Question one
The alliance between the two motor companies was a partnership strategic alliance. This is because the two companies had come together in order to ensure that their partnership is able to benefit them in different ways. Although the German company (Volkswagen) purchased a percentage of the total shares in Suzuki, the company was to share its technology with the smaller company as part of their partnership agreement.
Question two
The strategic alliance between Volkswagen and Suzuki was aimed at benefiting both companies.
Benefits for Volkswagen
Volkswagen was supposed to benefit in terms of gaining access to the Indian market. The Indian market was fast growing. Since Suzuki had established its firm in Indian, the alliance would have seen Volkswagen have an excellent opportunity to access the market in order to promote its internationalization strategy. In order for a company to expand its emerging markets, there is the need for it to analyze the business culture in such markets. Hence, the presence of Suzuki in India would have provided Volkswagen the opportunity to learn the business culture in India. Furthermore, the company would have benefited from the smaller car platform in Suzuki by gaining the small displacement motors. Therefore, the company would achieve more innovative technologies in Suzuki in order to provide more customized cars for its customers (Purkayastha & Syed, 2012, p. IC 13).
Benefits for Suzuki
The alliance would have seen Suzuki gain access to the technology used by Volkswagen. The hybrid technology at Volkswagen was important in ensuring that the company was able to meet the increased needs of the automobile industry. Hence, the partnership between Suzuki and Volkswagen would see Suzuki expand its technology and be able to manufacture its high-end vehicles using the technology that would have been provided by Volkswagen. Purchasing the smaller percentage of its shares from Suzuki, Volkswagen promoted the financial stability of Suzuki. This means that the partnership acted as a financial support for Suzuki to enable it expands its market and technology.
Generally, the alliance between these two companies would ensure an increased brand awareness to both companies in different markets. In addition, it provided them with the opportunity to reach other markets that would not have been able to expand and gain access to new clients.
Disadvantages of the Alliance
In partnership strategic alliances, there are different challenges that are faced by the parties involved. According to McSweeney (2002), most of these alliances are not good since companies have cultural differences. Each company usual has their business plans that make it difficult to combine with those of the other company in order to have a joint proposal. However, most companies are driven by their self-interest making it difficult to create a mutually beneficial alliance (Purkayastha & Syed, 2012, p. IC 19). For example, Volkswagen failed to provide the hybrid technology to Suzuki. On the other hand, Suzuki was not going to give access to its promising Indian market since it was the only way the company would ensure it grows. Therefore, holding honesty and trust is not easy. Partnerships are always faced with a breach of contract. In this case, Volkswagen did not provide the technology to Suzuki, which was a breach of contract. In terms of financial stability, it is disadvantageous for Suzuki in that Volkswagen denied selling the shares it had purchased from Suzuki. This means that the company lacks control of a percentage of its shares.
References
McSweeney, B. 2002, “Hofstede’s model of national cultural differences and their consequences: A triumph of faith – a failure of analysis”, Human Relations, vol. 55, no. 1, pp. 89-118.
Purkayastha, D. & Syed, A 2012, “After the breakup: the troubled alliance between Volkswagen and Suzuki”, IBS Center for Management Research, pp.IC13-IC22
