Strategic Alliances and Outsourcing – The Current Research into Strategic Planning

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Strategic Alliances and Outsourcing – The Current Research into Strategic Planning

Strategic planning remains one of the most popular topics in contemporary organizational research. This growing popularity is partially explained by the fact that markets become more saturated, and firms want to have a strong strategic advantage in their struggle for market position and profits. Depending on the goals pursued by an organization, it can opt for creating a strategic alliance or outsourcing. Both concepts have been extensively explored by scholars. What firms need is to pay more attention to the human side of strategic planning and consider the impacts strategic alliances and outsourcing may have on workers.

Strategy begins with a profound understanding of the core concepts and competencies. Strategic alliances remain some of the most frequently mentioned concepts in the strategic planning field. Kumar (2014) asserts that strategies based on alliances are more susceptible to uncertainty shocks. Thompson, Peteraf, Gamble, and Strickland (2015) confirm that "the stability of an alliance depends on how well the partners work together, their success in adapting to changing internal and external conditions, and their willingness to renegotiate the bargain" (p. 144). A good illustration is the case of Nissan and Renault. The two companies with entirely different cultures came together to accomplish common tasks, and their alliance was quite a success (Kumar, 2014). "Firms enter into alliances to achieve goals that they might find difficult to attain on their own, but they are also confronted with the possibility that their partner may act opportunistically" (Kumar, 2014, p. 83). That is, the success of any alliance will depend on many factors. For instance, if the organizational cultures of the two companies forming a strategic alliance are completely different, they may encounter serious obstacles to effective cooperation. Yet, such obstacles are equally relevant to firms that trade their ownership rights or those, which decide to outsource their activities to external parties (Haussler & Higgins, 2014). Apparently, strategic alliances are not the only opportunity for companies to achieve their corporate goals.

Some firms may apply to outsourcing in planning and implementing their strategies. Elango (2008) defines outsourcing as "moving activities that had previously been performed within the organization externally" (p. 324). In other words, outsourcing entails a decision to hire a third party to perform some or most of organizations' internal operations. A good example of outsourcing is that of Nabisco – the company has decided to outsource a few hundreds of its jobs to Mexico (Madhani, 2016). The move will give Nabisco, the Oreo cookie manufacturer, a strong competitive advantage. By outsourcing some of its jobs to Mexico, Nabisco will save considerable labor expenses. Thompson et al. (2015) confirm that, with outsourcing, "an activity can be performed more cheaply by outside specialists" (p. 153). It will also have more space to explore and conquer Mexican markets. Unlike strategic alliances, Nabisco will not need to look for a prospective partner and hope that it will not fail to achieve the agreed upon goals. Still, like strategic alliances, outsourcing also has its limits. One of the primary concerns here is what will happen to the employees who are laid off by the company in the U.S. as part of its outsourcing strategy.

As firms choose to go offshore in their strategies, they should also tackle with some of the most pressing ethical, environmental, and labor concerns (Doh, 2005). Unfortunately, Elango (2008) disregards the effects outsourcing may have on businesses. Companies that use outsourcing as a competitive strategy should assume greater responsibility for managing its advantages and risks. Organizations that choose alliances also should be more thorough allocating their resources, managing their capabilities, and meeting stakeholder needs. Regardless of the strategic pathway chosen by a company, it will have considerable effects on all stakeholders. This being said, when the pros and cons of strategic alliances and outsourcing are considered, the human factor should remain a priority for any company. People are the greatest asset a company can ever have, and their interests and needs should also be taken into account whatever method of strategic planning comes into play.

In summary, strategic planning is a complex avenue that encompasses a diversity of concepts. It is also a source of abundant business growth opportunities for companies in 21^st century markets. Strategic alliances and outsourcing are just two out of the many approaches companies can use to gain and sustain a strong competitive advantage. Both strategic options have their strengths and weaknesses. Unfortunately, researchers focus mostly on the positive side of the strategic planning story, while ignoring the downsides of outsourcing and strategic alliances. Future research is needed to see how the discussed concepts work in different strategic environments, what effects they have on organizations, and what risks they pose to different organization stakeholders.

References

Doh, J.P. (2005). Offshore outsourcing: Implications for international business and strategic management theory and practice. Journal of Management Studies, 42(3), 695-704.

Elango, B. (2008). Using outsourcing for strategic competitiveness in small and medium- sized firms. Competitiveness Review: An International Business Journal, 18(4), 322- 332.

Haeussler, C., & Higgins, M.J. (2014). Strategic alliances: Trading ownership for capabilities. Journal of Economics & Management Strategy, 23(1), 178-203.

Kumar, R. (2014). Managing ambiguity in strategic alliances. California Management Review, 56(4), 82-103.

Madhani, A. (2016). Oreo cookie in White House hopefuls' crosshairs over outsourcing. USA Today. Retrieved from http://www.usatoday.com/story/news/2016/03/10/oreo-white- house-contenders-crosshairs-over-outsourcing/81575488/.

Thompson, A.A., Peteraf, M.A., Gamble, J.E., & Strickland, A.J. (2015). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases. NY: McGraw-Hill/Irwin.