Businesses in the modern business environment are increasingly faced with the need to develop effective strategies in order to improve their competitive advantage and increase revenue. As a result, businesses are increasingly forming strategic partnerships or alliances with other entities for several reasons. Strategic alliances between various businesses are mainly geared towards exchanging or publishing information, conducting joint trade shows or meetings, providing education and training programs, sale of products and services, and monitoring policy issues. Generally, strategic alliances take various forms depending on the nature of business, business objectives, and products, services or resources. Moreover, the nature of these alliances is largely influenced by conditions in the local market such as competition in the market.
As previously mentioned, business entities form strategic alliances with other for-profit entities for several reasons including distribution of products and/or services to a specific target of customers, joint development of products and services for the local market, and working towards a common agenda (“Benefits for Strategic Alliances and Partnerships,” n.d.). This implies that the strategic alliance becomes crucial to the success of business objective or goal because of its impact on competitive advantage. Actually, a strategic alliance helps in the development of maintenance of the sources of competitive advantage to the business. In addition, the alliance prevents competitive threat, lessens significant risks, and develops or sustains strategic decisions for the business.
The main aim of formation of strategic alliances is to help improve revenue or business profits through adding value and enhancing competitiveness. These alliances enhance competitiveness through creating parity in the primary segments of the local market and add value by developing the business’ core competency and competitive advantage. In essence, a strategic alliance provides the basis for developing incremental skills in the business. The enhanced competitiveness brought by strategic alliance emerges from its ability to block a competitive threat. The competitive threat is blocked through creation of parity in the local market as both companies jointly develop products and services for the market. For instance, if a company competes in a market characterized by high and medium price range, it is increasingly vulnerable to low-priced entry. The firm can successfully block the competitive threat in the market by forming an alliance with a volume partner in a neighboring market, especially if the production processes do not into the market.
Mergers and Acquisitions
Mergers and acquisitions are terms that are used to refer to business reorganizations that focus on transferring ownership control from one company to another. While these terms fall into the overall concept of business takeovers, they are quite different in terms of their processes and objectives. The most evident difference between mergers and acquisitions is based on how the takeover is announced to the targeted firm and the results of the new organizational structure. While mergers entail proposing the takeover to the company’s representative manager, acquisitions involve proposing the process directly to the owner of the business. In addition, mergers and acquisitions differ with regards to the reasons they are proposed and conducted (Motis, 2007).
There are different types of mergers and acquisitions including horizontal and vertical mergers and acquisitions. Vertical mergers and acquisitions are takeovers that enable a business to integrate its supply chain as a means for enhancing costs and efficiency. In this process, the business acquires suppliers and harmonizes production and logistics across the entire supply chain. As a result, the business secures access to resources, components, and materials in order to meet changing demand levels when necessary. In contrast, horizontal mergers and acquisitions are takeovers that enable the business to acquire another firm’s products in the same market segment. Through this process, the business organization can expand its product range and increase profits or revenue through the sale of more products to its existing customer base. Horizontal mergers and acquisitions also help a company to enhance distribution coverage for its own products and services, particularly if the firm has already developed a customer based in another geographical location. This type of merger and acquisition is associated with several benefits including increasing market share, lessening competition, and creating a monopoly.
In addition to the existence of several types of mergers and acquisitions, these takeovers are selected for various reasons. These varying reasons are usually geared towards creation of operating, financial, and managerial synergies. In this case, the mergers and acquisitions involve acquiring or combining operations, lower costs of financing, and combining or acquiring high-performance management team. Some of the most common reasons for mergers and acquisitions include gaining efficiency, creating synergies, saving costs, and enhancing or strengthening market power. In some cases, mergers and acquisitions take place as preemptive and defensive measures and for disciplinary reasons.
Impact of Current Trends on Strategy
The modern business environment is characterized by numerous changes that are brought by current trends such as technology, organizational design, and turbulence. Technology has become a major aspect in today’s business environment because of its impact on modern communications and the emergence of innovation as an important strategic driver of organizations (Ahmad, 2014, p.73). Many business organizations currently focus on innovation as a means of enhancing their productivity and profitability through creating new products and services that help meet the ever-changing tastes and preferences of customers. As a result of the focus on development of innovative products and services, businesses are increasingly using technology, which is a major trend in the modern business environment. Technology continues to have tremendous impact on strategy because technological advances continue to generate huge opportunities and challenges. Technological advances have forced business organizations to restructure departments and structures as part of enhancing strategy to realize the established business goals. In addition, businesses are increasingly adopting technological means of doing business in order to deal with challenges and take advantage of emerging opportunities.
Turbulence is another current trend that has significant impacts on businesses and their strategy in respective markets. Turbulence basically refers to uncertainties that are caused by changing market conditions and customer demographics. These uncertainties make it difficult for business managers and owners to have control of the organization’s situation though they need to be prepared to effectively handle market changes. As a result, the major impact of turbulence on strategy is the development of new measures to help deal with uncertainty. Business managers and owners have not only been concerned with turbulence but have increasingly focused on creating initiatives that promote effective business operations during uncertain times. In this case, turbulence has forced business owners and managers to develop strategies that enhance their business’ ability to control its situation. Moreover, turbulence makes organizations to internalize local markets by acquiring suppliers and with suppliers and customers.
Organizational design has created the need to develop different organizational structures as part of business strategy. This trend has largely been brought by the rapid technological advances, globalization, and increased uncertainties in markets. Generally, organizational design acts as the basis of determining how an organization will operate and respond to market conditions and customer tastes and preferences. Business organizations are increasingly developing different organizational structures in order to operate effectively and increase revenue while meet the needs and preferences of customers.
Risks to Human Subjects
The process of managing a business is characterized by several risks to human subjects because a business can be an increasingly dangerous occupation with various kinds of risks. Risks to human subjects in the business have emerged as a major issue in the modern business environment because of the numerous changes that continue to take place and the nature of the business. Actually, running a business has many aspects that need to be managed with risks to human subjects being the most difficult to handle. Generally, the risks to human subjects emanate from the fact that running a business involves working with people from diverse backgrounds and academic qualifications.
Some of the most common risks to human subjects include security incidents, data breaches, human error, inadequate policies and procedures, and poor decisions (Caldwell, 2012). It is increasingly important for business owners and managers to effectively identify and mitigate these risks because they have considerable impacts on the operations and success of the business. Actually, business owners and managers face the need to effectively manage risks to human subjects as part of their management strategy in order to promote and ensure the survival of the business in its respective market.
Mitigating risks to human subjects in the business requires the use of two-pronged approaches in risk management. These approaches proactively deal with weaknesses while capitalizing on standard risk management strategies and initiatives that are resilience-oriented. One of these approaches to mitigating risks to human subjects in business is educating and training users about organizational policies and procedures and the desired performance. This involves the use of education and awareness activities that help remind people of their specific responsibilities and roles in the business process. These education and awareness activities help human subjects in the business to understand their specific roles and responsibilities and work towards achieving the desired level of performance.
The second approach involves establishing effective organizational policies and procedures that help in mitigating risks to human subjects. The various people in the organization should not only be reminded of these policies and procedures but a corporate culture that promotes compliance with them should also be established. Business owners and managers should ensure that the policies and procedures are refined in a manner that makes them actionable, easily accessible, and understandable across all departments or divisions. This will help them understand the company’s expectations and work towards compliance with the various policies and procedures.
Ahmad, S. (2014, July). Technology in Organizations. International Journal of Research in Business Management, 2(7), 73-80.
“Benefits of Strategic Alliances and Partnerships.” (n.d.). ASAE: The Center for Association Leadership. Retrieved August 18, 2015, from http://www.asaecenter.org/AboutUs/content.cfm?ItemNumber=137633
Caldwell, C. (2012, October 3). Human Risk: Are Employees the Weakest Security Link? Retrieved August 18, 2015, from http://www.itbusinessedge..html
Motis, J. (2007, February). Mergers and Acquisitions Motives. Retrieved August 18, 2015, from http://economics.soc.uoc.gr/wpa/docs/paper2mottis.pdf