Globalization is now synonymous with a borderless society. Arthur Thompson, strategic management professor of University of Alabama stated that “industries move toward globalization for any of several reasons” (Thompson, 1999). Many companies have set up shop in many countries around the world. Thus, they have to adjust to the diverse cultures of these places. Global strategic alliance encompasses outsourcing, making memorandum of agreements with other companies and setting up its branches in other countries.
On the contrary, common knowledge shows that some companies prefer not to go along with this new globalization phenomenon. Meaning, they prefer to cater to their nearby clients and selfishly not combine with other companies for one reason or another. The following paragraphs will explain the reasons in detail why global strategic alliance is a winning international strategy. Global Strategic Alliance` (GSA) is a winning International Strategy. First, the multinational corporation is now the lead agent of globalization. It is the coherent activity that has changed the competitive selection process.
Second, Outsourcing is another global strategic alliance that fosters a winning international strategy. Third, signing memorandum of agreements with other companies is another Global Strategic Alliance` (GSA) that is a winning International Strategy. First, the multinational corporation is now the lead agent of globalization. It is the coherent activity that has changed the competitive selection process. Consequently firms that do not have global strategic alliances will have higher probabilities of being edged out into extinction.
The article IBM and DWL form Global Strategic Alliance to Deliver Unified Business Services Software for Financial Services (Darcy, 2002) shows that IBM has entered into a global strategic alliance to help improve DWL customer service to change into a customer centered marketing strategy. The fusion between IBM’s service capacities, hardware and middle ware and DWL’s industry leading software programs will definitely give it an overwhelming edge over the unions’ business rivals. The combination will save costs as their combination gives answers that will improve and unite the customers across many territorial boundaries.
The combination will help banks, insurance companies and other financial institutions to combine vital customer databases for a more effective management decision making strategies. The major ace up the sleeve of the multinational corporation is its ability to exploit, then to coordinate, and finally to optimize its activities across countries with different comparative advantages at any given moment. For, the best advantage of multinational corporations is that they can coordinate separate value added activities across national boundaries. The global company can provide more favored access to international markets.
Also, it can provide the diversity to reduce risks. The alliance here is among the different country branches of one multinational company. Examples are Coke, Pepsi, McDonalds, Kentucky Fried Chicken Procter and Gamble, and others (Morgan, 2003). A McDonalds hamburger chain that will be set up in Thailand will automatically generate profits because the marketing strategy brought in Thailand is a mixture of tried and tested marketing strategies researched, analyzed and widely accepted in all its branches around the world permeated into the local customer culture in this Asian country.
Coke’s global marketing strategy is to impress on their consumers that is a divergent powerful international business able to adjust to the diverse cultures, wants and needs around the world (Churchill, 1995). Second, Outsourcing is another global strategic alliance that fosters a winning international strategy. For, lower prices combined with quality will generally increase the company’s clients. To achieve lower selling prices, one marketing strategy is to produce these goods or buy imported materials from an outsourcing company in India, China, Taiwan and other countries.
This is called value retailing. Outsourcing literally gives a big edge against competitors in the current tough and competitive business world. Phenomenally, outsourcing of raw materials to third world countries has increased because the labor cost in these Asian countries are cheaper than if companies hire local workers in the United States. Definitely, cost structures, internal processes and ways of working between the outsourced supplier of goods and services and the American purchasers of goods and services are very crucial factors that will make company profits skyrocket way above the competitors.
Examples of outsourcing are calling center jobs, accounting jobs. Also, some companies buy the raw materials needed to make a new product from third world countries in order to lessen manufacturing costs. Thus, management’s successful cost reduction through outsourcing (supply chain management) is another global strategic alliance which fosters a winning international strategy (Hughes, 1998). However, some customers buy because of loyalty. These loyal customers may include company employees, customers that have experienced the excellence and quality of the company’s past and current services.
Third, signing memorandum of agreements with other companies is another Global Strategic Alliance` (GSA) that is a winning International Strategy. For example, H. J. Heinz Company and Kagome Company Ltd of Japan have banded together to forge to strategic alliance. Heinz is the leader in the ketchup industry that uses tomatoes as its main ingredient whereas Kagome is one of the biggest leaders in the vegetable fruit juices in Japan. They agreement stated that Kagome will supply the tomato juices to H. J. Heinz. Kagome has average annual sales of $1 billion and Heinz has annual sales nearing $ 10 billion.
Heinz is the world’s number one tomato ketchup producer while Kagome is the biggest tomato processor in the Pacific area. This global strategic alliance will help both companies reduce their marketing and production costs. In turn, their profits will definitely increase (FindArticle, July, 30, 2001). Further, the article IBM and Portal Software Form Global Strategic Alliance indicates that IBM and Portal Software have joined together in a global strategic alliance. IBM is the leader in the electronic business infrastructure market.
While, Portal software, Inc. is one of the leaders in the customer management and billing software market in the specialized field of the broadband, internet and next-generation communication industry. They agreed that IBM will integrate its WebSphere Everyplace Suite together with Portal’s Infranet in order to come up with a strategically feasible carrier grade 3G ready infrastructure platform for wireless service providers. And, they will combine resources to sell its combined software solution and related after sales services to wireless service providers around the world.
Their main objective is to recover large investments in 3G licenses. One of their combined marketing strategies is to invite possible clients to visit IBM’s telecommunications centers of competency in North America, Europe, and Asia Pacific (Ibid). However, No monetary amounts are available since both companies have just started their combined strategic operations. (FindArticle, March 5, 2001) For emphasis, another company, KPMG, has entered into a global strategic alliance with Tata Consulting Services to venture into a winning International Strategy.
Tata is India’s biggest information technology services company. They have met and vowed to help each other create a niche market. Their combined bolt –in will be focused on improving and increasing customer service from the pre –sale to the sale and finally to the after sale steps. The fused KPMG Consulting and Tata Consulting Services alliance will increase KPMG’s profits because of the huge saving in service costs as compared to when the alliance had not been forged. KPMG can now outstretch its service area globally with this new event.
KPMG consulting is engaged in management consulting services servicing clients strategically established in all the four corners of the world. KPMG has under its wings over ten thousand personnel and has been serving the management consultancy needs of over two thousand five hundred clients around the world. Its head office is in the United States. Likewise, Tata Consultancy Services is India’s largest conglomerate. It is an established and successful company in the field of information technology.
This includes systems integration, consulting, software development, engineering and infrastructure management. Technically, Tata Consulting Services sells software packages for each unique business environment focused on hospital management, electronic or ATM banking, customer management, insurance billing and many others. Tata consulting services has twenty thousand persons under its fold. It has over one hundred twenty branches globally and strategically established in more than one hundred twenty three nations (Findarticle, April 10, 2003). In short, Tata will provide the information technology to KPMG.
With Tata’s help, KPMG will be able to come up faster and more accurate data bases so that KPMG can make faster and more accurate decisions. KPMG is one of the top four auditing, accounting and consultancy firms in the United States. One Tata’s clients are BT retail. Tata is has branches in 34 countries around the world. This combination will benefit Tata because KPMG will be paying Tata consulting for setting up its information technology system. Likewise, KPMG will benefit from this relationship because its customer database will be updated by Tata consulting.
Consequently, a more improved KPMG database will help the company make better decisions on time. On the other side of the coin, The Chicago Times (Wolinsky, 2002) stated the Global Strategic Alliance between the accounting firm Arthur Andersen and other accounting firms outside the United States has damaged the images of companies connected with Arthur Andersen. The disgrace that brought down Arthur Andersen occurred when some Arthur Andersen auditors aided the Enron Company to present false financial statements.
However, KPMG to act as a white knight and save the companies connected with Arthur Andersen. KPMG’s chairman Harald Wiedmann stated that “We are sounding out the possibility of merging our business activities in the most important countries in Europe, Africa, the Middle East, Canada, Asia and Latin America. ” (Wolinsky, 2002) CONCLUSION First, it is proven above that the multinational corporation is the lead agent of globalization. Second, it has been clearly explained that outsourcing is another global strategic alliance that fosters a winning international strategy.
Third, it is overwhelming that signing memorandum of agreements with other companies is another Global Strategic Alliance (GSA) that is a winning International Strategy. Based on the above discussion, opposing views cannot overshadow the evidences presented above that our thesis Global Strategic Alliance (GSA) is a Winning International Strategy. In conclusion, not joining this phenomenon may cause the extinction or deprivation of those old –fashioned companies who think only of their small community and themselves as the only way to increase their market share in terms of product sales.
Evidently, people prefer to buy imported clothes and other items whose raw materials and labor costs came from China, Korea, India and other third world countries. Clearly, common knowledge shows that many companies have outsourced the production of their goods by strategic global alliance with these foreign companies so that the American company can sell the goods at lower prices and still make huge profits.
Just simply visiting the grocery and other stores will give us the evidence that we need to prove that outsourced strategic global alliance will defeat companies that produce the goods using raw materials and labor from the United States due to the high costs. To close, Peter Drucker stated “In turbulent times, an enterprise has to be managed both to withstand sudden blows and to avail itself of unexpected opportunities”. (Drucker, 1980)