Thursday, May 23, 2013

Toyota Motor Corp: Designing Strategic Alliances in Global Competition

Part 1: Toyota Motor Corp: Designing Strategic Alliances in Global Competition Strategic alliance refers to the agreement where managers share or pool the resources of their organization as well as expertise with an oversea corporation, and how the companies share the risks and rewards of initiating a new venture. However, such relationships have to make sense for the long-term so as to sustain a meaningful value. Furthermore, high performing business organizations cannot dare to go wrong with the incorrect strategic alliances. Therefore, excellent organizations have to be plan in forging correct relationships in the global market. Toyota Motor Corporation is an international corporation and currently the global biggest automaker in relation to revenue, profits, sales and net worth according to the Fortune Global 500 (Costanzo, 2010, pp 11-15). The company was set up in 1926 as the Toyoda Automatic Loom Ltd. and it has constantly been more dynamic and productive in contrast to competitors. It has also been extensively recognized for its quality products as well as production systems. Moreover, the corporation has already entered into third generation of hybrid engine that is incredible because many manufacturers are yet to begin developing their first. Toyota has also formed long-term strategic partnerships with a lot of its suppliers for automotive components and parts, not only to realize lower costs but also to enhance the reliability and quality of its automobiles (Costanzo, 2010, pp 34-39). There are different types of strategic alliances which are mainly categorized into horizontal, vertical and inter-sectoral alliances. Horizontal strategic alliance is distinguished by collaboration that exists between only two or even more companies in the similar industry, for instance, the partnership between Toyota Motor Corp of Japan and German finest carmaker BMW who accepted to prolong their collaboration to a larger strategic alliance in an effort to challenge their global competitors as the competition intensifies. Vertical strategic alliances are characterized by cooperation between two or additional more firms in a vertical chain. Intersectoral strategic alliances are characterized by alliance between firms, two or more, that are not in the similar industry and they are also not related along a vertical chain (Dess, 2010, pp 65-70). There are a number of benefits that come with forming strategic alliances. For instance, these alliances allow each partner to focus on their respective competitive advantages. The partners are also able to learn from each other and develop competencies which can be more extensively exploited elsewhere. In addition, partnerships also reduce the political risks involved while firms attempt to enter into new markets. The firms have adequate appropriateness of resources as well as competencies necessary for them to survive (Dess, 2010, pp 84-89). However, there are several disadvantages of forming strategic alliances between firms. The companies risk losing their control of proprietary information, in particular with regard to complex transactions that require extensive coordination as well as intensive sharing of information. Difficulties in coordination may also arise due to the informal collaboration settings along with highly expensive dispute resolution. Another issue pertains to agency costs since the benefit of effectively monitoring the activities of the alliance is not completely captured by these firms, which leads to the free-rider problem. Alliances also influence the costs due to missing formal hierarchy as well as administration in these strategic alliances (Costanzo, 2010, pp 54-58). Strategic alliances today have turned into a major recipe of competitive advantages for companies and have enabled them to deal with the increasing technological and organizational complexities which have arisen in the current global market. Strategic innovation structure weaves together several dimensions to create a number of outcomes which drive growth. Core technologies along with competencies refer to internal organizational capabilities, competencies as well as assets which could possibly be leveraged so as to provide value to the customers, together with technologies, brand equity, intellectual property and the strategic relationships(Dess, 2010, pp 112-116). Since 1995 when eBay was established, it has enjoyed strong growth in revenues and has been a key player in online action industry. In 2010, the company announced that Paypal will collaborate with UnionPay of China in an effort to expand its operations in the market dominated by another Chinese competitor Alipay. This partnership would provide the customer of UnionPay with a nationwide electronic-payment network which would enable them to make online purchases from overseas websites. eBay also announced that Paypal will establish a global e-commerce hub in China in an effort to increase exports from the China. By helping the local companies to link with the global customers, would bolster the company’s transaction volumes in China by over 80 percent (Costanzo, 2012, pp 2). eBay’s distinct business model has managed to unite sellers and buyers in the online market place and it has attracted more than 221 million users who are registered. The company has also enabled e-commerce at various levels through a number of websites such as Paypal, eBay market places, Skype, Shoppng.com and Remt.com. The firms range of services and products have evolved form the collectibles to customer services, household products, among others. This range of products has also attracted many users who consist of small businesses, students, major corporations, government agencies as well as independent sellers (Costanzo, 2012, pp 2-3). Part 2: Diversification and International Strategies and Organizational Structures Diversification refers to the corporate strategy for increasing sales volume for new products as well as new markets. Furthermore, diversification may involve the expansion into new segments of a particular industry which the business already operates, or making investments in a potential business but not within the scale of the current business. Diversification is component of four major growth strategies that were defined by Market/Product Ansoff matrix, which include market penetration, market development and product development. Ansoff called attention to that diversification strategy is distinguished from other strategies. The initial three approaches are normally pursued with similar merchandising, technical and financial resources that are used for original product range, while diversification usually calls for a company to obtain new techniques, new skills as well as new facilities (Ansoff, 2007, pp 64-70). There three categories of diversification include concentric, horizontal, as well as conglomerate. Concentric diversification implies that there exists a technological resemblance between industries, meaning that the company can leverage its technological know-how so as to gain a number of advantages. For instance, a firm which manufactures the industrial adhesives may choose to diversify into the adhesives that are sold through the retailers. Technology will remain the same though marketing effort may have to change. In addition, the company may too increase its respective market share by launching a new product which helps it to earn more profit (Ansoff, 2007, pp 75-80). Horizontal diversification involves the company adding new products and services which are often commercially or technologically unrelated to the current products although that might appeal to the current customers. Such strategy is likely to increase a company's reliance on particular market segments. A good example is when a firm which was producing notebooks before could also enter into pen market. Horizontal diversification seems to be desirable when the current customers tend to be loyal to present products as well as when new products are of good quality along with have better prices and promotion campaigns. Furthermore, this new range of products is normally marketed to similar economic environment to the current products that may result in instability and rigidity (Ansoff, 2007, pp 89-95). Conglomerate or lateral diversification is where a company markets its new products and services which do not have commercial or technological synergies with the current products though that could attract new customers. Conglomerate diversification usually has very modest relationship with a company’s current business. Thus, the major rationales for a firm to adopt this strategy are to make improvement in its profitability as well as flexibility in its operations, and to obtain a better response in the capital markets while the firm gets bigger. Despite the fact that this strategy can be very risky, if successful, it can also offer increased profitability and growth (Amason, 2010, pp 76-81). International strategy refers to the strategy that firm use to sell its products and services outside the firm’s domestic market. One major reason why firms implement international strategy is that the global markets have potentially new opportunities. In addition, firms are able to obtain four major benefits from adopting international strategies; an increase in their market shares, increased returns on key capital investments or investing in new processes and products, huge economies of scale, learning or scope and competitive advantage via location, for instance easy access critical resources, low-cost labor and customers (Thompson, 2010, pp 176-180). Organizational structures are made of activities for instance task allocation, supervision and coordination, which are aimed achieving organizational goals. It may also be seen as the viewing perspective where persons view their organization as well as its environment. Organizations may be structured in a lot of different ways, basing on their goals and objectives. In addition, organizational structure normally determines modes wherein it performs and operates. Organizational structure facilitates the expressed assigning of responsibilities to different functions as well as processes to various entities, for example, the department, branch, workgroup and also individual persons. Organizational structure influence organizational activities in two major ways. Firstly, it offers the basis for which the standard operating processes along with routines rest. Secondly, it also determines which people should take part in which decision-making procedures, and hence to what degree their views have an influence in the organization’s actions (Witcher, 2010, pp 131-140). Organizational structures include pre-bureaucratic structure, bureaucratic structure, post-bureaucratic structure, functional structure, divisional structure and matrix structure. Pre-bureaucratic or entrepreneurial structure does not have the standardization of the tasks. It is mostly common in the smaller firms and it is best used for solving simple tasks. Furthermore, it is completely centralized and the strategic leader normally makes all major decisions and communication is mostly done through one to one conversations. In particular, it is useful to new business since it gives the founder more control for growth as well as development (Jeffs, 2008, pp 110-116). Bureaucratic structures give clear defined responsibilities and roles, have hierarchical structure and reverence for merit. Post-bureaucratic structure is used to describe the generic aspects in organizations. In the generic sense, post bureaucratic is usually used to define a number of ideas, which can comprise culture management, total quality management as well as matrix management. In the functional structure employees in the functional departments of a firm carry out specialized tasks, such as engineering department being staffed with only software engineers, which results in operational efficiencies in that group. Nonetheless, it may also result in an absence of communication among functional groups in an organization, which makes the organization inflexible and slow (Hitt, 2011, pp 154-160). Divisional structure also referred to as product structure, groups all organizational functions into divisions. Every division in the divisional structure consists of the entire necessary resources as well as functions in it. Divisions may be classified from various viewpoints. One may make divisions on the geographical basis or on the product or service basis. Each division can have its own respective sales, marketing and engineering departments. Matrix structure categorizes employees by product and function. This structure may combine the finest of both structures. Matrix organizations regularly make use of teams of staff to carry out work, so as to take the advantage of strengths, and make up for weaknesses of decentralized and functional forms. Matrix organizational structure consists of weak functional matrix, balanced functional matrix and strong project matrix (Sekhar, 2009, pp 148-152). Strategic Innovation refer to creating growth strategies, other new products and services or the business models which alter the game along with generating considerable new value to the customers, consumers and the company as a whole. Strategic Innovation challenges the firms to look further than their current business boundaries and take part in a creative, open-minded exploration of realm for possibilities (Amason, 2010, pp 123-126). Bibliography Costanzo, L.A. 2010. Cases in Strategic Management McGraw-Hill Dess, G. et al. 2010 Strategic Management: Creating Competitive Advantages. McGraw-Hill Costanzo, L.A. 2012. eBay: Strategic Management: Text and Cases McGraw-Hill Thompson, J. et al. 2010. Strategic Management: Awareness & Change. Cengage Learning EMEA Witcher, B. et al. 2010 Strategic Management: Principles and Practice. Cengage Learning EMEA Jeffs, C. 2008 Strategic Management Sage Publishers Ansoff, H. 2007. Strategic Management Palgrave Macmillan Hitt, M. et al. 2011 Strategic Management: Competitiveness & Globalization: Concepts Cengage Learning Sekhar, G. 2009. Business Policy and Strategic Management I. K. International Pvt Ltd Amason, A. 2010 Strategic Management: From Theory to Practice Taylor & Francis Publishers