Business Policy and Strategy
1
Alliances and Networking
Module 011
Alliances and Networking
Integration, diversification and acquisition are just few of the ways that a
company or firm would take to expand the business. There are other few that
may be considered by an entrepreneur to outsmart the challenges and to
retain in the business like forming alliances or trying networking.
At the end of this module, you will be able to:
1. Define alliances;
2. Enumerate kinds of alliance;
3. Understand the concept of networking;
4. Recognize the advantages of networking;
5. Distinguish the importance of business relationship.
Alliance
This strategy is used by firms different from acquisition. Strategic alliance allows two or
more companies to agree to pursue upon objectives as independent organizations. This is
an effective strategy for companies which possess assets or expertise that both companies
need to enhance their businesses. This can also be developed by outsourcing relationship
which aims to achieve a win-win benefits innovation and mutual outcomes.
The partners share their products, distribution channels, projects, capital, expertise or
knowledge, intellectual properties, technology and even economic expertise. Since they
mutually share ideas and resources, they also have a fair share on expenses and risks.
Types of Alliance
1) Horizontal strategic alliances
This type of alliance is formed when active firms are in the same business area. This
alliance is horizontal in nature, for it allows the competitors to work together in order to
improve their position in the market. Raue & Wieland (2015) describe the example of
horizontal alliances between logistics service providers. They argue that such companies
can benefit twofold from an alliance. On the one hand, they can "access tangible resources
which are directly exploitable." This includes extending common transportation networks,
their warehouse infrastructure, and the ability to provide more complex service packages
by combining resources. On the other hand, they can "access intangible resources, which
are not directly exploitable." This includes know-how and information and, in turn,
innovativeness.
Course Module
2) Vertical Strategic Alliances
This strategy aims to put company of different streams in the supply chain. This is the
collaboration of the manufacturers and distributors, whose intention is to intensify and
improve their relationship and offer a much lower price.
3) Intersectional Alliances
This alliance takes place between firms that are unrelated, neither in vertical chain nor in
the same area. They do not intervene in any way but aims to get profit instead.
4) Joint Ventures
The joint venture strategy allows two or more companies to form a new one for a certain
project and a long-term relationship. The new company is built with shared equity,
resources, and know-how. This venture may also be for a finite time only.
5) Equity Alliances
This type of alliance is made possible by companies acquiring equity shares thus making
each other shareholders of each company. This also called company cross-shareholding
which aims to share profit and reach common goals. This makes each company a leading
decision power at their respective companies. This also lessens the competition between
and among firms.
6) Non-equity Alliances
This alliance usually becomes an effective strategy among small enterprises. The
cooperation of several companies may include close relations between customer and
supplier to outsourcing of certain corporate tasks or licensing, to vast networks in R&D.
Networking
The Oxford English Dictionary definition of a (business) network is: "A group or system of
interconnected things or people." This is significant when it is considered networking in its
fullest sense - beyond one-to-one meetings or contacts.
Investopedia.com defines networking as an exchange of ideas and information among
groups or individuals who have the same interest for business purposes. Entrepreneur
connects with others through ties or contracts.
While business networking processes a business that is mutually beneficial with other
business people and potential clients or customers.
The principle of networking is finding and building helpful relationships and connections
with other people.
Mutual benefit or mutual gain is a common feature in successful networking - and this is a
powerful underpinning principle to remember when building and using your own
networking methods. It is human nature, and certainly a big factor in successful
networking, for an action to produce an equal and opposite reaction. Effort and reward are
closely linked.
Business Policy and Strategy
3
Alliances and Networking
The Benefits of Business Networking
• New contacts and referrals
Meeting potential clients through referrals is one of the best parts of networking.
Sharing the opportunities brought by the business and being able to share them with
others hopefully makes them new partners. With this strategy the possibility of
expansion is possible.
• Visibility
It is imperative to meet new clients regularly in this strategy. The entrepreneur
maintain a regular business relationship through attending luncheons with clients and
attending events which raises personal and company profile.
• Staying current
Nothing is permanent in business so to keep up with the target market conditions and
overall trends, updating with new trends, knowing successful marketing strategy and
attending seminars and workshop with business associates are tools to stay current.
• Problem solving
The need for a solution to problem is the main goal of business networking. The ability
to provide solution to other firms is an effective way to reach out and outsource with
them. By having good business relationship, the networking channels move according
to plan.
• Sharing knowledge and experience
Taking advantage of the viewpoints and other firms’ experiences, expand the ability of a
company to progress. The valuable advice from other firms also save time and money in
a particular venture before getting involve with it.
• Confidence and morale
Business people maintain an optimistic and positive mindset thus an entrepreneur
would boost his morale when he associates with them. Regularly meeting these people
develops an outgoing personality and become like them.
With the given benefits, business networking does not only increase business revenue
but also develop business relationship and new skills and strategies in business.
Course Module
Glossary
Outsourcing - The contracting or subcontracting of noncore activities to free up cash,
personnel, time, and facilities for activities in which a company holds competitive
advantage.
Win win - Negotiation philosophy in which all parties to an agreement or deal stand to
realize their fair share (not 100 percent) of the benefits or profit.
Referral- A recommendation by someone
Revenue - The income generated from sale of goods or services, or any other use of capital
or assets, associated with the main operations of an organization before any costs or
expenses are deducted
Target Market - A particular market segment at which a marketing campaign is focused
References and Supplementary Materials
Books and Journals
Thomas L. Wheelen and David Hunger; 2010; Philippines; Prentice Hall
Online Supplementary Reading Materials
Networking. https://www.entrepreneur.com/encyclopedia/networking. March 30, 2018
Networking. https://www.businessballs.com/building-relationships/networking-42/.
March 30, 2018
Strategic Alliance. https://en.wikipedia.org/wiki/Strategic_alliance. Retrieved March 29,
2018
Online Instructional Videos
Strategic alliance. https://www.youtube.com/watch?v=rACNp6VumDs. Retrieved March
30, 2018
Networking. https://www.youtube.com/watch?v=lWBNpAZWwzc. Retrieved March 30,
2018
