Adopting the Right Methodology for Job Execution

While performing any process, standard skills and resources are required. It might be possible that whatever you need,  you may not get inside your firm.  And this is the time when firms turn towards M&A alliance and licensing agreements. However, from the last 20 year study has shown that out of 162 multimedia companies only 49 are actively using the resources that are available, rest are relying on developing resources in house. When they were asked why they do so? Their simple answer was that they find fault in their strategy or lack skilled manpower. Instead of looking into new opportunities, blaming your strategy leaves a lot of scope to grow. According to Bloomberg limited only 26% companies forces on M&A and 36% on alliance and 12% still stick to their in-house preparation. While deciding whether to develop a new contract or going with existing internal resources one can ask 3 portions to themselves.

(a) Do you have all the necessary resources?

Developing new resources internally is quick then acquiring it from outside.but it can lead to other initiatives as well when products are developed internally with new resources and capabilities can make existing products obsolete equipped with old functionality and processes. This is seen in numerous telecom and automobile companies. With the advent of new processes, existing one demand less and create huge loss.

Another example how internal practices caused disturbance when the US medical council with IBM decided to develop new generation ECG it faced several internal conflicts over use of technology, resources, trade, partners within the firm. Hence they turned outside the firm to procure established ECG which was lacking market in spite of good technical capabilities. IBM also licensed new technology to offer new health care service. By entering into agreement it created a quick pace in the market.

Conflict is not always disturbing. It can create ways to gain insight on how to build stronger resources. Choosing an internal and external approach is not established practice. It varies according to demand and situation.

Question. Do you and your partners share similar values?

contracts and licensing agreements are the simplest way to obtain resources externally. But it requires a high level of transparency. If there is a lack of transparency or one side is more knowledgeable than the other side can create contact less balanced as it creates fear of being taken advantage of. If there is a mismatch between present value and future value of resources and technology it can be difficult to agree on terms and conditions.

Overall to acquire technology or engage in any kind of alliance you need to first possess certain kinds of competencies within your knowledge of technology, s/w and tools. It can protect one from being taken advantage of. Government mechanisms to allow foreign investors in indigenous Pvt companies up to only certain extent also prevent companies from getting used.

Alliances are mostly seen effective when only few people and firms are involved. For example, an alliance that failed because of involvement of many corporates: In late 2009 German auto giant Volkswayen with Japanese Suzuki motor corporation integrated their production and development efforts by remaining independent but created a complex set of activities of rules and coordinate work which quickly race conflicts between firms. Volkswayen learnt his lesson.

Question. How deeply one needs to get involved for alliance?

To work for for a long period of time active involvement and coordination is necessary.

Acquisition is usually performed to obtain resources and service. For example merger and acquisition are usually performed between the companies where long-term integration is required. Also over-reliance on acquisition can also lead to several risks. Companies involved in M&A need to be strict with process and selling of the resources they don’t need.

However, different approaches call for different selection skills and its implementation which in turn depend on organizational structures. And taking to one process for a long time can cause huge loss.

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