Question

Explain the decision processes behind the formation, evolution and performance of alliances and networks

Answer 1

Answer:

The decision processes behind the formation, evolution and performance of alliances and networks:

Alliance

Alliance is the strategic decision between the two organisation where they join together to pursue the mutual benefit of their individual business.

Formation of alliance:

Alliance can be accomplished between the two organisations by sharing the resources with each other. These resources could include the raw material required for the finish product, the facility required for manufacturing the product, the warehouse required for storing the product, sharing of the product itself, sharing of the knowledge and the expertise, sharing of the intellectual property, etc.

Evolution of alliance:

The strategy of alliance is as old as the existence of the organisation itself. Initially the trade association used to make alliances among themselves so as provide the product to the customers. In 1970s, an alliance among the organisations was made for enhancing the performance of the product in the market. The company used to purchase the high quality of raw material at least possible prices. In 1980s, an alliance among the organisations was made for gaining the economies of scale. And in 1990s, an alliance among the organisations was made for entering the international markets.

Performance of alliance:

The performance of the alliance is quite complex in nature and this is because of three reasons. First is that the companies in alliance have their own style of working and reporting and dealing with the provision of the product to the customers and each of these companies want to achieve their own personal goals by the use of the resources of the other. Secondly, the company in alliance receives some of the inputs from the parent company and in return the company provides output to its allied company. Lastly, the company in alliance may not receive the same treatment in the other company as far as quality control and scrutiny is concerned.

In order to measure the performance of the company, every company in alliance should be individually audited for its performance and then the decision should be taken by the parent company of whether intervention is required or not in the alliance. The parent company should conduct the trend analysis and should compare the data with its forecasted data to measure the performance and should analyse whether the goal of the alliance is achieved or not.

Network

Network is the relationship between the organisations for fulfilling their specific needs. The example of network includes the relationship of the company with the supplier, customers, distributors, retailers and competitors.

Formation of network:

Networks can be formed formally or informally. A formal network between the two organisations involves the contract for providing the necessary resource to the organisation by another organisation. Example includes the network formed between the organisation and the suppliers for ordering various kinds of raw materials.

An informal network is the one which is not documented in terms of the contacts and it simply works on the basis of communication between the organisation and its stakeholders. Example of an informal network includes the network between the organisation and its customers.

Evolution of network:

The evolution of network is as old as human civilisation and in terms of the business the network is as old as the idea of conducting the business. Almost all the businesses, right from its incorporation, requires to work by forming the network either in formal or informal manner. No organisation can exist without being in network with the other entity. An organisation needs to be in the network of the suppliers and the customers at least to conduct its business activities.

Performance of network:

The performance of the network can be measured by using different criteria for different entities. For customers, the performance of the network is the communication between the organisation and the customers. If this communication is able to generate the business and revenue, than the network is said be a strong one. Similarly, if the suppliers supply the raw material of good quality within the stipulated time at the least cost from the market, than the network is said to be strong between the organisation and the supplier.