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Research Paper (postgraduate), 2010
75 Pages, Grade: A
Chapter 1: Introduction
1.2 Background of the study:
1.3 Rationale of the study:
1.4 Problem Statement:
1.5 Research Aim:
1.6 Research Objectives:
1.7 Structure of the Research:
Chapter 2: Literature Review
2.2 Conceptual Framework:
2.3 International Strategic Alliance:
2.4 Theories of Strategic Alliance:
2.4.1 Knowledge based theory:
2.4.2 Resource Based Theory:
2.5 Trusts and Control in Strategic Alliance:
2.6 Comparing Strategic Alliance with Joint Venture and Mergers:
2.7 Logic behind creating strategic alliances:
2.8 Demerits of Strategic Alliance:
2.9 Role of key individuals in Strategic Alliance:
3.1 Methods Outline
3.2 Research Onion:
3.5 Research Design:
3.5.1 Justification and limitations for selection of Descriptive design:
3.6 Sampling Method:
3.7 Data Collection Methods:
3.8 Research methods:
3.9 Research Questions:
3.10 Research Ethics:
3.11 Research Limitations:
Chapter 4: Presentation of Data
4.2 Quantitative Questionnaire for employees:
Chapter 5: Analysis of Data
5.1 Quantitative Analysis for employees:
5.2 Qualitative Questionnaire for managers:
Chapter 6: Discussions and Interpretations of Findings
6.1 Interpretations of Quantitative Research:
6.2 Interpretations of Qualitative Research:
Chapter 7: Conclusions, Implications and Recommendations
7.1 Objective Linking:
7.2 Recommendations for the industry:
7.2.1 Alliance Strategy:
7.2.2 Alliance Management:
7.2.3 Alliance Capability:
7.3 Recommendations for future research:
Section A: Quantitative Questionnaires
Section B: Qualitative Questionnaires
Section C: Reflective Statement of the study
List of Figures:
Figure 1: Conceptual Framework
Figure 2: Increase in numbers of Strategic Alliance in the last 7 yrs
Figure 3: Steps in establishing Resource Based Alliance
Figure 4: Risks involved in Strategic Alliances
Figure 5: Research Onion
Figure 6: Research Philosophy
Figure 7: Steps involved in Deductive Approach
Figure 8: Number of yrs with organization
Figure 9: The alliance between Shaca Construction and Urban Fabrik would benefit both the companies
Figure 10: Effect of Alliance on the organisational culture and work environment
Figure 11: The effects of the strategic alliance between Shaca Construction and Urban Fabrik
Figure 12: Is strategic alliance better than joint ventures and mergers
Figure 13: Changes noticed in the global market as a result of strategic alliance
Figure 14: Strategic alliance of Shaca Construction and Urban Fabrik will boost the employee productivity, improved work processes
Figure 15: The alliance initiated changes in the work culture of your company
Figure 16: The negative impacts of this strategic alliance on the organisational operations
Figure 17: The motive behind the strategic alliance of Shaca Construction and Urban Fabrik
List of Tables:
Table 1: Number of yrs with organization
Table 2: The alliance between Shaca Construction and Urban Fabrik would benefit both the companies
Table 3: Effect of Alliance on the organisational culture and work environment
Table 4: The effects of the strategic alliance between Shaca Construction and Urban Fabrik
Table 5: Is strategic alliance better than joint ventures and mergers
Table 6: Changes noticed in the global market as a result of strategic alliance
Table 7: Strategic alliance of Shaca Construction and Urban Fabrik will boost the employee productivity, improved work processes
Table 8: The alliance initiated changes in the work culture of your company
Table 9: The negative impacts of this strategic alliance on the organisational operations
Table 10: The motive behind the strategic alliance of Shaca Construction and Urban Fabrik
Table 11: Contribution of alliance in developing a sustainable future for both the companies
Table 12: The effect of strategic alliance on the workforce of both the organisations
Table 13: The demerits of entering into a strategic alliance
Table 14: The influence of alliance process on the profit structure of both the organisations
Table 15: Type of cost benefits, revenue sharing of both the organisations is associated with the alliance process
illustration not visible in this excerpt
Strategic alliance is one of the most rapidly growing trends in the construction sectors. Bierly and Coombs (2009) marked strategic alliance as an effective method for neutralising the competition and also ensure sustainable future business prospects. Gulati (2009) argued that strategic alliance is an agreement for sharing common goals that would benefit all the parties to the agreement. Dussauge and Garrette (2008) explained the nature of strategic alliance by comparing it with joint ventures which is a more stable form of alliance. Hofstede (2008) described that apart from proving scope for new business opportunities strategic alliance maintains the identity of the firms in the alliance. Reuer (2011) noted that organizations are entering into strategic alliances because organic growth alone is insufficient to accomplish desired growth for the organization. All these definitions reflect different characteristics of strategic alliance. The construction industry has witnessed extensive merger procedures throughout its duration in the corporate sector.
This study will focus on evaluating the reasons behind the growing trend of strategic alliances. The research will understand the concept thoroughly and discuss the benefits and disadvantages of strategic alliance. The case study selected for the research include two companies specialised in construction business and well known as Shaca Construction and Urban Fabrik. The researcher will connect the research questions with the case study for analysing the practical implications of strategic alliance on the organisational growth and development.
Strategic alliances have gained importance in the corporate sector as they have comprehensively reduced the effects of geographic boundaries in the business operations (Sim and Yunus, 2007). The necessity of strategic alliances is different for each organisation. For few, strategic alliance is a weapon to attain competitive success by effective utilization of the resources of both the companies, while most of the business firms consider alliance as a superior method of investing corporate resources (Todeva and Knoke, 2005). Studies have shown that there is a steady increase in the number of strategic alliances between 1979 and 1985 (Mockler, 2009). The period between 1980 and 1989 marked the increasing trend in strategic alliances between companies. However, more strategic alliances between global companies were noted 1981 and 1990. However, Hamel (2007) opined that there has been a noticeable lesser number of UK companies venturing into alliances in the early 1980s.
The U.K. construction industry after being badly hit by the recent economic recession is on a state of recovery. However, as per the Construction Industry Forecasts published by the Construction Products Association, U.K. the output of construction sector may fall by 6% in the following two years. The decline in growth is due to slash in the capital budget as well as lack of revival from the private sector.Despute several government initiatives, the contribution of the construction industry to the U.K. economy will remain negligible until the first phase of 2014. Output in the public sector construction was increased by 11% in the last 5 years but private sector experienced a loss of 15%. Housing and non housing projects in the private sector collapsed due to withdrawal of finance as a result of credit crunch [Available from http://www.academia.edu/170677/ Accessed on 3rd May 2013].
In the words of Seaden et al. (2011), the construction industry is a very competive and high risk business. In order to sustain in a volatile economy, firms form strategic partnerships to differentiate from the competitiors, access to better organisational innovation and technology and for better strategic planning. Slaughter (2008) adds that creating efficiency through economies of scale, capitalize on the use of facilities and build complementary competencies. Egan (2008) believes that construction firms enter into partnerships in order to spread financial risks and cost sharing. The proposal to establish strategic alliance between Shaca Construction Construction Construction and Urban Fabrik is perceived to be for pooling the resources and achieve common objectives.
Strategic alliances for purchasing cooperation have enabled the companies to act as global purchasing organizations taking optimum advantage of joint expertise, volume, platforms and standard parts. Shaco would get the benefit of sourcing raw materials at the right time through the alliance with Urban Fabrik. Combining the best practices of both the companies, it would bring improved efficiency and value to their purchasing operations.
Shaca Construction Ltd was founded in the year 2002 by Spencer Heydon and Anthony Carr. The company offers a range of contruction services and is well known for aligning their activities with clients needs. Shaca Construction Construction Construction is specialised in groundwork and structural alterations. The company has carried out structural alterations while doing refurbishements within the House of Lords, construction work at the Palace of Westminster, including underpinning and pile caps at Westminster Hall. Shaca Construction Construction Ltd has also carried out the concrete framework, basement excavation, groundwork and other external work for a new residential complex at 144 Ilford Lane, U.K.
Urban fabrik is a London based company, specialised in construction business. An effective combination of knowledge, experience and adaptability is reflected in their projects that they deal in hotels, residential and commercial sectors. Some of the best projects they dealt with are ShoreditchRooms and Spa, Rochester Place, Pizza East, Eccleston Square hotel, Soho Hotel, Berlin etc. Urban Fabrik considers itself to be a traditional contractor that utilised its own in house tradesmen, plant, equipment, workshops and site offices. The company is able to manage its costs, quality and time and carry on with a sustainable business.
Mockler (2009) mentioned that strategic alliance is aimed to create opportunities for growth in the intentional market; on the other hand, the alliance could have certain disadvantages on the working of both the companies. Dussauge and Garrette (2008) stated that alliances could be costly, not only because of cash leaving the concern but also due to division of returns between the partners. Alliances in the construction sector reduce the possibilities of generating financial viability by cooperating with competing companies. Alliances require involvement of managerial time resources needed for developing an alliance, managing it and resolving potential conflicts between firms.
Hofstede (2008) opined that often failure of the parties to act simultaneously might hamper in alliances success and operations of the other company. Poorly defined goals such as return on investment, market expansion, cost attainment leads to potential difficulties on the company's operations. Finally, poor choice of partner could also result in Shaca Construction and Urban Fabrik unable to reach the desired target or vice versa. To ensure success through strategic alliance it is necessary for the companies to form disciplined, structured and systematic alliance with each other. The author selected this topic because evaluating the positives and negatives of strategic alliances in the corporate may give rise to a new era of sustainable business practices.
Strategic alliance is effective for developing the business status in the industry but there are certain critical issues related to it. Gari (2008) focused on the impact of strategic alliance over the workforce of the organisations and stated that strategic alliance initiates changes in the organisational structure and culture which may have positive as well as negative influence over the employees. However, strategic alliance has reflected the growth for the majority of the firms opting for it. It has brought a new revolution in the corporate industry by unifying the business houses and reducing the competition in the market. Mockler (2009) explained that the influence of strategic alliance on reducing the competition may hamper the quality of products and services produced by the firms.
Faulkner (2009) stated that longevity of an alliance depends on the viability of the conditions on which the alliance was formed. Change in market situations and business stature may also hamper the alliance. Issues like change management, business growth, goal setting, etc. are influential in the developing an alliance. The alliance between Shaca Construction and Urban Fabrik has taken place mainly on the basis of business expansion and revenue earnings. The terms and conditions of the alliance have to be honoured by both the parties for sustaining the alliance and making fruitful. Strategic alliance without doubt comes with added advantages for the firms in the treaty but the organization should ensure that the firms are capable of holding up the alliance for a prolonged time to reap the full benefits of the procedure. Hofstede (2008) explained that increasing alliances among the corporate players, particularly in construction industry are creating a global community that aims to develop a stable economic condition in the world. The problem is their diverse cultures and structure which may create dispute and hamper the entire process.
The study aims to reveal the causes that are urging the construction industry towards creating strategic alliances. The benefits and disadvantages of the alliance process and its effect on the stakeholders of the firms will also be discussed in the study through a case study of the impact of the alliance of the firms i.e. Shaca Construction and Urban Fabrik.
- To study the effectiveness of strategic alliances in the international market.
- To critically analyse the rationale behind adopting strategic alliance techniques.
- To assess the impact of strategic alliance between Shaca Construction and Urban Fabrik to evaluate the benefits and pitfalls for the firms.
Introduction: The chapter deals with brief introduction of the topic to the reader. The chapter includes the aims, objectives, research questions, rationale, and purpose and study background.
Literature Review: It deals with the studies and the theories of previous authors on the present topic. Various models on the present topic are studied in the chapter.
Research Methodology: It involves the philosophy, approach, and sample size and data collection process of the study.
Presentation of Data: This chapter presents the raw data collected from the respondents via survey.
Analysis of Data: The chapter involves analysing the data collected through primary research.
Discussion and Interpretation of the Findings: This chapter deduce information from the primary data and discuses about the possible outcomes of the study.
Conclusion, Implications and Recommendations: in the final chapter of the study, the researcher connects the objectives with the data collected and provides suitable recommendation in respect to strategic alliance process.
The chapter follows a brief introduction of the topic. Aims, objectives and questions would help in conducting the research methodically. The chapter also includes the rationale and purpose behind conducting the study. It can be concluded that strategic alliance between the two construction companies (Shaca Construction and Urban Fabrik) would help to recover from the recent credit crunch and achieve strategic goals.
Literature review analyses the secondary data collected by the researcher and evaluates the historical development in the research topic. The evaluation process also includes analysis of the theories and the issues not covered by the existing models and concepts. The literature review provides the analyst an overview of the situation and proper background knowledge (Gulati, 2009).The researcher has focused on the alliance of Shaca Construction and Urban Fabrik for evaluating the process of strategic alliance and its impact on the global business industry.
Strategic alliance in the construction business provides a useful means for cost sharing, risk allocation, pooling of resources, technology transfer, organisational innovation and earn economies of scale. It also assits the construction managers, particularly in the public sector to evaluate tenders and build cooperative relationships with the other construction stakeholders. The current literature focuses on the theorical underpinnings relating to strategic alliance benefits and drawbacks, particularly in the construction sector.
The conceptual framework connects the different variables of the study and forms an outline of the research. Hakim (2007) stated that conceptual framework defines the flow of the study and the link between the contents of literature review and the subject topic. The framework of the study is reflected below:
illustration not visible in this excerpt
Figure 1: Conceptual Framework
(Source: Created by Author)
Harbison and Pekar (2008) explained that strategic alliance is based on the belief that two is better than one. With the growing competition, organisations are trying to extract any and every benefit that the industry offers. The business houses aim to gain a competitive advantage in their activities such as doing research development at a decreased cost or getting most of the customer base without dispensing too much into market research projects or trying to assess the customer behaviours and psychographs. Strategic alliance evolved to satisfy this need of the business organisations and help them in attaining superior position in comparison to their competitors (Reuer, 2011). As the demands for forming strategic alliances grew, the role of the concept also enlarged.
Hamel (2007) defined strategic alliance as a relationship between two parties for achieving a set of agreed goals and develop the business status in the market. In the words of Das and Teng (2006), strategic alliances are an agreement made between two or more companies who have agreed to share their resources and achieve mutual benefits in the process. Dussauge and Garrette (2008) stated that strategic alliance is the process of joining hands for achieving common goals and objectives. Again Faulkner (2009) highlighted that the strategic alliance builds a relationship between two or more companies that would pursue common objectives in their own ways. All these definitions convey the same meaning that strategic alliance is the formation of an agreement or relationship for improving the business conditions. However, the differences lie in the features briefed in these definitions. Hamel (2008) pointed strategic alliance as a relationship between two parties to which others disagreed. Again Hamel (2008) also acknowledged that the parties in an alliance pursue a set of agreed goals rather than common goals. Pek-Hooi (2008) supported that firms contribute in forming strategic alliance to achieve benefits and the beneficial terms for the parties may differ which results in agreeing on set of objective for each company.
illustration not visible in this excerpt
Figure 2: Increase in numbers of Strategic Alliance in the last 7 yrs.
(Sources: Kang, N. and Sakai, K., 2012, p-24)
The collaboration between independent companies is the rising trend seen for the past quarter century. The cross border diversifications of the companies have increased the cooperation between the companies (Narula and Hagedoorn, 2006). This kind of cooperation is needed to share the resources both within and also outside the boundaries. There are cooperative relationships involved in such inter-firm alliances formed either by the help of contractual agreements or by ownership (Humphrey et al. 2010). There is absolute and true distinction between the two types of strategic alliances which are mainly made either for long term alliances or for short term period.
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