The Rationale for Inter organizational Relationships

At one time companies mainly established relationships with other organizations to achieve tactical objectives,such as selling in smaller overseas markets.Several factors create a need to establish cooperative strategic relationships with other organizations.These influences include the opportunities to enhance value offering to customers,the diversity,turbulence and riskiness of the global business environment,the escalating complexity of technology,the existence of large resource requirements.The various drivers of relationships fall into four broad categories:

1.Opportunities to enhance value by combining the competencies of two or more organications

2.Environmental complexity

3.Competitive strategy 

4.Skills and resource gaps

1.Value - enhancing opportunities :

The opportunity present in many markets today is that organizations can couple their competencies to offer superior customer value.Even when partnering is not required a relationship strategy may result in a much more attractive value offering.

Interestingly,the development of internet aggressive emphasizes that while major players like Google and eBay could adopt aggressive competitive positioning against each other because of their goals in online advertising,they see major advantages at present in collaborating.

2.Environmental Complexity:

The theme of the changing and turbulent global business environment is examined in several chapters,so the present discussion is brief.Environments display escalating turbulence and diversity.Diversity refers to differences between the elements in the environment,including people,organizations and social forces affecting resources.Organizations meet this challenge by: a) altering their internal organization structures b) establishing strategic relationships with other organizations.

Procter and Gamble has reconfigured itself from being an inward-facing company to an outward facing organization that is open to open to collaboration.More than 50 percent of its innovation output comes from outside the company.

3.Competitive Strategy:

In some cases,working with other organizations may be a key element of how an organization competes.There are several examples suggesting this factor is of increasing importance.The "Hollow Organization" competes primarily through its relationships with other organizations to deliver value to end users.The "Hollow" airline,for example,is one where the airline itself owns little more than its brand,network and internet site engineering and maintenance services are outsourced aircraft are leased by the hour from the manufacturer airport services are provided by third party suppliers,food and catering services are outsourced sales and distribution channels are online and alliances with other airlines provide access to a network of destinations.

4.Skills and Resource Gaps:

The skills and resource requirements of technologies in many industries often surpass the capabilities of a single organization.Even those companies that can develop the capabilities may do so faster via partnering.Thus,the sharing of complementary technologies and risks are important drivers for strategic partnerships.

Technology Constraints:

Technology constraints impact industry giants as well as smaller firms.Small companies with specialized competitive strengths are able to achieve impressive bargaining power with larger firms because of their high levels of competence in specialized technology areas and their ability to substantially compress development time.

Financial Constraints:

The financial needs for competing in global markets are often greater than the capacity of a single organization.As a result,companies must seek partners in order to obtain the resources essential for competing in many industries or to spread the risks of financial loss with another firm.

Market Access:

Internationalization relationships are also important in gaining access to markets.Products have traditionally been distributed through marketing intermediaries such as wholesalers and retailers in order to access end user markets.These vertical channels of distribution are important in linking supply and demand.

Information Technology:

Information technology makes establishing inter organizational  relationships feasible in terms of time,cost and effectiveness.Advances information technology provide an important resource for improving the effectiveness of both internal and internationalization communications.

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