes the disparities in forms of authority of economic exchanges. Three types of transaction cost alliance are market governed, hierarchical governance and hybrid governance. The transaction cost alliance is mainly used by the small and medium scale business units. Humphrey et al. (2010) remarked that the key demerit of this alliance procedure is that all the possible outcomes cannot be documented in the agreement which can arouse future disputes among the allies.
2.5 Trusts and Control in Strategic Alliance:
Malmgren (2010) explained that apart from business development and expansion, strategic alliances are also formed to reduce the complexity of the operational activities. Business houses are continuously forming alliances to outsource their logistics process. In these situations, the key factor evolves as managing the outsourced units and control the risks associated with it. Unlike other forms of business mergers, alliance allows a firm to keep its identity separate and chase their goals in their own manner (Ghani et al. 2011). This creates variations in the decision making process and may result in the end of the alliance. The risks involved in alliance initiate the need for controlling the resources and trusting the partners.
Figure 4: Risks involved in Strategic Alliances
(Source: Coombs, J.E. and Deeds, D.L., 2008, p-248)
Malmgren (2010) observed that apart from the legal barriers the strategic alliances are mostly based on the term gentlemen’s premise. As the firms are allowed to keep their identity and maintain their own work culture and structure, the disciplinary status often scoops very low in this process. The partners in the agreement must honour their agreements for ensuring that the alliance is helpful for expansion of their business process (Das and Teng, 2009). Managing the alliance is a huge responsibility which has to be shared by both the parties. Every employee, managers, investor should fulfil their roles in order to ensure that the alliance survives and help the business entities gain a strategic competitive advantage over the competitors. Keeping in focus the motive of the alliance, the firms must delegate the jobs efficiently. In the case of Shaca Construction and Urban Fabrik, the alliance is formed to undertake more sustainable projects and createstronger platforms to earn competitive advantage .
2.6 Comparing Strategic Alliance with Joint Venture and Mergers:
Mergers and acquisitions are the most common form of partnerships that can be seen in the corporate sector. Gleason et al. (2009) noticed that the main motive behind the mergers and acquisition is that working collectively yields better results than working single handed. M&A has two parts, in merger two firms join hands and moves forward as a single unit. In an acquisition, one firm takes over another firm completely and the buyer becomes the major organisation. The primary demerit of this form of partnership is that M&A may not be always in a friendly environment rather it can be hostile (Sim and Yunus, 2007). For example: Oracle Corporation is known for their acquisitions, they prefer to take over another organisation and move forward. Companies like SUN, BEA, etc. are part of Oracle’s acquisition (Reuer, 2011).
Joint Venture is similar to merger process, the only difference is that the identity of the parties to the contract remains intact. A new entity is created in a joint venture with a new administrative and business operation process. Gleason et al. (2009) explained in a joint venture is the foundation of a new organisation by the founders of the venture that will carry out its business activities with the founders as well as the other stakeholders. Unitech (India) and Telenor (France) created a joint venture called Uninor in India (Kang and Sakai, 2012).
Strategic Alliance focuses on developing partnerships between two or more firms based on their key strengths like resources, brand name, financial support, market relations, etc. (Faulkner, 2009). In strategic alliance the origin of both the companies is intact and the alliance is aimed at achieving mutual benefits. The alliance is a long term procedure and can be extended by observing the performance reviews. However, the legal restrictions are less in this form of partnership. HP and Oracle created a strategic alliance where both the companies shared their servers for maintaining their database (Reuer, 2011).
2.7 Logic behind creating strategic alliances:
Varadajaran and Cunningham (2006) highlighted that a strategic alliance has become a means of acquiring and expanding business operations over the globe and sustain in the competitive environment. Strategic alliances present an opportunity to the firms for acquiring and sharing their resources. The business houses look to utilise the benefits of their allies and develop their skills and resources. Akio (2009) referred to the strategic alliance as a process of inter-organisational learning that involves both the firms. Camuffo and Volpato (2006) stated that the most imposing factor behind the creating of strategic alliances is acquiring managerial resources. Kauser and Shaw (2006) argued that firms should have the capability of applying acquired resources skilfully. The firms should learn to use the resources acquired for overcoming the limitations of their own resources and develop a competitive advantage over its competitors. Moreover, firms should also consider the fact that the services provided by the allies are resulting in benefits that could not be yielded by the other firm alone.
Akio (2009) mentioned that in the age of globalisation and technological expansion of business activities strategic alliance is one of the most useful resource for expanding their service offering to their customers. Establishing alliances with firms operating in the same market allows the firms to represent their brand in a broader and diversified market. The alliance of Shaca Construction and Urban Fabrik is for planning to occupy more market space by getting more projects and understake cost effective and sustainale projects.
2.8 Demerits of Strategic Alliance:
An increase in the number of strategic alliances formed in the corporate world reflects its effectiveness in enhancing the business performance. However, any firm should consider some critical factors before getting into any alliance Ebgu (2006). Alliance entails the need for working in a new cultural environment. The business house has to consider the adaptability of their workforce before creating an alliance. The operational practices of the firms may differ and be the reason for disputes that may hamper the existence of the firm. Yoshino and Rangan (2009) explained that creating an alliance is a time taking process and may develop situations fostering tension, frustration and suspicion on the part of the allies. The outcome of the alliance may always not be similar for all the allies, one can gain while the other can lose.
Gleason et al. (2009) explained that the fact that strategic alliances have very little legal considerations encourages the firms in alliance to indulge in unprofessional manners for reaping the benefits of the process. Humphrey et al. (2010) added that strategic alliance is not always successful in maintaining the identity of the firms, in some occasions the dominating firms tends to take over the submissive firm. Such an instance was observed a few years back in the alliance between Amazon.com and Borders Books. The most suspicious factor in an alliance is maintaining the consumer base of the firms; one firm may extract the consumers from another because of its brand or quality service. Akio (2009) reflected that often firms get engaged in a hostile situation regarding the process of operation of the partnership.
2.9 Role of key individuals in Strategic Alliance:
With the success of a strategic alliance key role is clearly defining the roles and responsibilities of the stakeholders involved in the process (Kauser and Shaw, 2006). Each firm should assess the strengths and weaknesses of its employee base and managers and assign duties accordingly. The organisations have to consider all the aspects of the alliance including managerial, operational, documentation of financial and tax related activities, etc. The employee base has to be thoroughly connected with the process of alliance and understand each other’s managerial process and resources. It should be ensured that the pitfalls of the alliance are covered. The employees have to believe in the vision of the alliance and align their personal objectives with it.
The managers of the firms play an important role in developing a stable environment for the alliance. The managers must communicate with the employees and share with them the positives and negatives of the alliance. Ebgu (2006) noted that alliance or not manages should always try to utilise the full potential of the resources available to the company. Akio (2009) added that to change in the working process and work environment of the firms, employees may find it difficult to deliver their services. In such situations, it is the duty of the managers to ensure that the employees clearly understand the complicacies in the process of alliance and offer them suggestions to cooperate with the organisation. Yoshino and Rangan (2009) stated that strategic alliances often create conflict among the work groups of both the firms, it is the duty of the manager to evaluate a conflict resolution system for the alliance. The stakeholders of the firms must have proper knowledge of the alliance and commit to the cause (Das and Teng, 2009). Without the support of the stakeholders the outcomes of strategic alliances often become unsatisfactory and create hostile situations in the business environment.
2.10 Summary:
The above literature review focused on explaining and analysing the different aspects related to the formation of a proper strategic alliance. The researcher observed the explanation of the process by different scholars and the variations in their definitions. The types of strategic alliances that are commonly being used in the present corporate scenario were also analysed. The secondary data also explained the importance of stakeholder support, trust and control in the formation of a strategic alliance. The analyst has tried to evaluate the reasons behind the forming of alliances and compared them with joint ventures and mergers. The above study has aided the researcher in understanding the process of strategic alliance and the reasons behind its growth in the corporate industry.
Chapter 3: Research Methodology
3.0 Introduction
Research methodology is a science of studying the techniques of performing the research scientifically. In this research the researcher has provided the approach, philosophy, design, tools and techniques along with the proper justification. The researcher has selected appropriate research methods and its aspects for understanding the topic of the study.
3.1 Methods Outline
In the opinion of VanderStoep and Johnson (2009), method outlines provides the basic structure of the methodologies used in the study. For studying the subject topic, the researcher has considered positivism research philosophy, deductive research approach, and descriptive research design. Data have been collected from secondary and primary sources and analysed for understanding the process of strategic alliance and its impact on the global corporate sector. Research ethics, validity and reliability have been maintained while collecting responses from the chosen sample.
3.2 Research Onion:
Saunders et al. (2009) acknowledged that it is necessary to unfold each layer of the research onion, to methodically derive a conclusion for the study. Each layer of the research onion denotes steps to conduct the study.
Figure 5: Research Onion
(Source: Saunders et al., 2009, p – 52)
Kothari (2008) criticized that the layers are not chronologically placed. Data collection and analysis layers that are placed as the innermost layer should however be the primary step of performing the study. However, the research onion developed by Saunders is considered more suitable and the helps researcher to logically perform the study by unfolding each layer of the onion.
3.3 Research Philosophy
Figure 6: Research Philosophy
(Source: Johnson et al., 2007, p – 109)
Sekaran and Bougie (2010) pointed out that research philosophy is concerned with the search of knowledge applicable within the research. The research philosophy includes positivist (researcher collect facts and then studies the relation of one set of factors with other), phenomenology (analyzing the difference between human beings in their role as social factor) and realism (consider what is being felt by senses that might not be actual thus requires rational judgment of human mind).
3.3.1 Justification and limitations for selection positivism philosophy
The researcher has chosen positivism approach for the present study. Being a positivist, the researcher has collected facts from the respondents and other secondary data to finally derive conclusion based on the need of strategic alliance to create growth opportunities within the international market. The positivism approach is more scientific in nature (VanderStoep and Johnson, 2009). The conclusion derived from choosing the approach is considered as actual and scientific that would not have been possible had the research chosen interpretive or realism approach for the study. However, positivism bars the scope of imagination and assumptions which limits the findings of the study. Moreover subjects like human behaviour cannot be illustrated in positivism philosophy.
3.4 Research Approach
Research approach is of two types: Inductive and deductive. Hesse-Biber (2010) opined that deductive approach works from general to specific mode. It is also termed as top-down approach. Conclusions logically follow from the available facts. On the contrary, the Inductive approach is “bottom-up approach” that moves from specific to broader generalizations and theories. However, the deductive approach includes certain degree of uncertainty and conclusions follow the observations.
3.4.1 Justification and limitations for selection of deductive approach
Deductive approach has been selected by the researcher in this study. As the researcher is not evaluating a new theory and judging the compatibility of the existing theories in the present conditions deductive approach is more suitable for the study. The researcher will study the existing literatures and critically analyse them. The researcher will also gather primary data for comparing the validity of the theories. The researcher draws conclusion of the study based on these comparisons and evolutions. Deductive approach also aids the researcher in representing the data collected in graphical and statistical manner (Johnson et al. 2007). However, deductive approach is mainly used for quantitative studies and some factors involved in the process are beyond the control of researcher.
Figure 7: Steps involved in Deductive Approach
(Source: Johnson et al., 2007, p – 96)
3.5 Research Design:
The research design is selected on the basis of the knowledge of the researcher regarding the research aims and objectives. In general three typos of research design are used for conducting an academic or social research namely, explanatory, exploratory and descriptive. Explanatory o exploratory research design is used in situations where the research does not develop a formal set of objectives or questions and does not have sufficient knowledge about the research topics (Bryman, 2008). Descriptive design on the other hand is used for a constructive research that has a set of objectives and questions. Descriptive design is used for evaluating answers to questions with what, how, when, where and who.
3.5.1 Justification and limitations for selection of Descriptive design:
The research undertaken by the analyst is formal and has a set of objectives and aim to be evaluated. Descriptive design is suitable for structured and formal researchers and provides the scope of an in-depth analysis so that the researcher can gather reliable and valid information for conducting the study fruitfully (Crowther and Lancaster, 2012). The study is also bound by time constraint and the researcher had conducted cross sectional survey that is supported by descriptive design. The most important characteristics of descriptive design is that it provides the researcher with a bigger range of respondents for gathering primary data. However, descriptive design does not intend to improve or modify the aspects discovered in the study.
3.6 Sampling Method:
Sampling methods have been broadly categorised into two segments namely, probability sampling and non-probability sampling methods. In probability sampling, the analyst selects the respondents randomly but the analyst should ensure that the sample represents the entire population of the research (Cameron, 2009). In non-probability sampling, the respondents are not selected randomly but on a purposive basis.
In this research, the author uses cluster form of probability sampling as the researcher is gathering primary research from a varied group of respondents like business analyst, journalists, automotive experts, employees and managers of Shaca Construction and Urban Fabrik. Cluster sampling segments the different groups of participants but analyses the data gathered in a collective manner. The primary disadvantage of this sampling technique is that there is a high chance for over or under representation of any cluster (Leavy and Hesse-Biber, 2010). The total sample size selected for the research was 100 participants out of which 55 respondents have send back proper answers.
3.7 Data Collection Methods:
Data collection in a research can be of two types namely primary data and secondary data. Primary data represents the fresh data that has never been published before and the researcher gathers it from the respondents of the study (Ellis and Levy, 2009). Secondary data represents data collected from previously published studies like journals, books, press releases, websites, etc.
In this study, the analyst will use both types of data collection methods for evaluating the research aim, objectives and questions. The researcher will gather the primary data from the samples by distributing survey questionnaires. The secondary data will be collected from libraries and online databases. The questionnaires were prepared separately according to the clusters however; the analysis is focused on the response provided by the employees and managers of the selected organisations.
3.8 Research methods:
Toloie-Eshlaghy et al. (2011) mentioned that two types of research methods can be used for analysing the contents of a research. These are quantitative and qualitative research. Quantitative data is used for analysing the primary data collected from the participants; it aids the researcher in representing the data in a graphical and statistical manner. Qualitative data is mainly used for analysing secondary research; it provides a descriptive and explanatory view of the data collected during the research.
In this study, the researcher will use both the methods of research for analysing the response of the participants. This will aid the researcher in evaluating both descriptive and explanatory view of the research. The researcher can identify the mental aspects with the qualitative research and also understand the present situations in the automotive industry with qualitative research.
3.9 Research Questions:
- How far the strategic alliance would be able to contribute in unifying the international business sector?
- Why Shaca Construction and Urban Fabrikformed strategic alliance between them?
- How has strategic alliance affected the business processes and profitability of Shaca Construction and Urban Fabrik?
- Have there been any demerits faced by the companies because of such alliance?
3.10 Research Ethics:
Denzin and Lincoln (2011) stated that ethics define the legality of the research. The researcher had ensured that the confidentiality of the respondents and the primary data collected for the study. All the data collected were used only for academic purpose. The researcher had framed the questionnaires so that it does not hut the emotions or feelings of the respondents. The researcher has strictly followed the code of ethics provided by the University.
3.11 Research Limitations:
The limitations of the research describe the complexity the process of conducting the study (Ellis and Levy, 2009). In this case, the limitations arise because of the time and money constraints. The researcher being a student did not have access to many valuable resources which could have helped in concluding the study. Moreover, the authenticity of the answers provided by the respondents is another limitation of the research.
3.12 Summary:
Choosing an appropriate methodology aids the analyst in conducting the study smoothly. In the above chapter, the researcher has explained the choice of the research methodology along with proper justifications. The researcher has attempted to fulfil the requirements of the research by staying within the ethics of the research.
Chapter 4: Presentation of Data
4.1 Introduction:
This chapter of the research reflects the primary data that have been collected from the samples. The samples here represent the employees and managers of Shaca Construction Construction and Urban Fabrik. The employees were enquired with the help of a survey questionnaire and the managers were asked by email. The responses were gathered and analysed to evaluate the conclusion of the study and fulfil the research objectives. The initial number of respondents considered was 100 but only 55 of them responded properly. Among these 55, 30 were employees of both the organisations and 10 managers were there. The rest of the responses were from business experts, journalists and automotive experts that are considered in this presentation.
4.2 Quantitative Questionnaire for employees:
| Organisation:_________________________ Name of the employee:_________ Age:____ Sex: _____ Designation:________ Department:_________ |
Q.1 How long have you been working with Shaca Construction and Urban Fabrik.?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Above 10 yrs | 4 | 30 | 13% |
| 7-10 yrs | 7 | 30 | 23% |
| 5-7 yrs | 6 | 30 | 20% |
| 2-5 yrs | 7 | 30 | 23% |
| Less than 2 yrs | 6 | 30 | 20% |
Table 1: Number of yrs with organization
Figure 8: Number of yrs with organization
Q.2 Do you think that the alliance between Shaca Construction and Urban Fabrikwould benefit both the companies?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Yes | 22 | 30 | 73% |
| No | 6 | 30 | 20% |
| Can’t Say | 2 | 30 | 7% |
Table 2: The alliance between Shaca Construction and Urban Fabrikwould benefit both the companies
Figure 9: Whether the alliance between Shaca Construction and Urban Fabrikbenefit both the companies
Q.3 Do you agree that the alliance affected your organisational culture and work environment?
Figure 10: Effect of Alliance on the organisational culture and work environment
Q.4 What are the effects of the strategic alliance between Shaca Construction and Urban Fabrik?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Improved working conditions | 4 | 30 | 13% |
| Excessive work Pressure | 7 | 30 | 23% |
| Better growth opportunities | 9 | 30 | 30% |
| Implementation of new managerial strategies | 5 | 30 | 17% |
| Better organisational performance | 5 | 30 | 17% |
Table 4: The effects of the strategic alliance between Shaca Construction and Urban Fabrik
Figure 11: The effects of the strategic alliance between Shaca Construction and Urban Fabrik
Q.5 Do you consider that strategic alliance is better than joint ventures and mergers?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Strongly Agree | 6 | 30 | 20% |
| Agree | 9 | 30 | 30% |
| Neutral | 3 | 30 | 10% |
| Disagree | 7 | 30 | 23% |
| Strongly Disagree | 5 | 30 | 17% |
Table 5: Is strategic alliance better than joint ventures and mergers
Figure 12: Is strategic alliance better than joint ventures and mergers
Q.6 What kind of changes in have you noticed in the global market as a result of strategic alliance?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Controlled Competition | 4 | 30 | 13% |
| Enhanced business growth opportunities | 7 | 30 | 23% |
| Better brand Equity formation | 7 | 30 | 23% |
| Larger Consumer Base | 9 | 30 | 30% |
| Better organisational performance | 3 | 30 | 10% |
Table 6: Changes noticed in the global market as a result of strategic alliance
Figure 13: Changes noticed in the global market as a result of strategic alliance
Q.7 Do you agree that strategic alliance of Shaca Construction and Urban Fabrikwill boost the employee productivity, improved work processes?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Strongly Agree | 9 | 30 | 30% |
| Agree | 11 | 30 | 37% |
| Neutral | 1 | 30 | 3% |
| Disagree | 6 | 30 | 20% |
| Strongly Disagree | 3 | 30 | 10% |
Table 7: Strategic alliance of Shaca Construction and Urban Fabrikwill boost the employee productivity, improved work processes
Figure 14: Strategic alliance of Shaca Construction and Urban Fabrikwill boost the employee productivity, improved work processes
Q.8 The alliance initiated changes in the work culture of your company, do you agree?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Strongly Agree | 8 | 30 | 27% |
| Agree | 13 | 30 | 43% |
| Neutral | 2 | 30 | 7% |
| Disagree | 3 | 30 | 10% |
| Strongly Disagree | 4 | 30 | 13% |
Table 8: The alliance initiated changes in the work culture of your company
Figure 15: The alliance initiated changes in the work culture of your company
Q.9 What are the negative impacts of this strategic alliance on the organisational operations?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| May not be mutually beneficial | 9 | 30 | 30% |
| Time taking process | 7 | 30 | 23% |
| Lose of customers to ally | 8 | 30 | 27% |
| Disputes regarding work culture | 4 | 30 | 13% |
| Others | 2 | 30 | 7% |
Table 9: The negative impacts of this strategic alliance on the organisational operations
Figure 16: The negative impacts of this strategic alliance on the organisational operations
Q.10 What do you think is the motive behind this strategic alliance?
| Options | Number of Respondents | Total Respondents | Response Rate (%) |
| Technological transfer | 3 | 30 | 10% |
| Sharing of SCM, resources | 6 | 30 | 20% |
| Component manufacturing through economies of scale | 9 | 30 | 30% |
| Wider sales reach | 7 | 30 | 23% |
| More brands/models to offer | 5 | 30 | 17% |
Table 10: The motive behind the strategic alliance of Shaca Construction and Urban Fabrik
Figure 17: The motive behind the strategic alliance ofShaca Construction and Urban Fabrik
Chapter 5: Analysis of Data
5.0 Introduction:
This portion of the research explains the information gathered from the respondents. The researcher has presented the data gathered in the previous chapter with the help of graphs and tables. These statistical representations will be explained in a theoretical manner in the succeeding section of the chapter.
5.1 Quantitative Analysis for employees:
Q.1 How long have you been working with Shaca Construction and Urban Fabrik?
Among the 30 employees, employees working atShaca Construction Construction and Urban Fabrik for 7-10 yrs and 2-5 yrs are 23% each. Again, employees working for 5-7 yrs and less than 2 yrs are 20% each. The numbers of employees who have spend more than 10 yearsare only 13%.
Q.2 Do you think that the alliance between Shaca Construction and Urban Fabrik would benefit both the companies?
The majority of the respondents (73%) think that the alliance will be beneficial for both the companies while 20% think negative for the alliance. 2% chose to stay neutral on the matter.
Q.3 Do you agree that the alliance affected your organisational culture and work environment?
37% of the employees think that the alliance has affected their organisational culture and work environment. 26% strongly support this statement. On the other hand, 20% disagreed and another 10% of the employees strongly disapprove of this statement while 7% remained neutral in this matter.
Q.4 What are the effects of the strategic alliance between Shaca Construction and Urban Fabrik?
30% of the respondents think that the alliance provides opportunities for growth, 23% think that it has resulted in excessive work pressure for the employees while 17% each think that a strategic alliance has involved new managerial strategies in the organisation and the performance of the organisation has improved. The remaining 13% think that alliance has provided better working conditions for them.
Q.5 Do you consider that strategic alliance is better than joint ventures and mergers?
20% strongly agree and 30% agree with this statement, 10% remained neutral on this view. 23% disagree and further 17% strongly disagreed with the fact.
Q.6 What kind of changes have you noticed in the global market as a result of a strategic alliance?
30% of the respondents’ stated that the consumer base has enhanced due to alliances. 23% each reflected growth in business opportunities, 13% voted for controlling competition and the remaining 10% selected growth in organisational performance.
Q.7 Do you agree that the strategic alliance of Shaca Construction and Urban Fabrik will boost the employee productivity, improved work processes?
The majority of the participants (30%) strongly agreed with the above statement and further 37% agreed. 3% stayed neutral on this assertion while the remaining 30% disagreed with the statement of which 10% were strongly against this proposition.
Q.8 The alliance initiated changes in the work culture of your company, do you agree?
Major chunk of the respondents (27% in strongly agree and 43% in agree) have agreed to this assertion. 7% did not comment on the issue, 10% disagreed with the statement and 13% strongly disagreed.
Q.9 What are the negative impacts of this strategic alliance on the organisational operations?
30% of the respondents think that the alliance may not bear similar results for both the organisations. 23% state that it is a time taking process and 27% again doubt that one company lose its customers to the other. 13% believed that the strategic alliance creates disputes in the work environment of the firms and remaining 7% opted for other demerits such as malfunctioning operational practices, lack of legal considerations, etc.
Q.10 What do you think is the motive behind this strategic alliance?
Once again 30% of the respondents have supported sharing of resources for product development. 23% selected wider consumer reach, 20% selected developing SCM process, 17% selected developing new brands and products and the remaining 10% supported technology transfer.
5.2 Qualitative Questionnaire for managers:
Q.1 How will the alliance help in developing a sustainable future for both the companies?
| Responses | ||
| Three managers said that the alliance will develop the resources of both the companies | Four managers favoured the scope of reaching a larger consumer base | Three managers said it would improve the work cultures and employee productivity. |
Table 11: Contribution of alliance in developing a sustainable future for both the companies
Q.2 What will be the effect of strategic alliance on the workforce of both the organisations?
| Responses | |||
| Two managers strongly believe that as the work culture changes and the employees will gain an ample opportunity to learn and enhance their skills | Four managers stated that initially the change will be resisted and this may lead to the hostile internal environment. | Three managers said that the alliance will provide hope for growth and opportunities to the employees | Remaining one manager stated that amalgamating the diverse workforce to two companies is a time taking process which may lead to building up of frustration among the employees. |
Table 12: The effect of strategic alliance on the workforce of both the organisations
Q.3 What are the demerits of entering into a strategic alliance?
| Responses | ||
| 2 managers stated that it may not be mutually beneficial | 4 managers stressed the issue of customer loss | Remaining 4 managers it reduces the quality of work |
Table 13: The demerits of entering into a strategic alliance
Q.4 How will the alliance process influence the profit structure of both the organisations?
| Responses | ||
| Three managers said that the alliance will increase the annual earnings of the companies | Six managers explained that while profit may increase but it may not be equal for both the companies | One manager said the profit will initially decrease as the alliance need sufficient time and money to output its full potential |
Table 14: The influence of alliance process on the profit structure of both the organisations
Q.5 What type of cost benefits, revenue sharing of both the organisations is associated with the alliance process?
| Responses | |
| 6 managers stated that the cost benefits will depend on the location of the production house and the marketplace needs. | Four managers think that the employee productivity of the firms should be the basis for sharing of revenue and costs of operations. |
Table 15: Type of cost benefits, revenue sharing of both the organisations is associated with the alliance process
Chapter 6: Discussions and Interpretations of Findings
6.0 Introduction:
This chapter focuses on explaining the information gathered from the respondents with the help of quantitative and qualitative analysis. The researcher will interpret the data presented and analysed in the previous two chapters. The information from these data will help the researcher in deriving a fruitful conclusion of the study.
6.1 Interpretations of Quantitative Research:
Q.1 How long have you been working with Shaca Construction and Urban Fabrik?
The above responses show that around 56% of the employees are employed in the companies for more than 5 yrs. This shows that both Shaca Construction and Urban Fabrikhave a good employee base and a stable organisational culture which retains the employees. The remaining number of employees shows that recruitment of young and energetic talent is also being done by the companies. It can be stated that organisational culture of both the companies is suitable for employees. This also reflects that the growth in the automotive industry is the outcome of optimum utilisation of the human resources.
Q.2 Do you think that the alliance between Shaca Construction and Urban Fabrikwould benefit both the companies?
Most of the respondents believe that the alliance will help the companies grow and develop a competitive advantage against other competitors in the market. Moreover, factors like an amalgamation of resources, enhanced consumer base are also beneficial for the organisations. However, 20% of the employees are against the alliance as they think it will affect the work culture and organisational behaviour. Other factors like loss of consumers and profitability sharing are considered by these employees. The confusion regarding the sharing of benefits may also hamper the prospects of the alliance. The firms have to nurture the alliance in the proper manner so that they can enjoy the benefits of the process.
Q.3 Do you agree that the alliance affected your organisational culture and work environment?
The responses reflect that strategic alliance influences the organisational culture and the work environment of a company. However, the influence may bear positive or negative results. Alliances often results in increased work pressure or changes in the work structure of the company. The ability of the employees to cope up with these changes defines the effectiveness of the alliance. However, some of the respondents don’t think that the alliance has affected the organisational culture or the work environment. The belief behind this statement is as both the companies belong to the automotive industry, the work style and structure should not be affected by the strategic planning process. This can be because either the employees are not directly related to the department of alliance or are in the lower employee group.
Q.4 What are the effects of the strategic alliance between Shaca Construction and Urban Fabrik?
The response of the employees suggests that the strategic alliance of the organisations has both positive and negative effects in their organisations. However, most of the employees think that it is a positive factor in developing a better future for the organisations and the employees. The performance of the organisations is expected to increase as sharing of resources takes place. However, strategic alliance also impacts the work culture of the organisation in a negative manner which has to be managed by the firms for pulling out the maximum benefits from the alliance. The employees will have to be trained for adapting to the changing organisational environment.
Q.5 Do you consider that strategic alliance is better than joint ventures and mergers?
Most of the employees agree that strategic alliance is better than joint ventures and partnerships as the organisations can keep their own identity and also gets a chance of developing their business skills. Joint ventures and mergers on the other hand is more authenticate and has a solid legal background which decreases the risk of failure of the partnership. Moreover, the number strategic alliances might have increased rapidly but the number of successful strategic alliance is very low. However, the marginal difference between the number of respondents agreeing and disagreeing with this statement shows that there lots of confusion regarding the importance and benefits of all these merging procedures.
Q.6 What kind of changes have you noticed in the global market as a result of a strategic alliance?
Contrary to the believe that strategic alliance can result in loss of customers, the participants have highlighted that the customer base of the organisations in the alliance is bound to increase as they can cover a larger market place. This leads to growth in consumer perception of the brands and better business opportunities. The organisational performance will also improve via the sharing of the resources of the allies. As firms are getting merged the competition is reducing but scholars argue that the decrease in the competition is also hampering the quality of the product and services. Moreover, the alliance can distract the focus of the firms from the consumer needs and requirements which can result in loss of customers and eventually result in a failed alliance and worsen the conditions of the global market. Scholars argue that the changes in the global market are influenced by the economic stability or instability rather than the formation of alliances.
Q.7 Do you agree that the strategic alliance of Shaca Construction and Urban Fabrik will boost the employee productivity, improved work processes?
Most of the participants have supported the alliance between their companies as they think it will enhance the growth of the companies as well as their personal growth opportunities. Sharing of resources in the new production house will also help in innovating new techniques that can attract the consumers. However, some of the respondents feel that change in the work environment may be harmful to the employees and the productivity may fall. The process of adapting to the changing work structure should be thoroughly understood by the employees, the aims and objectives of the alliance should be aligned with the personal growth of the employees for ensuring better employee performance.
Q.8 The alliance initiated changes in the work culture of your company, do you agree?
Going with the majority of the respondents, it can be observed that a change is obvious in the work culture of the organisations entering into a strategic alliance. As new resources will be included and new plans will be formed the employee has to adjust to the situations for supporting the objectives of the organisations. However, some of the respondents think that the work culture may not be affected by the alliance as formation of new plans will be on the same work line as before. The change can have a positive or negative impact on the work structure depending on the flexibility of the organisational structure. Both the organisations have to take significant steps towards merging their interests for ensuring that the employees are engaged in the process of alliance.
Q.9 What are the negative impacts of this strategic alliance on the organisational operations?
The response of the employees reflects that alliance when considered as a whole may enhance the consumer base of the firms but on an individual basis one firm may lose its customer to the other. The employees have more or less voted for each of the options that raises questions about the employee comfort regarding the alliance of Shaca Construction and Urban Fabrik. The employees voted most of the benefits of the alliance which can also impact the personal careers of the employees. The fact that alliance takes time to be fully operational is also a major factor as competitors of the firms may take advantage of the situation. Other forms of partnerships like joint ventures and mergers which are less time taking and have better legal bonding can also be considered before going into an alliance.
Q.10 What do you think is the motive behind this strategic alliance?
The corporate motive behind this strategy has been described in the literature review chapter of the study. However, the aim of the alliance is to develop new products by sharing their human and non-human resources. The alliance will help the firms to target new markets and improve their supply chain management. Monetary benefits will depend on the success of the new products developed by the alliance process. The ultimate aim is to reduce the cost of operations and develop new products for capturing new markets which will lead to business expansion and also develop sustainable future prospects for the allies.
6.2 Interpretations of Qualitative Research:
Q.1 How will the alliance help in developing a sustainable future for both the companies?
Out of the 10 managers, 3 stated that the alliance will develop the resources of the both the organisations. This will help the firms in developing a sustainable future for the alliance and the companies. Four other managers favoured the scope of reaching a larger consumer base. According to them, as more consumers can be reached the number of sales will grow and hence the market will be stable for the alliance. However, reaching a larger consumer base also means that the alliance has to fulfil the needs of the consumers that will be diverse in nature and taste. The remaining three managers stated the alliance will improve the work culture of the organisations and hence the employee productivity thus creating a sustainable future for the alliance. However, the positive impact of the alliance on the work culture is an assumption and may go the opposite way also. Thus, developing their resources will be the best manner to gain a competitive advantage in the market.
Q.2 What will be the effect of strategic alliance on the workforce of both the organisations?
Two managers stated that a change in the work culture will provide the employees new opportunities for enhancing their skills and knowledge base. However, four managers highlighted that the employee base may resist the change in the initial stages this can also hamper the future outcomes of the alliance. The internal environment has to be properly nurtured so that the employees can adapt themselves to the changing work culture and environment. On the other hand, three managers said that the employees will be encouraged by the alliance as it will develop opportunities for their personal career growth. One of the managers argued that amalgamating the diverse workforce is a time taking process and can lead to building of frustration among the work force.
Q.3 What are the demerits of entering into a strategic alliance?
Two of the managers explained that the alliance may not be successful for both the companies depending on their process of product development and marketing techniques. Four managers highlighted that creating an alliance may result in loss of customers. Brand loyalty of the consumers will also play a big role in the success of the alliance. The remaining four managers provided a different view and stated that the alliance can also lead to a reduction in the level of quality of the products and services. The changes in the work culture and structure have to be maintained properly so that the process of developing the products is not hampered. Sharing of resources and knowledge should develop the quality of the work but proper utilisation and implementation is also necessary for achieving the desired outcome.
Q.4 How will the alliance process influence the profit structure of both the organisations?
Three managers stated the alliance will increase the annual earnings of the firms. They asserted that Shaca Construction is well known for providing excellent services as far as timely delivery of constuctiuon projects are concerned. Urban Fabric is famous for its unique quality and craftsmanship in construction projects, particularly for refurbishments and refits. Alliance between the two construction companies will definitely help to maintain control in terms of cost, quality and time. As a result of undertaking more successful projects, it will be be possible to earn economies of large scale and increase profits.
Six managers argued that the profit may enhance but it may not be equal for both the companies in the alliance.. One of the managers stated that in the initial stages of the alliance, the firms should not look out for profit. They should focus on understanding the market needs and demands and build their product developing and marketing strategies.
Q.5 What type of cost benefits, revenue sharing of both the organisations is associated with the alliance process?
Six managers reflected that the cost and the revenue benefits will depend on the location of the production house and the target market requirements. The managers stressed the alliance will help in the implementation of better technology, shared control and sustainable production. The location of production house will also depict a similar kind of advantage to the firm. On the other hand, four managers criticise that the cost and revenue should be shared among the allies on the basis of their employee productivity or contribution towards the objectives of the alliance. This will reduce the chances of disputes among the organisations and also enhance the employee productivity of the firms. The outcome can lead to the development of a sustainable competitive advantage in the market against the competitors. As the legal formalities in a strategic alliance are less in comparison to JVs and mergers, the chances of disputes regarding profit sharing are high.
Chapter 7: Conclusions, Implications and Recommendations
7.0 Introduction:
In the words of VanderStoep and Johnson (2009), conclusion of a study reflects the effectiveness of the study and the understanding of the topic by the researcher. This research aimed at evaluating the reasons for the growing number of strategic alliances in the global corporate sector and also identifying the effects of this process on the business houses. The researcher explains and described various theories and discussions related to strategic alliance. The researcher has selected the alliance between Shaca Construction and Urban Fabrikfor understanding the process of strategic alliance and its impact on the organisational performance. This chapter will present the triangulation of the theories used and primary data gathered to fulfil the objectives of the research. The analyst will also present suitable recommendation based on the study and the scope for further research on the subject topic.
7.1 Objective Linking:
Objective 1: To study the effectiveness of strategic alliances in the international market.
The objective here is to understand the contribution of strategic alliance in the global market. The researcher has linked this objective in the questionnaire of primary data in the questions 2,4, 6 and 9 of the quantitative analysis and question 1 and 3 of the qualitative analysis. The employees think that the alliance had some positive as well as negative contributions in their organization. Most of the employees stated that while the alliance gains new customers, it may result in loss of customers for the allies. The organisational performance of the firms can yield both upward and downward trends. The crucial factor is the alignment of employees’ personal objectives with the objectives of the alliance. Moreover, strategic alliance also induces sharing of knowledge, skills and resources to enhance the productivity and provide quality output. The participants also stated that as the organisation can reach larger consumer groups, the future prospects of the sustainability in the marketplace enhances for the organisations. In the literature review section, the researcher has explained the impact of strategic alliance in “international strategic alliance”, “logic behind creating alliance” and “gaps in strategic alliance”. It has been observed, scholars argued that as strategic alliances are created in the global market, the competition is decreasing and with it the level of quality of the products and services. The researcher evaluated that creating a strategic alliance is easy but sustaining the alliance in the market for generating business growth is the challenge faced by the corporate sector. The literature review section reflected that Europe and Asia are the two continents leading the race in the creating alliances. The connection between these global markets is that Asia has the two of most developing or emerging market places (India and China) while Europe has the investors. An increase in the number of alliances and other forms of partnerships can create a friendly environment in the corporate sector but the necessity of such an environment is the question of the hour.
Objective 2: To critically analyse the rationale behind adopting strategic alliance techniques.
The researcher here objectifies to understand the reasons behind the creation of an alliance in the international business. This objective has been reflected in the quantitative questions 5 and 10 and on the qualitative question number 1. The respondents explained that the alliance is created for entering into a new market place with new or existing products and services or developing the business resources for creating a sustainable future prospect in the competitive market. Focussing on the alliance of Shaca Construction and Urban Fabrik, the aim is to develop better construction by sharing their human and non-human resources. The alliance will help the firms to improve their supply chain management and streamline their organisational operations. The customer base of both the companies is expected to enhance as they join hands. Moreover, in answer to question number 5 of the quantitative analysis, the participants selected strategic alliance above joint ventures or mergers and explained that the strategic alliance retains the identity of the allies and develops the brand equity for the alliance as well as the organisations in it. However, any precise reason could not be obtained as the responses marginally differed on this question.
The literature review section analysed this objective in “logic behind creating alliance” and “comparison between joint ventures, partnerships and strategic alliance”. The researcher observed that most of the scholars agree that strategic alliances are created to gain a competitive advantage in the marketplace and develop better future prospects. As the global market is thriving with competition, the business houses aim to acquire as many consumers as they can. Moreover, aspects like globalisation and FDI have created opportunities for these firms to grow their consumer base. In case of Shaca Construction and Urban Fabrik, they have the opportunity to highlight their service and image in a broader marketplace with their existing brand value and the brand value of their ally. Some of the scholars also implied that strategic alliance is a safe passage for new companies to sustain in the competition filled business environment. However, the ultimate aim is to earn as much market space by increasing the number of customers and reducing the number of competitors.
Objective 3: To assess the impact of strategic alliance between Shaca Construction and Urban Fabrikto evaluate the benefits and pitfalls for the firms.
This objective focuses on the strategic alliance formed between Shaca Construction and Urban Fabrik. The objective is to identify and analyse the positive and negative aspects of the alliance of both these companies. The researcher has linked this objective with question number 2, 3, 4, 7, 8 and 9 of the quantitative analysis and all the questions of the qualitative analysis. According to the responses of the participants, the alliance has affected their organisational culture and work environment. The alliance on one hand has boosted the performance of the organisation but has also created pressure on the employees to perform. Some of the respondents think that the alliance will create better opportunities for the company and their personal career growth while others think that as the managerial process is changing adaptation of the employees may reduce the skill level and the productivity. The respondents also stated that the alliance has aided in developing the skill set and knowledge base of the employees which can be utilised for amplifying the organisational performance. However, observing the lengthy process of alliance, it can build frustration or irritation among the work force and hamper the outcome of the alliance.
In the literature review section, the researcher has explained this in section “trust and control in alliance” and “role of key individuals in alliance”. The alliance between the selected companies is a blend of resource based and transaction cost allowance. At both the firms are aiming to develop new products targeting a new customer base, they have to utilise the resources available to them in the best possible manner that would ensure optimum wastage reduction and reduction of costs of operations. The alliance process is bound to influence the internal and external affairs of the companies, but the managerial personnel and the employees have to ensure that the impact is positive and beneficial for the organisations. The negative aspects that are involved in the alliance process should be neutralised by the firms to avail the benefits of the process. Proper allocation of job roles and responsibilities, trust and control among the allies and appropriate usage and implementation of resources will ensure that the alliance succeeds in achieving its goals.
7.2 Recommendations for the industry:
The strategic alliance is a broad topic and covers numeral aspects of the business world. Shaco Construction and Urban Fabrikare giant players in the construction world and have formed an alliance to develop their business process. After studying the secondary and the primary data collected, the researcher has gathered the following recommendations that can be utilised to sustain the strategic alliance of the companies in the competitive marketplace:
7.2.1 Alliance Strategy:
As Shaca Construction and Urban Fabrikhave entered into an alliance for better service and market entry, they have to ensure that the alliance governing methods for controlling the corporate relationship should be fair and trustworthy from both the sides. The structure of governance is one of the foremost steps in managing the process of alliance. The structure of alliance describes the process of integration and utilisation of resources of both the organisations. One of the most important factors that relate to successful governance of any alliance is managing the associated risks. Shaca Construction and Urban Fabrikhave to identify the complications implicated in the process of resource and knowledge sharing as these factors laid out the foundation for the governance.
Another important aspect that should be considered while designing the alliance strategy is developing the time frame of the alliance in which it will attain the set objectives and goals. The time frame of the alliance will reflect the financial aspects as well as the position of the organisations on the present market conditions. Time frame also lays out the foundation for the setting of short term and long term objectives of the alliance.
7.2.2 Alliance Management:
The function of the management within an alliance is to merge the objectives of the allies so that the knowledge of the entrepreneurs and the managerial authorities is not wasted. The alliance of Shaca Construction and Urban Fabrik must develop a system for managing and storing information of all the operations and planning. The knowledge sharing should be guided by a process that ensures security and authenticity of the information. This is again related to risk management in the process of alliance. Similar to the process of forming an alliance strategy, risk management should also be included in the alliance management system.
Identification, classification and neutralisation of risks should be done with the help of proper framework that can be accessed by both the allies. For example, classifying risks into two broad aspects can be performance related risks and relational risks. These risks can be further segmented into many other categories which have the potential to hamper the outcome of the alliance. Constant risk assessment is an effective process of identifying and eliminating the risks. Apart from these factors, transparency of the top authorities in briefing their workforce about the alliance is also necessary. The workforce has to clearly understand the motives of the companies and identify the benefits that can be achieved by the company as well as individual employees.
7.2.3 Alliance Capability:
With the progress in the operations of alliance activities, the managers has to assess the capability of their organisations for sustaining and supporting the aims and objectives of the alliance. The managers must ensure that the resources of the firm are in alignment with the alliance process. Estimating the capability of the alliance develops a disciplined approach and creates a process that will guide the allies to substantive growth. The employees of the organisations should be properly trained to adapt to the new circumstances and also enhance their knowledge base and skills. Both Shaca Construction and Urban Fabrikcan set up workshops that will educate the employees about the new objectives of the alliance and help them cope up with changes in the organisational culture and structure. The training process should also be accompanied by supervision and evaluation of the employees. This was the management can sort out a line of successors for carrying out the operations of the alliance.
7.3 Recommendations for future research:
The above study is mainly based on the impact of strategic alliance on the global business process. The project has studied the topic by considering the case of Shaca Construction and Urban Fabrik alliance. However, strategic alliance being a vast topic, the researcher was not able to cover all the aspects of the alliance. Further researches can be conducted on the various types of alliances that exist in the industry. The study can also focus on the influence of strategic alliance and its connection with the process of globalisation and FDI. The internal and external factors of an organisation that complicate the process of alliance needs to be studied for fully understanding the process. Moreover, other factors like financial aspects, competitors’ contribution, etc. of strategic alliance are important factors for explaining the process of strategic alliance.
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