Qualitative Analysis Of Factors Contributing To The Success Or Failure Of A Strategic Alliance

As earlier stated in the previous section, data from two case studies will serve as the basis for this analysis, furthermore, analysis of the questionnaire responses will be revealed with charts and tables to ascertain the coherency between the interview responses and the factors revealed in the analysis of the case studies. This is further elaborated in the chart below.

Case Study

This case study is exploring the failed strategic alliance that occurred between; Volvo (Swedish car manufacturing firm) and Renault (French car manufacturing firm). Although cordial relationship has existed between the two firms for a couple of decades before 1990, in 1990 Volvo and Renault collaborated and formed an alliance (Renault bought 25% of Volvo’s car production section and Volvo became the owner of 20% of Renault’s motorcar section, furthermore, they both held 45% of each other’s company’s truck division).

The two companies, being highly successful automobile firms, many thought the alliance will lead to the obliteration of competition and will grant them total control of the automobile market. Unfortunately, the Volvo-Renault Alliance only lasted for 3 years. In other to completely grasp in depth the factors that contributed to the early demise of the alliance, the analysis incorporates the various perceptions of respondents on the factors considered by the two giant automobile firms that culminated into the formation of the alliance and the challenges that eventually led to the demise of the alliance.

Brief Information on Volvo and Renault Automobile Firm

Volvo is a Swedish automobile firm established 1927 by Assar Gabrielson and Gustaf Larson, it currently boasts of more than 2,300 local dealers worldwide and its biggest markets exists in Sweden, China and the United states of America. The company deals in the production of both trucks and cars, with trucks contributing to about 63% of its overall net sales. Olof Pearson has been holding the position of CEO since 2011. Renault is a French automobile car manufacturer established in 1898 by Louise Renault and his brothers, the firm quickly made a name for itself and gained popularity in motor racing by notching up a good number of wins consecutively.

Today, Renault is present in well over 118 nations, boasting of 38 plants and 13,300 outlets. Major markets exist in France, brazil, Russia, Argentina, and Germany. Renault group is headed by CEO Carlos Ghosn, Renault is divided into 4 sections; Renault, Dacia, Renault Samsung Motors, and AvtoVAZ. The analysis of the research data revealed 7 themes categorized into two sections, namely, pre-alliance and post-alliance issues.

Pre-Alliance

Selection

On selection of partners by the firms, the analysis revealed that both firms understood what they stand to gain from each other in the alliance. Alliance with Renault seemed like a very viable deal to Volvo, they hope to gain in terms of financial capital and technical know-how in the production of cars since Volvo specializes more in truck production. Volvo had small output and a small range of products, this effectively barred them from competing in the global market, an alliance with a more prominent firm was the only feasible solution, and since Renault had shares in Volvo already, the decision was effortless for Volvo. On the part of Renault, it hoped to exploit to their advantage the engineering capabilities of Volvo and its renowned reputation for safety.

Objectives

At that very point in time, the alliance between Renault and Volvo will lead to the creation of the sixth largest car manufacturer, and the second largest manufacturer of trucks worldwide, some of the noted objectives for the alliance as documented in the data include;

a. The partnership was initiated because of what the two firms stand to gain in terms of production power, financial power, and quality engineering capability.

b. Volvo was adversely affected by the recession and demand for automobiles was desperately increasing, there was a desperate need for Volvo to partner with a firm that would sustain them financially and provide a financial backing that would motivate the creation of new innovations and new product development.

c. however, the data revealed that there was an undercover plan for Renault to acquire Volvo and not a partnership.

Resource Contribution

Volvo's contribution is geared more towards the development of efficient engines, while Renault produced the manpower needed for production, furthermore, on the use of technology, as at that point in time Volvo has adopted the use of CAD (Computer Aided Design) in creating its designs, while Renault is still into the use of papers and woods.

Network

In order to smoothen the relationship amidst the two firms in the alliance, each firm opened up its network to one another. This network encapsulates the industrial and social relationships, technical know-how was provided through their common suppliers rather than through competition, the networking provided an avenue for the rapid increase in innovations.

Post Alliance

Performance

Upon commencement of the alliance, the pace of innovations rose, production and sales rose and there was a significant fall in price, however, the participating firms later acknowledged that this recorded positive improvement falls way below expectation and this served for a foundation upon which the dissolution was built. While Renault affirmed that the alliance has increased the efficiency of their production significantly, volvo argued that the bigger the company the more difficult it is to ensure all its employees are giving there 100%, stating that they have not experienced any significant efficiency in performance since the formation of the alliance.

Cultural Differences

Based on the responses from the data collected, one of the most notable differences that contributed immensely to the disintegration of the alliance is cultural differences. The employees from both firms have difficulty communicating with each other as there were two distinct cultures, swedes and French. "French like to think of themselves as being better educated coming from good engineering schools" and this resulted in French employees making exclusive engineering decisions without the consent of the swedes. Despite the obvious technical advancement of the swedes, the French have a culture of engaging in vast discussions which often lad to a conclusive result. Overall, despite the technical know-how of the swedes, French managers see themselves as superior in the organizational hierarchy.

Organizational Differences

These differences are as shown in the image below:a. LeadershipThe two CEO’s have different leadership style, particularly Gyllenhammar, the CEO of Volvo. While he is considered by many as a visionary, he lacks the skills needed for a corporate successful alliance, he was never accustomed to being a follower, a listener or having a partner in leadership. This sort of totalitarian leadership that he is accustomed to creating a lot of doubts within the alliance.

b. Management

As soon as the alliance was formed, the management of both firms strived to achieve their individual objectives rather than their collective objectives, this resulted in the non-acceptance of the national differences, employers were deprived of the time to adjust to the development.

c. Trust

The alliance was inaugurated with a cross-acquisition of shares, with Renault having shares in Volvo and Volvo having shares in Renault, this was done with the purpose of generating trust. However, as earlier stated the leadership style in Volvo had an adverse effect on this process and this resulted in employees, shareholders, and investors entertaining a significant level of doubt on the credibility of Renault.

d. Alliance Restructuring

An alliance must maintain its sole purpose and its fundamental ideals and strive for collective interests. However, this was the opposite of what transpired in the Volvo Renault agreement. The alliance contract was re-enacted in favor of Renault, giving Renault a high edge in control, this metamorphosed into the loss of confidence in Renault by Volvo employees, investors, and shareholders. They saw this move as an attempt by Renault to dominate. Furthermore, Volvo feared that the Alliance will tarnish its image of quality products in north America since Renault is perceived as having low quality products.

Case Study

This case study is exploring the success story of IBM in a strategic alliance, IBM alliance structure has helped transform the company from a predominantly hardware firm to a software. There flexibility and a strength and knowledge in forming alliances have transformed the firm over the years to an all encompassing and a force to reckon with in the field of technology. They are arguably one of the most successful firms in area of alliances, they have a deepened understanding of when and how to engage in a strategic alliance and when to put an end to the alliance, IBM is currently in a successful alliance with over 200 firms, this makes them a suitable case study for this survey. As seen in the thematic image below; the following factors are contributing immensely to rate the rate successful alliance of IBM.

IBM, without doubt, faced a troublesome era in the early nineties, especially when they faced with competition they were never prepared, this led them to realize that most of it development and innovations has been internalized. IBM gave little or no importance to other innovations and developments going on around the world. In other to salvage the firm from obliteration, new explorative and exploitative alliances needed to be established. This eventually led to becoming the technology firm with the highest number of alliances and partners. As illustrated in the thematic diagram below, these are some of the factors that significantly contributed to the successful implementation of the alliance by IBM;

Nature of Alliance

IBM were quick to understand that strategic alliance provides a quick and efficent strategic change within the company, however, if the nature of the alliance is not well defined, it may undermine the expected result. They therefore understands that the nature of an alliance are in two distinct folds; exploitative and explorative. Exploitative entails the refinement and extension of existing innovations and technologies while explorative entails the experimentation and introduction of new innovations and technologies. Defining the nature of alliance gave them an edge and provide the basis for their entry and exit in any strategic alliance.

Partner Selection

IBM is meticulous in their selection of partners, they select partners based on these two main mechanisms; when they seeking to increase the speed of change of partners and when seeking for partners outside the area of their existing competence. IBM understands that changing partners of getting partners alone will not provide effective solutions, but also understanding and modifying the relationships. They understood that flexibility is sacrosanct in their strategic alliance. IBM puts the selection criteria first above any social relationship and once the partner is failing to serve its purpose, they oftentimes end the partnership without giving much thought to the social relationship existing between them and the firm.