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The Global Logic Of Strategic Essay

2633 words - 11 pages

INTRODUCTION The topic under review is strategic alliances. This particular form of non-equity alliance between firms in the same industry (competitors) is becoming an increasingly popular way of conducting business in the global environment. Many different reasons of why such alliances are occurring have been recognised. These include: the increasing globalisation of the world's economy resulting in intensified global competition, the proliferation and dispersment of technology, and the shortening of product life-cycles. This critique will use Kenichi Ohmae's viewpoint on strategic alliances as a benchmark for comparison. Firstly, a summary of Ohmae's article will be provided. Secondly, in order to critique Ohmae's opinion, it will be necessary to review other literature on the topic. Thirdly, a discussion of the various viewpoints and studies, that have hence arisen, will be discussed in detail. Finally, conclusions will be drawn with implications for companies operating in today's global environment, together with suggestions for future research on strategic alliances.THE GLOBAL LOGIC OF STRATEGIC ALLIANCES The underlying argument or reasoning behind Ohmae's opinion that strategic alliances, or entente, are the only way forward for all companies competing globally. "Globalisation mandates alliances, makes them absolutely necessary." (Ohmae, 1989). The author has supported this viewpoint, that globalisation makes strategic alliances necessary as vehicles for customer-orientated value, with four issues facing today's companies: 1. The Californization of Need; 2. The Dispersion of Technology; 3. The Importance of Fixed Costs, 4. Dangers of Equity.The first issue, described by Ohmae as the Californization of Need, refers to the convergence of customer needs and preferences and the fact that the national identity of many high-quality products has virtually disappeared. Secondly, companies can no longer maintain a leadership position based solely on superior, advanced technology. This results because of the increasing number of critical technologies embedded in the majority of products, therefore, no one can keep the technology out of the hands of competitors around the globe. Thirdly, Ohmae emphasises the importance of fixed costs. He believes that companies can no longer compete by keeping their variable costs lower than their competitors. The majority of costs incurred by companies these days are fixed costs, therefore, what matters is maximising marginal contribution from fixed costs and a logical way to do this through forming strategic alliances. The final issue Ohmae identifies is dangers of equity. Today's business environment is full of imperfect options and control of a company does not necessarily translate into success. This points to strategic alliances as being a fast, less risky and profitable way to enter the global arena.Ohmae finishes his article with the "logic of entente". In this section there are two main points: the shift from...

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