Discussion # 9: Assignment: Case Scenario 9: Norning International Norning International (NI) states that both its past successes

and future growth strategies are based on an evolving network of wholly owned businesses and joint ventures around its core competency in glass making. Through their alliances and owned divisions they compete in four global business sectors: Specialty Glass and Materials (including materials for HDTV and LCD displays), Consumer Housewares (including microwavable dishware), Laboratory Sciences Products and Services (test tubes, testing equipment, and drug trials testing), and Communications (fiber optics and related technologies). Per the companys annual report, binding all four sectors together is the glue of a commitment to leading edge glass making technologies, shared resources, and dedication to total quality. Each sector is composed of divisions, subsidiaries and alliances. However, the central role played by alliances is demonstrated by the fact that the combined revenue of its 30-some alliances is more than double that of NI on its own. Most of the alliances provide NI with access to particular geographic markets, industries, or channels, although an increasing number of alliances involve both market access and technological development. [1] Why would a company like NI place such emphasis on alliances as a growth vehicle?

Company like NI place such emphasis on alliances as a growth vehicle could be for many reason, but most importantly could be for growth strategy, an alliance ensure that both parties will act in a certain way in order to achieve a common goal. Core competency of NI is glass making four global business sectors, alliance will allow company to focus on non core business with limited resources to develop their capabilities that are not glass making not only that alliance as growth vehicle will benefit NI in winning larger market share, even at the expense of short-term earnings, business diversification, product development by R & D, market penetration to new and emerging market, and also market development with be much more easier for NI because the companys will get an opportunity to share resources with the alliance company to manage and maintain the growth, and dedication to total quality, gain competitive advantage, and also overcome the communicational, cultural and many other barriers. So above discussion gave a clearer picture of NI emphasize on alliance of growth vehicle.

[2] What risks arise from a strategy based on such a network of alliances?
Risks arise from a strategy based on such a network of alliances are many like Growth strategies - business growth can involve in Building up new businesses from scratch and developing them (organic growth), Acquiring already existing businesses from the current owners by the acquisition of a controlling interest. But there is an issue of spreading the costs and risks NI need to take in consideration to which extend they can do it. Finance and management- NI require to Buy a high quality management team which exists in the acquired company, obtain cash resources where the company acquired is liquid but again Risk-spreading, dependency on partners Independence and also overcoming the barriers to entry in new market will be a risk factor equally. Acquisitions and mergers- apart from cost they might be too expensive especially if resisted by directors of the target company. Customers of the target company might resent a sudden takeover and consider going to other suppliers for their goods. Incompatibility The problems of assimilating new products, customers, suppliers, markets, employees and different systems of operating might create management overload in the acquiring company. Asymmetric information purchaser not really knowing the actual value of the company thereby overpaying or ignoring a potentially profitable acquisition. Risk of organic growth - it takes a long time to growth organically so time is the risk factor here. Barriers to entry distribution networks, government rules and regulation, cultural barrier, environmental issues, adaptability, but not forgetting the risk that firm will have to acquire the resources independently and organic growth may be too slow for the dynamics of the market. Ventures risk- it could lead to a conflicts of interests between the different parties, even disagreements may arise over the profit shares, amounts invested and marketing strategy, not only that any partner may wish to withdraw from the arrangement any time. Virtual risk - Virtual corporations effectively put market forces in all linkages of the value chain, this has the advantage of creating incentives for suppliers, perhaps to take risks to produce a better product, but can lead to loss of control. So NI need understand each factor carefully and measure expected threats and risk on its each alliance.

[3] NI appears to be managing a large number of alliances. What criteria should it use to exit particular alliances?
Having a large number of alliances the company must emphasize on exit to alliance, as alliances open the door to save cost and maximizing revenue by growth, but as per previous discussed in question one, alliance are also to benefits NI to share recourses, develop product by research and development, effective market penetration and understanding and marching deferent needs and demand to meet by the specific product category , number of alliance will bring various problems and issues so exit strategy could be manage by an agreement in seek of partners but to do that NI need to have an Alliance Strategy that Meets organizational objectives and Needs, take in consideration of the mobile workforce is one of the fastest growing threats to security, establish and follow the alliance Processes, create flexible of teaming Agreements also create measurement processes, and create a Culture of Alliance Knowledge Sharing but most importantly Understand When to Terminate the Relationship, and in when to continue.

The alliance performance can be benchmarked on a number of intangible criteria, besides the cost minimization and opportunity maximization approaches. But it is not easy to evaluate the performance of alliance because alliances are formed to serve a wide variety of strategic objectives (e.g. marketing, market entry, R&D, etc) and not solely on financial. Thus, it requires an alignment between the objectives and the metrics used for assessment. NI can measure the success of its alliances by evaluating a number of core metrics based on the basic strategy or reason for the alliance. These metrics could be on the basis of (i) time frame or speed (ii) increased revenue (iii) increase in transfer of knowledge or skill. Such evaluation is vital to determine the progress and performance of the alliance, as well as to see whether there are areas that the alliance partners can seek renegotiation or strike a new bargain. But if the measurements are deteriorating, before the managers consider an exit strategy, they have to deal with contentious issues and assess the contractual terms and the governance arrangements of the alliance, as well as the anticipated respond to their decision. Ideally, the exit strategy should be managed via a mutually agreed procedure that put forth the interests of associated partners, customers as well as NI's shareholders.

Create an Alliance Strategy That Meets Organizational Objectives and Needs First, understand your company's objectives in a potential relationship. What does your company need that a partnership might fulfill? Is a partnership the only way or the best way to meet these needs?

The mobile workforce is one of the fastest growing threats to security. Establish and Follow Alliance Processes

Perform Due Diligence

Create Flexible Teaming Agreements

Create Measurement Processes

Drive Toward Joint Profitability

Create a Culture of Alliance Knowledge Sharing

Understand When to Terminate the Relationship

(i) time frame or speed (ii) increased revenue (iii) increase in transfer of knowledge or skill.

1. Why would a company like NI place such emphasis on alliances as a growth vehicle? Company like NI deems alliances foster growth more rapidly than organic growth or M&A. The resource-based view advocates that firms form alliances to access valuable, rare, non-imitable and non-substitutable resources that can earn higher level of returns. By emphasizing on the alliances strategy, NI can focus on its core competencies in glass making while the alliances can grant NI access to new customers, markets, products, new technologies, distribution channels, and skills and knowledge in other global business sectors such as Laboratory Sciences and Communications. By aligning to other partners, NI need not overstretch its limited resources to develop capabilities that are not core to glass making. Instead of trying to duplicate each others' competencies, the alliances could reduce the tendency of direct competition, and hence foster cooperation amongst them. In communication products which are characterized by short lifecycles and in laboratory science products which demand high precision and quality, NI would not only benefit from cost and time savings in strategic investments by aligning and leveraging on its partners, but also inherit the culture and the economics of the different kind of businesses thay may be alient to NI. In summary, the motivation for NI to use the alliances as vehicle to grow can be generally categorized into three main reasons: (a) cost-related (b) strategic transformation, and (c) learning, skills or knowledge-related.

2. What risks arise from a strategy based on such a "network of alliances"? Many alliances that NI has entered into with the right intents can face potential risks either in the form of relational risks or performance risks, or even both. The potential relational risks include lack of cultural fit and communication; differences in corporate partners' personalities, and commitment amongst the partners. Even the lack of trust in the form of responsibility, reliability and equality (opportunism) may bring out the demise risk of the alliance. Performance-related risks can come in the form of lack of strategic fit, deficiency in complementary capabilities, and differences in operating procedures, but sometimes do include market situation, regulatory environment and economic conditions. The fact of changing technologies, market conditions and consumer tastes can result in the change or shift in focus or strategies of respective parties. When such changes result in some incompatibility, it may often lead to a rift between the partners. Pulling out from the alliance may result in the loss of market share, brands or even the new technology. The alliances that NI has established can also make NI too dependent on its partner inadvertently. This can place NI more susceptible to a situation where its partners who owns the critical resources starting exercising control over NI. Finally, whether the risks are in the form of relational or performance, these risks if not managed adequately can eventually led to the collapse of the alliance, more so when the strategic intent of the alliance is not clearly articulated among the partners. 3. NI appears to be managing a large number of alliances. What criteria should it use to exit particular alliances? Since NI's combined revenue of its 30-some alliances is more than double of its own, NI must have already considered its exit strategies as normal business processes prior to entering such alliances. The alliance performance can be benchmarked on a number of intangible criteria, besides the cost minimization and opportunity maximization approaches. But it is not easy to evaluate the performance of alliance because alliances are formed to serve a wide variety of strategic objectives (e.g. marketing, market entry, R&D, etc) and not solely on financial. Thus, it requires an alignment between the objectives and the metrics used for assessment. NI can measure the success of its alliances by evaluating a number of core metrics based on the basic strategy or reason for the alliance. These metrics could be on the basis of (i) time frame or speed (ii) increased revenue (iii) increase in transfer of knowledge or skill. Such evaluation is vital to determine the progress and performance of the alliance, as well as to see whether there are areas that the alliance partners can seek renegotiation or strike a new bargain. But if the measurements are deteriorating, before the managers consider an exit strategy, they have to deal with contentious issues and assess the contractual terms and the governance arrangements of the alliance, as well as the anticipated respond to their decision. Ideally, the exit strategy should be managed via a mutually agreed procedure that put forth the interests of associated partners, customers as well as NI's shareholders.