Role Of Strategic Alliance in the Successful Business Growth in China

A strategic alliance is an agreement between firms to do business together in ways that go beyond normal company-to-companydealings, but fall short of merger and or a full partnership (Wheelen and Hungar,2000).These alliance range from informal handshake agreements to formal agreements with lengthy contracts in which the parties may also exchange equity,or contribute capital to form a joint venture corporation . Peter Drucker ,who has been called the father of the management theory ,states :The greatest change in the corporate culture , and the way business is being conducted, may be the accelerating growth of relationships based not on ownership, but on partnership(Drucker 1996). The number of strategic alliances has almost doubled in the past ten years and is expected to increase even more in the future (Booz,Allen and Hamilton,1997).More than 20,000corporate alliances have been formed worldwide over the past two years and the number of alliance in the USA has grown by 25 percent each year since 1987(Farris, 1999).A survey which was published in the electronic business showed that 80 percent of electronic companies have strategic alliance and most are planning to negotiating additional agreements (Vyas et al.,1995).According to the recently released study conducted by Anderson Consulting, 82 percent of executives believe that alliance will be the prime vehicle for future growth(Kalmbach and Roussel, 1999). Strategic alliances are the partnerships of two or more corporations or business units that work together to achieve strategically significant objectives that are mutually beneficial.Not all companies can provide what is required so that they can compete in the market. Therefore due to this reason they are teaming up with the different companies who have the resources to provide them the needed technology. Both companiesreceivebenefits from the partnership.According to Hsieh (1997) : host countries now demand more in the way of technology transfer .China is the great example for this. Another reason for forming the strategic alliance is to outsource business functions, which can include marketing, production,accounting, sales, or virtually any other process, to a company which can do it better and cheaper.Indeed many companies are forming the alliance to get the best quality or technology or the cheapest labour or production cost (Quinn 1995).For example, BP Amoco PLC has recently decided to outsource its accounting function to PricewaterhouseCoopers LLP (PWC). In this way, Amoco will gain more efficient accounting work while PWC will gain some employees (Liesman 1999).

Types Of Strategic Alliance : In a study by Cooper and Lybrand (1997), they identified the following types alliances:
y y y y y y y

Joint marketing Joint selling Production Design collaboration Technology licensing Research and development contracts Other outsourcing

Technology Associates and Alliance (1999), a strategic alliance consulting company, lists the following types of alliance: 1. Marketing and sales alliances : y Joint marketing agreements y Value added resellers 2. Product and manufacturing alliances : y Procurement supplier alliances y Joint manufacturing 3. Technology and know how alliances : y Technology development y University/industry joint research China is being widely recognized as rising power in the 21 stcentury. As its economy is growing very fast since the last two decades, China is already said as the Global economic power. As there are many fundamental differences in the political system of China, then also China has acquired rising economic power than the other countries because of open market economy-oriented reforms.China started its economic reforms way back in 1978.Due to these reforms China has transformed itself into a Global economic power. It is also said that (Wadhva, Charan D) China will be the Global power by the year 2020 with carefully evolving a grand vision and grand strategy for transformation. China`s economy was not as good as it is today always. In 1975 Soviet Union were better in economy than China. In 1949 when the communist party of China came to power its leader were planning to transform China into a powerful socialist nation,which included improvement of the living standard, increasing of the military equipments, and also narrowing the difference between the incomes. In the same year when the communist party of China was in power, the economy of China was struggling due to the warfare. Many industries were destroyed and damaged at the end of the war with Japan in 1945 the Soviet Union troops had destroyed many things because of the lack of maintenance, agriculture was disrupted and the economy had hit China very badly.

After this China started building up the economy. In 1978,after the years of state control,the government of China embarked on the program of economic reform. The government did all this to awaken the dormant economy of China. Due to this it encouraged the formation of rural enterprise and private business, liberalized the foreign trade and investment, lowered the prices, and invested in industrial production and education. Before 1978 China was seeing the annual growth of 6% per year and after 1978 the annual growth went up to 9%, and in several years economy reached till 13% also. To know about the fast growth of China, the team from IMF (International monetary fund) examined the sources of nations growth and were surprised to see that although the growth in country`s capitalassets, such as new factories, machinery was important so were the Chinese workers that increased the economy due to work efficiency. This was the driving force behind the economic boom. During the year 1974-94 gains accounted more than 42% of Chinas growth and after 1990`s it had overtaken the capital as most significant source of that growth. This jump in productivity originated from the economic reforms that begun in 1978. Before the economic reforms, nearly four in five Chinese worked in agriculture; now one in two does. Due to the reforms the property got expanded in the countryside and it formed a small non agriculture business in rural areas. DE collectivization and higher prices for agriculture product led to more productive farms and efficient labour. Due to this the workers shifted from traditional agriculture to manufacturing firms. Due to reforms, enterprise manager started selling their products in private market, granted bonus for good workers and fired the bad ones. Also the private businessman developed much needed consumer product, earned hard currency from foreign market and also gave flexibility to economy by paying taxes to state. By introduction of foreign investment, china started open door policy that helped in adding power to the economy. This foreign money helped in building factories, created jobs and linked china to the international market fortransfer of technology. This transfer of technology and also the people of china have increased the economy of the country.Also there has been a remarkable transformation in Chinas enterprise sectors over the past two decades that has sharply circumscribed the state sector in terms of its share of output and broader role in the economy. One of the examples of strategic alliance in the growth of the Business in China is that Nigeria had asked for $5 billion from the World Bank for improving the transportation in their country, but the bank was not able to give that much of amount, so China gave them $8 billion dollar for the work, and in return got the hold of oil.China has secured four oil drilling licences from Nigeria as President Hu Jintao continues his week-long tour of Africa, his second in three years. In exchange China will invest $4bn (2.25bn) in oil and infrastructure projects in Nigeria. China will buy a controlling stake in Nigeria's 110,000 barrel-a-day Kaduna oil refinery and build a railroad system and power stations.

Conclusion: Although China is heading towards the top position in the worlds economy, its work and physical size alone is making it as a global power. Moving millions of Chinese out of agriculture and putting them into the rural sectors without worrying about the urban sector has . Also the open door policy that China started has given boon to the economy of China as it has helped China move into international market. Leading cause for the Chinas growth is initiation of the reforms that was started in the year 1978. As such China have given a great example for the rest of the countries, its like jumping using the pole vault

Bibliography: Zuliu, Hu and Mohsin, S.Khan (1997),Economic issue , NO.8 ,International Monetary Fund. Wheelen, T.L. and Hungar , D.J.(2000),Strategic Management and Business Policy,7thed.,Addison-Wesley Publishing Co.,New York,NY,pp.125-134,314. Drucker, P.(1996), Nonprofitprophet,The Alliance Analyst ,[online],http://www.allianceanalyst.com. 11 November. Booz,Allen and Hamilton (1997),Cross-border alliance in the age of collaboration,Viewpoint. Farris, P.(1999),Getting together strategic alliances,CIOMagazine,[online],http://www.cio.com/archive/0/0/00_part_content.html, 19 October, p.1. Vyas, N.M.,Shelbum,W.L. and Rogers, D.C.(1995),An analysis of strategic alliance :form,functions and framework,Journal of Business and Industrial Marketing, Vol. 10 No. 3, pp. 47-60. Kalmbach, C. Jr and Roussel, R. (1999),Dispelling the myths of alliances[online],http://www.2c.com.html, 16 November , pp. 1-8. Hsieh, T.Y.(1997), Prospering through relationships ,Corporate Finance , Vol. 8 No. 3, April, pp. 1-12. Quinn, J.B. (1995), On the edge of outing, The Alliance Analyst,http://www.alliance.analyst.com, 26 June. p. 3. Liesman, S.(1999), BP Amoco is set to outsourcen accounting in $1.1 billiondeal,Wall Street Journal, 10 November , p. 8. Coopers and Lybrand (1997),Strategic alliance ,Coopers and Lybrand Barometer,Spring.