Companies perform value chain analysis

Companies perform value chain analysis

Question 1

Companies perform value chain analysis by checking on each step of production to create a product (Teng, 2007). Overall, in building strategic alliances in business, the objective of the value chain analysis is the deliver a value maximum in support of the least probable total costs.  There are several ways in which companies take advantage of value chain strategies in building a strategic alliance. These approaches lead to the firm’s capabilities in comprehending and optimizing activities, which in the end, bring about competitive advantage as well as higher levels of profits. These are some of how companies take advantage of value chain analysis in creating strategic alliances in businesses:

1. Making sure that the value generated surpasses the anticipated costs-majorly, there exist five activities of the value chain. By analyzing the events, an organization is capable of ensuring that its value created exceeds the cost. The principal value chain activities which should be accessed incorporate operations, services, on-bound and inbound logistics, sales, and marketing (Dyer, Kale & Singh, 2001).
2. Gaining a competitive edge as well as boost the company’s profits-whenever, a firm can create an advantage within one of the above mentioned five activities via analysis of the value chain. It can capture competitive as well as augment its entire profit. To achieve a competitive edge, an organization maps out particular activities in five generic value chain actions, thus checks on approaches to creating competences.

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The process of value chain adds in developing a competitive advantage by having clear notions of ways on how to tweak as well as promote the process of business operations in providing various values at low costs. Thus, the company would be capable of netting a robust competitive edge.

Question 2

As firms are gaining experiences in forming strategic alliances, they always get to find portfolios having ballooning partnerships.   Since all these alliances created have the capacity of contributing to the value of an organization, not every association is indeed strategic to a firm. Thus, the choice of a partner in a strategic partnership is imperative when it comes to the formation of strategic alliances. This is due to the following reasons:

1. Risk mitigations-a right partner in a strategic alliance assist in the mitigation of essential risks within underlying business objectives, risk nature as well as probable impacts. Risk mitigation is helpful in the context of supply strategic partnerships.
2. Blocking competitive threats-a right partner in the business assist in preventing competitive threats when it comes to establishing a competitive edge. In this case, the choice of an excellent partner in the business would lead to the blocking of probable threats that an organization can experience.

• Future strategic alternatives- choosing the right partner in the business is fundamental in attaining business objectives, which could turn out to be crucial in future dates. Right business partners make the expansion into the global market easier at various distribution points.

Excellent choice of business partners affects the stability of alliance-building, thus leading to shared goals and benefit partners through the following ways:

• Formation of economies of scale which enables participating forms to marshal a more extensive set of resources as well as to attain significant mass required to succeed globally.
• Promoting competitiveness- most of the trade projects need professionals drawn from various fields. Having the right partner in the strategic alliance assists in the acquisition of required in-house skills.
• Through setting new standards for the company- companies coming together set new standards that promote prosperity in terms of business expansion.
• The partners in the smart business alliances offer something having a premium package which the other firms might not be capable of providing. Thus, collaborative partnership calls for an organization to partner with a firm which its shares visions and missions.

Question 3

Joint venture cooperative agreements are different from other strategic alliance building. A joint venture refers to a deal made between two or more factions.  It happens whenever two-party consent to enter into contractual agreements in performing particular tasks. Strategic alliance agreements made by two or more parties, but the camps coming together never lose their independence (Teng, 2007). The joint venture cooperative agreements are different from other alliance building in the following ways:

1. In the joint venture, the approval of coming together is to mitigate risks while in the strategic alliance, the deals aim to take full advantage of the returns.
2. For joint venture cooperation, there is an existence of an agreement before the formation of such a partnership. On the other hand, for a strategic alliance, contract, or settlement, survival is not necessarily needed. There might be a contract or no contract.

• An agreement on joint ventures calls for the existence of separate legal entities with the company’s identity, which is distinct. The strategic alliance agreements do not require an independent legal entity.

Both the joint venture and strategic alliance have benefits and pitfalls. This section highlights the merits and demerits of the joint venture and strategic partnership:

Merits of Joint Venture

1. Accessibility to better resources like technology and professional staff
2. The parties share risks and costs

• Joint ventures are flexible thus have limited lifespans

1. Assists in the building relationships and networks
2. Virtual limitless potentials
3. Global joint ventures eradicate racial discriminations

Demerits of Joint venture

1. At some points, a joint venture might have vague objectives
2. The flexibility in the joint venture can be restricted

• Might lead to culture clash

Merits of Strategic alliance

1. Promotes accessibility to global marketplaces
2. Improves speedy markets

• Knowledge gained from partners in developing competencies might be broadly exploited (Leiblein & Reuer, 2019).

Demerits

1. Partner handling every business internally has to rely on the other.
2. Firms incur some costs on top of the benefits

• There is a clash on corporate cultures