Business alliances are arrangements between independent businesses aiming at matching goals. They develop for specific reasons and in most cases aims at reducing the cost of their products and enhancing customer services. The arrangement based on the agreement made and both members of the individual businesses are involved in management and share equally the risks involved of the business. For proper management, there is a need to follow certain principles such as developing a working place that is right for the alliance, measuring its progress and productivity, leveraging opinions and also influencing cohesion. In light of Strategic Alliances and Joint Ventures, Xerox and Fuji Xerox is an example of the case and below are the arguments on alliances basing from the example mentioned earlier;
What happened since the end of the Xerox and Fuji Xerox case?
To start with, Fuji Xerox was a joint venture between an American company named Xerox and a Japanese company named Fuji Photo Film. At the end of the case, the following noticed;
Development of Joint Enterprise Contract (JEC). This contract specified what the Board of Directors was supposed to compose. In this contract also, it is defined that Fuji Xerox management is to be selected by the Fuji Photo Film. To add on, it identified concurrent matters related to management issues. , for example, the need for financial policies and expenditure, operations of the business plans, the involvement of third parties in their agreement and also the deals on sales beyond their licensed agreed territory.
The outlined policies for product acquisition At the end of the case, guidelines were drawn specifying between the companies. Also, reimbursement policies for Fuji Xerox on costs regarding development and manufacturing established.
Escalation of competition. After Xerox and Fuji Xerox developed, other competitors entered the market offering the related product. The first one was Canon; It introduced the “New Process” copier machines that used liquid-toner instead of dry toner. There was an advantage to the Canon Company. They were a bit smaller and less costly to manufacture. Though they were challenging to use, they still were a cheaper alternative to Xerox’s dry copiers.
Xerox and Fuji Xerox became a global company. It is considered to be one of the most successful alliances made globally. Fuji Xerox’s production volume was small for its marketplace only, but through the joint venture, greater heights achieved, and the amount of production increased to reach the global market.
Increase in volumes of production. As a result of the alliance, a sufficient amount was reached to cater for the gained market worldwide. The American company is sufficient in its manufacturing skills, excellent research programs, and software capabilities. The Japanese’s Fuji Forex is useful in designing and development of hardware. In that case, it spearheaded for efficiency and an increase in the volume of production
Lessons Learned from the Above Case
The alliance is productive according to the above arguments, and it is clear that oneness is the strength. Xerox and Fuji Xerox being an example, the venture yielded fruits as it is now one of the most successful alliances between an American company and a Japanese company.
An excellent business relationship is possible.
Considering the above case, things achieved even if that alliance was based on legal contracts and formalities. This is, for instance, development, improved researches, higher managerial levels and increase in manufacturing and productivity.
Goals between two businesses in an alliance can be conflicting.
In Xerox and Fuji Xerox, management was a bit of a challenge. According to Fuji Xerox’s point of view, other companies like Canon had better single control based locally as compared to them.
The volume of production increases as a result of a joint venture.
From what I have learned from this case, the volume of production of Fuji Xerox was small, but due to the alliance, it increased. Now as a joint business, it produces enough quantities for the global market. Xerox, on the other hand, Xerox was able to reach its required volume for its excellent and by the alliance is steered development for both companies.
Adjustment cannot be hand-full and is just a growing process.
For two or more businesses to ally, there are legal procedures and required to be followed to complete the process. These legal contracts are flexible. Alliance focuses on one primary goal for both, and that is maximizing their profit.
Even a large company can sometimes face challenges such as lack of cost structure. For instance in this case of Xerox and Fuji Xerox, at around 1979, it suffered a fall in terms of market position in the copier market. There was a loss of market share, so it had to strategies its moves one of them being acquiring financial services companies.
Technological advancement achievement
One of the major concerns in an alliance is an agreement to offer technical assistance. That entails sharing and transfer of technology between the parties involved.
Porter’s Five Forces framework
Management and organization
Considered under supplier power. It gives the company a view on how the administration will affect the below factors; first, the number of suppliers involved in the supply of the product. The second point is, the uniqueness of the companies’ services considering how the company organized. The third point is the ability to substitute and hold itself in terms of performance. The fifth point is the Management of costs when the company is changing.
Management achieved through different strategies that are put in place by both companies in the alliance through their Board of Directors. These strategies can be such as the following;
Both companies to have members in the General Board of directors equally so that they can make decisions on a common goal of interest based on achieving their desire to maximize profit. Coordinated management is highly effective because they make decisions as a whole without going outside the agreement.
Developing a working place that is right for both
Businesses differ in their culture and how they operate. To manage a partnered company effectively, there is need to put into considerations some factors such as establishing an organizational structure and policies. Having a well-crafted contract will assist this as will outline the agreements reached upon the formation of the alliance.
Good management leverages differences. The businesses might be having different points of on maybe the hierarchical nature of running the business, but through a contract, a familiar voice can lay out that is acceptable by both parties. One company may lack some expertise in some areas while the other is and thus knowing their strength and weaknesses will enable them to make effective decisions.
Achieved through training, for instance, training workers of merging companies. Discussions and presentations both develop a sense of belonging and will share and exchange ideas on various aspects of their jobs such as technology. Also, they will abide by the protocols, and this will avoid blaming on one another in case a problem happens and rather than dealing with it together.
Evaluating the progress of the alliance
Higher expectations usually are expected when two businesses are in a partnership. Measures that are at the place first see if effective decision making is recommendable and their performance on running the organizations instead of measuring metrics at the early stages of the partnership.
Controlling the relationship between internal stakeholder and external stakeholder
Both have a share in the business, so it is essential to put into consideration the roles they play in the alliance before making decisions. Misalignment especially of the internal stakeholders may result in lack of interest to invest in the joint business. To achieve the attractiveness of the company, it needs to have good relations with its internal units to attract other companies to ally.
Managing the alliance portfolios
Businesses allying need to have an understanding that although they are single entities trying to benefit respectively singularly, they agree. Therefore, they need to set aside their unique strategic nature and focus on the portfolios of the alliance which are a higher target.
Acquisition of ownership should not be a target
Because the alliance was formed specifically for a specific reason, it is important to respect one’s independence. Entails letting the normal functions of individual businesses to happen with interference. In that case, expertise and the willingness to work remain intact and the self-worth of both companies upheld.
Having a relational governance
There should be mutual respect and reputation between companies entering into a joint venture. It is informal of interaction between the two companies, and it entails how the companies trust each other. Evident through reducing the contract costs, adapting costs as a result of the relationship they share.
Establishing shared ownership
Dictate the profit of each company as they will be at a mutual goal. This ownership will also entail the type of management and the hierarchy it follows. In this case, it will be easier to make decisions basing on the benefit of all and also how problems can be solved. A well-drafted contract of ownership policies is essential to ensure that it is strictly followed to the latter because management determines the success or failure of a business.
In conclusion, a business alliance is crucial as it is beneficial. It works in the advantage of both the companies in the pact in terms of competing effectively in the market, maximizing profit, governance, and improvement of managerial skills, technological advancement, risk sharing and also researches. The agreement entered by the companies is mutual.
In terms of performance, organization, and management; an alliance creates room growth and learning. Inter-Firm cooperation steers for high performance as it is a joint venture and ideas shared. Also, there will be an increase in the volume of production because of the need and expectation to perform higher. This volume increment aims at reaching a broader market from the local marketplace to even globally. When the sales increases it also increases the margin of profit being made by both companies in the joint business together.
Decision-making in an alliance is productive and efficient. The Board of Directors that established makes decisions basing on what favors both companies and their interest in respect to their cultures. The conclusions reached will then be then implemented yielding to more growth. In addition to this point, problems quickly solved. Problems and losses are part of a business and thus getting into a partnership gives the company an opportunity to address them more rapidly and effectively.
Acquiring a broader market can be achieved easily through an alliance. Taking an example of Fuji Xerox, it had a small volume of production and a smaller marketplace locally. By entering into a joint venture with the American company named Xerox, it improved and increased its capacity of production and also gained a broader market to sell its products. Together with Xerox as an alliance and joint venture, the company became a global company with its market all over the continents of the world. In that case, therefore, a joint venture can open new opportunities in the market, and that will also attract investors who will be interested in investing to the business hence increasing sales as well as the profit.