Question

5

Discuss the three primary characteristics of a good ally.

6.

How can a firm increase the probability of selecting a good partner?

7.

Explain the term relational capital and the importance this concept plays in managing an effective business alliance.

8. What are first-mover advantages? Discuss these advantages.

Answer 1

5.Three primary characteristics of a good ally are :

I)Must have capabilities that the firm lacks and that it values.

A good ally helps the firm achieve its strategic goals, whether they are market access, sharing the costs and risks of product development, or gaining access to critical core competencies.

II) Shares the firm's vision for the purpose of the alliance.

If two firms approach an alliance with radically different agendas, the chances are great that the relationship will not be harmonious, will not flourish, and will end in divorce.

Iii) No exploitation on the other from its own end.

A good ally is unlikely to try to opportunistically exploit the alliance for its own ends, that is,to expropriate the firm's technological know-how while giving away little in return. In this respect, firms with reputations for "fair play" to maintain probably make the best allies.

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6. To increase the probability of selecting a good partner, the firm should:

*Collection of information

This involves collection of t as much pertinent, publicly available information on potential allies as possible

*Gather data from informed third parties.

These include firms that have had alliances with the potential partners, investment bankers that have had dealings with them, and former employees

*Get to know the potential partner as well as possible before committing to an alliance.

This should include face-to-face meetings between senior managers (and perhaps middle-level managers) to ensure that the chemistry is right.

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7.Relational capital :

Relational capital is one of the component of intellectual capital or the intangible value of a company. The knowledge of the intangibles of a company has been receiving increasing importance in the last years, due to the gap between market value and the value of intangible assets.

Importance relational capital in managing an effective business alliance

*According to Badaraco, Relational capital is an important asset, since it influences organizational performance through its impact on innovation and operational efficiency .

* Relational capital is the foundation of future business. In an environment of customer control, with attention a scarce commodity, a firm’s ability tobuild and maintain relationships with customers, suppliers, and partners may be moreimportant than a firm’s land, property, and financial assets.

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8.i.) First-mover advantages :are the advantages that accrue to early entrants into a market.

iii) By identifying and investing early in a country with high potential for future growth, international firms may build brand loyalty and gain experience in that country's business practices.

iii) These will pay back substantial dividends, if that country achieves sustained high economic growth rates.

.iv)For example, eBay was the first company to take the auction process online. Coca-Cola was the first cola producer, and began selling its product to the public in 1886; this has given it considerable advantage over competitors.

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