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Transformation of Strategic Alliances in Emerging Markets

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Transformation of Strategic Alliances in Emerging Markets, Volume I

Desalegn Abraha

University of Skövde, Sweden

Akmal S. Hyder

University of Gävle, Sweden

United Kingdom – North America – Japan – India – Malaysia – China

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First edition 2021

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ISBN: 978-1-80043-745-6 (Print)

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Dedication

To the memory of

My parents Ato Abraha Ghebrekidan and Weyzero Jeddah Tesfazghi and my brother Engineer Kubrom Abraha whom I remember for their never ending love and care

Desalegn Abraha

My parents Syed Abdul Halim and Salema Begum and my brother Syed Azmal Hyder whom I miss for guidance and inspiration

Akmal S. Hyder

About the Authors

Desalegn Abraha received BBA in Management from the University of Addis Ababa in Ethiopia in 1976, MSC in Industrial Marketing from the University of Uppsala in Sweden in 1989, and PhD in International Business from the University of Uppsala in 1994. Currently, Desalegn is Professor Emeritus at the University of Skövde. He has a broad teaching experience and has so far taught courses on international business, international marketing, marketing research, services marketing, internet marketing, digital marketing, and industrial distribution. His research interests deal with foreign market establishments in network contexts, the internationalization of SMEs, strategic alliances in the international market, bank marketing, and the impact of ICT on marketing. He has published two books and about thirty five articles in international scientific journals such as the Journal of International Marketing Research, Industrial Marketing Management, International Business Review, International Journal of Bank Marketing, European Journal of Marketing, Journal of Services Marketing, and International Journal of Strategic Management.

Akmal S. Hyder PhD from the University of Uppsala in 1988 is a professor of Marketing at University of Gävle, Sweden. He has a broad teaching experience and has so far taught courses on international business, emerging markets, international marketing, marketing research, services marketing, and distribution. He has served as a visiting faculty for nearly two years in the North South University of Dhaka, Bangladesh. Dr. Hyder has a keen interest in international students and teacher exchange program and worked as a coordinator at the University of Gävle for several years. He has published two books and a number of articles in international scientific journals such as International Business Review, Scandinavian Journal of Management, Industrial Marketing Management, European Journal of Marketing, Career Development Management, Thunderbird International Business Review, Journal of Services Marketing, and Business and Society Review.

Foreword

This book is published in two volumes titled Transformation of Strategic Alliances in Emerging Markets, Volume I and Transformation of Strategic Alliances in Emerging Markets, Volume II. Volume I contains eight chapters which are the Overview of the Authors' Strategic Alliances Studies, Alliances Transformation in Emerging Markets, Strategies in Emerging Markets, Institutional factors in Emerging markets, the Journey of Strategic Alliances in Emerging Markets, Theoretical Background, Research Methods, and Emerging Markets: European Transition Economies. Specifically, Volume I defines the research problem, the justification of the research problem, the theoretical framework, the research methods, the strategies, institutional factors, journey of strategic alliances, and the classification of emerging markets.

Preface

The appropriateness and timeliness of publishing this book is beyond doubt as it deals with how the long-term business relationships and networks have changed over time in emerging market alliances. Initially, the alliances were established among Swedish firms and firms in Eastern and Central Europe (ECE). There have been several differences among the alliance partners, i.e., the Swedish and their local partners. Specifically, the Swedish and the local partners have experienced different attitudes, beliefs, ways of thinking, cultures, traditions, ways of conducting business, concept of time, modes of communication, negotiations, etc.

In early 1990s, many Western firms entered into the complexity of ECE, which we introduce in this study as European emerging markets, without having the necessary preparations. Many promising business ideas failed due to lack of knowledge about the ECE emerging markets in regards to social, cultural, political, legal, and human features. It became clear to Western managers that adequate preparation is a prerequisite for success in the region. However, there has been good sign that networks of relationships and competence in dealing with those networks are gradually developed. This study focuses on the changes that have taken place in motives, resource contributions and exchanges, learning, in relationships and networks development, performances, and the general environmental factors within which the alliances function.

Initially, all European transition markets followed the socialist ideology and had almost the same economic structure, but during the last 30 years of transition, things have undergone many changes. Success in adopting market economy and changing policies have created several gaps among these emerging markets. It has therefore become important to know why some countries have done so well, while others fallen behind. This study sees the collaborations as a clear step to reduce the risk of investment by foreign firms and to gradually get accepted by the local governments and the people in the transitional economies. There has been a basic difference in the management style between the Western and Central and Eastern Europe, and therefore issues such as how these dissimilar companies make things go, what result they achieve, and what they really contribute to the development and transformation process are stressed in this book.

Many research works have concentrated on different characteristics of alliances, but surprisingly, no fruitful attempt has yet been made to focus on the dynamic aspect of this form of collaboration. In the case of European emerging markets, this absence is crucial as partners have a totally different background and consequently have different ways in doing business. In fact, the ECE region is not only different from the Western countries but also from the other developing countries. Development and conducting relevant research to study alliances in these emerging markets has been set as one of the main objectives of this book. To fulfill this goal, a conceptual framework from a process perspective has been designed to describe and analyze the formation, development, and functional mechanism of strategic alliances in the transition region. This conceptual framework has been used in this work to go into depth for capturing fundamental issues, functional patterns, and changes of the alliance activities.

One of the main reasons for alliance formation is exchange of complementary resources among the partners. We argue that no alliance study can be complete and justified unless this vital issue is duly considered. Moreover, commitments of the partners in regards to formation and operation of alliances are vital to the fulfillment of the partners' motives. Exchange of resources has to be defined and understood as a part of a dynamic and ongoing process, which means that things can change from time to time depending on the partners' understanding and the environment in which alliances operate. Partners' learning is essential and important for the alliance operations and performance. Changes in the partners' behavior can be a consequence of learning that takes place in the alliance.

In contrast to Hyder and Abraha (2003), which contains 20 cases, this book consists of 10 cases. Out of the 10 cases, eight are discussed in three phases and two in two phases. The current empirical study analyzes and presents 28 minicases. Compared to the previous book, the current work deals with two categories of countries, namely “fast complete adapting countries,” i.e., Poland and Hungary and “medium complete adapting countries,” i.e., Estonia and Lithuania.

The foreign partners faced many challenges. The first challenge was the scanty knowledge of the markets and the local partners. The second challenge was the process of transformation from central planning to market economy. The third challenge was the law and regulations to accommodate and support the new kind of business not practiced earlier in the region. The last challenge related to the local culture and the challenge of changing people's attitudes. However, the challenge for the local partners was to adjust to the changes and to quickly get back on track. The first opportunity the foreign firms took advantage of was the early entrance in the market. Their other opportunity concerned access to capable partners with wide distribution networks in the region. The local partners, on the other hand, could learn modern marketing and dealing with better technology to increase their competitiveness.

Environmental and institutional factors have been found to play a substantial role in the formation, organization, operation, and finally dissolution of the alliances in the European emerging markets. The speed of change has been rapid in the fast complete–adapting countries compared to medium complete–adapting countries, which is noticed in the change of ownership structure and increased level of competition. The fast complete adapters have quickly accepted the Western standard and opened their markets for free investment. Many of the foreign firms have expressed their satisfaction over the changes and see virtually no difference in these countries compared to many countries in the West in doing business.

Vital changes came in relation to regulations and business law to ease the business process. The financial institutions became more professional and the foreign firms gradually experienced less difficulty to borrow locally. Things also improved in the Baltic states (medium complete adapters) as more Scandinavian banks operated in this region. This book offers an in-depth knowledge and understanding of the dynamic challenges and opportunities in emerging markets for the academics and the global business actors.

Acknowledgments

We have come in contact with various people in carrying out this challenging task. Our curiosity in emerging markets and involvement in MBA programs motivated us to initiate and write this book. Particularly, it was a tedious job to follow the alliance process from a long-term perspective.

We would like to express special thanks to Professor Jan Johansson from University of Uppsala, who introduced us to the subject of international business. From the University of Skövde, we thank Mikael Wickelgren, head of the School of Business, Peter Wallström and Joachim Samuelsson (head of divisions), and Jan Sedenka for collaboration and support in the research work. Thanks also go to Andrea Castello Diao and Gisela Fernández Rego for collecting data in the later part of the research process. We have received technical support from Natasa Facol, University of Skövde, for which we are thankful.

From the University of Gävle, we received support from many colleagues. Particularly we like to thank Daniella Fjälström for her support and encouragement in the research process. We extend our thanks to Michelle Rydback, Maria Fregidou-Malama, and Nina Daskalova for intellectual and professional support when we needed it. Our special thanks go to Jaana Kurvinen who as the Dean of the business school understood the importance of the work for education and research.

We would also like to express our extreme thanks to the Emerald book Publishing Limited group for their unreserved efforts in the preparation of the final manuscript of our book. Their continuous and clear feedback, comments and guidance in the whole process is beyond imagination. First and foremost we are very grateful to Nick Wolterman the Commissioning Editor of Emerald Publishing who took the initiative and who asked us if we are interested in discussing publishing our book with Emerald. His initiative and efforts were successful as we have managed to prepare the final version of our manuscript in accordance with the Emerald guidelines. We will also like to thank Melisa Close Associate Publisher/Emerald Publishing/North America, Sally Martin the Editorial Assistant, Business Management & Economics, Virginia Chapman the Publishing Assistant/Emerald Publishing and Mohamed Imrankhan the Assistant Manager – Operations for their unreserved efforts to make the publication of our book successful.

In addition, we are very grateful to the managers of the Swedish firms and the managers of their alliance partner firms in the emerging markets. They offered themselves by being willing to be interviewed for several hours despite their tight schedules and other business engagements. We also wish to thank our family partners Zayd Tsegai and Anjuman Hyder for their encouragement, patience, and support in our efforts to write this book. Finally, our deepest appreciation goes to our beloved children Bana, Jonathan, Fanus and Zebib Desalegn, and also to Afif, Labib, and Raqiq Hyder.

Desalegn Abraha

Akmal S Hyder