Critical Evaluation Of Corporate Alliances

Summary

Corporate alliances are mostly a 50/50 bet since only about half of these ventures give returns to partners above the cost of capital. This is very worrying since alliances and partnerships are what many business models are based on. The article points out the reason as to why these alliances fail is the fact that they are traditionally managed and organized. Most alliances are normally defined by service level agreements which mainly identify what is committed to be delivered by each side rather than what they hope to attain from this partnerships. The SLAs put emphasis on the operational performance metrics and not the strategic objectives .the managers of the alliances are not sure whether they stick to the agreement made initially or renegotiate afresh.

The article focusses on Solvay which is ranked among top 40 pharmaceutical companiesthat develops neuroscience, influenzavaccine, cardio-metabolic and pancreatic enzyme products. Sincethe cost of bringing new drug discovery has gone up it has become hard for the organization to capitalize of their research skills. They therefore began their transition by choosing their suppliers Quintiles to perform the initial stages of the trial process. These two companies therefore formed a joint clinical team for every compound so that they can manage strategic and operational aspects when it comes to carrying out the clinical trials. The initial five year contract set up went well. However,there were concerns by Solvay about loss of control since the inhouse activities were outsourced.therefore, the senior executives of the two companies were to endorse and commit to the alliance strategy that included the sharing of risks and profits (Kaplan,Norton,&Rugelsojen, 2013).

Critical evaluation

From the article there are some likely shortfalls within alliance outcomes which were identified. These include putting more focus on the terms in a contract of the alliance as opposed to a joint venture, spending a lot of time in selling the alliance within the organization and not managing the strategy, concentrating on controlling the alliance and getting returns as opposed to the removal of barriers that hinder successfully executing the strategy. These issues as identified by the executives could be addressed through management systems that are based on the balanced scorecard tools. Therefore a scorecard and strategy map is to be used as a framework for the governance system when it comes to monitoring the progress towards goals and creation of incentives for the tow parties in order for them to achieve them (Zaman,&Mavondo, 2010).

It also points out the need to create a committee which will oversee the creation of the map and eventually lead to the governance process. There are also some objectives that the team came up with these are; living the alliance that meant having right leadership,culture, communication, IT, reward and recognition. The next objective is collaboration which entails creating desirable transparency .speed and process innovation is another objective which means that things are done right, leveraging the global expertise and improvement the start up and management studies. Growth is another objective hat involves the creation of the right portfolio of new products; collaborate on the decisions of the development of new compounds, improvement on the investment management. Finally value for both is the last objective. After the objectives are set out clearly the next step is coming up with the alliance strategy map. Whereby, all the company’s strategic goals are brought together so as to illustrate the existing casual linkages. Once the strategic objectives have been sorted into themes and they have been mapped there is need to create metrics which will enable the organization to tract the progress of these objectives. With all these lay out there is also the need to establish the governance that will see all these executed. Therefore critically thinking we can say that all these are important steps when it comes to realizing the success of any strategic alliances that are formed. Thisis because simply forming a strategic alliance is not enough as it mostly leads to their failure. Therefore managers should be keen in realizing the cause of failure and come up with a map and scorecard that will steer the alliance in the right direction.

Analysis

From the article I can say that Solvay relates to the organization that I work at. This is because Adis enterprises producers of plastics. Just like Solvay the organization wanted expand but did not have enough finances to do so. Therefore, the mangers decided to form an alliance with one of the companies that supplied the company with plastics .in the alliance it was stipulated that the supplier would carry out research and development of new types of plastics that they want to introduce. UnlikeSolvay, thealliance that Adis formed was very successful since from the word goes it was started out by creating a map followed by a governance process. Therefore, the alliance formed was successful and both organizations gained greatly from it.

References

Kaplan,R.S,Norton,P.D&Rugelsojen,B.(2013).Managing Alliances with the balanced scorecard.

Zaman,M.&Mavondo,F.(2010)Measuring strategic alliance success:A conceptual framework.Retrieved August 4,2013 from http://www.anzmac.org/conference/2001/anzmac/AUTHORS/pdfs/Zaman.pdfSegil,L.(20O2).5 Key to creating successful strategic alliances.Retrieved August 4,2013 fromhttp://www.forbes.com/2002/07/18/0719alliance.html