Many Firms Fail When They Enter Strategic Alliances

Activity I Many Firms Fail When They Enter Into Strategic Alliances W

Activity I - Many firms fail when they enter into strategic alliances with firms that link up with companies based in other countries. What are some reasons for this failure? Provide an example. Activity II - E-Loan and Lending Tree are two entrepreneurial firms that offer lending services over the Internet. Evaluate the features of these two companies and, for each company: Evaluate their characteristics and assess the extent to which they are comparable in terms of market commonality and resource similarity. Based on your analysis, what strategic and/or tactical actions might these companies take to improve their competitive position? Could E-Loan and Lending Tree improve their performance more through co-opetition rather than competition? Explain your rationale. 2 pgs in length and double spaced pls

Paper For Above instruction

Introduction

Strategic alliances are collaborative agreements between firms intended to leverage mutual strengths, expand markets, or acquire new resources. While alliances can provide significant competitive advantages, international collaborations often encounter challenges that can lead to failure. Similarly, the internet-based lending industry demonstrates differing strategic approaches, with firms like E-Loan and Lending Tree competing and potentially collaborating to enhance their market positions. This essay explores the reasons behind failure in international strategic alliances and evaluates the strategic dynamics of E-Loan and Lending Tree, examining how they can optimize their competitive strategies through cooperation or competition.

Failures in International Strategic Alliances

International strategic alliances frequently fail due to cultural, managerial, and operational misalignments. One primary issue is cultural differences, which impact communication, trust, and decision-making. For example, Western firms partnering with Asian companies may face challenges due to contrasting business practices and cultural values (Ghemawat, 2001). These disparities can cause misunderstandings, reduce coordination efficiency, and diminish trust, leading to alliance dissolution.

Another reason is managerial and strategic misalignment. Firms may enter alliances with differing expectations regarding control, resource-sharing, and strategic goals. Sometimes, partner firms have incompatible objectives, or one partner might pursue selfish interests at the expense of the alliance (Shenkar & Odell, 2001). For instance, Vodafone's failed alliance with China Mobile in 2010 was partly due to strategic differences regarding market approach and control, undermining the partnership’s effectiveness.

Operational issues, such as incompatible systems, technological differences, or logistical challenges, also impair alliance success. Companies may struggle to integrate their operations smoothly if they have divergent processes or standards (Hitt et al., 2007). These operational hurdles can erode the perceived value of the alliance, causing frustration and eventual breakdown.

Legal and geopolitical factors further complicate international alliances. Regulatory disparities, tariffs, and political tensions can restrict operations or create legal uncertainties that discourage long-term investments (Agarwal & Ramaswami, 1992). For example, alliances involving firms from North Korea or sanctioned countries are often hindered by legal restrictions, making partnership sustainability problematic.

In summary, cross-border alliances face multidimensional risks—cultural, managerial, operational, and legal—which must be meticulously managed to ensure success. Failure often stems from inadequate due diligence, poor communication, misaligned expectations, or external environmental factors.

Evaluation of E-Loan and Lending Tree

E-Loan and Lending Tree are prominent examples of Internet-based financial service companies that facilitate online lending. Their core service involves connecting borrowers with lenders through online platforms, aiming to simplify and expedite the lending process.

E-Loan focuses on personal loans, mortgages, and auto loans, emphasizing transparency, ease of use, and competitive rates. Its platform offers pre-qualification tools, educational content, and quick processing times (Jones & Shaikh, 2002). Lending Tree operates as a marketplace that aggregately hosts multiple lenders, allowing consumers to compare offers and select suitable loan options. It earns revenue through advertising fees and lead generation, providing a broader array of lending products, including mortgages, personal loans, and refinancing options (Brown & Gupta, 2010).

Market Commonality and Resource Similarity

E-Loan and Lending Tree exhibit high market commonality—they both target similar customer segments seeking accessible, affordable loan options online. Their services directly compete for the same market of consumers and lending institutions. As aggregators, both companies rely on a network of lending partners, which demonstrates resource similarity in their operational models.

However, their resource profiles differ slightly. E-Loan invests heavily in brand reputation, customer service, and educational content to foster trust and loyalty. Lending Tree emphasizes technological infrastructure—its comparison platform and data analytics capabilities—to attract and retain users (Chen et al., 2009).

Strategic and Tactical Recommendations

To strengthen their competitive position, both companies should pursue strategic moves aligned with their core competencies. E-Loan could leverage its brand reputation and customer education initiatives to develop long-term customer relationships, including personalized financial planning tools. Lending Tree can enhance its value proposition by integrating AI-driven decision support systems, improving the accuracy and relevance of loan offers.

Both firms could benefit from strategic collaboration, or co-opetition, where they share insights or technological innovations while maintaining competitive independence. For instance, joint investment in cybersecurity protocols or data privacy standards could reinforce consumer trust (Brandenburger & Nalebuff, 1996). Co-opetition could also enable them to expand their market reach collectively in emerging regions lacking robust online lending infrastructure.

Competitive Versus Cooperative Strategies

Engaging in co-opetition—collaborative competition—might provide these firms with advantages over pure rivalry. By sharing resources or coordinating on industry standards, they can lower operational costs and enhance credibility (Ritala & Tidström, 2014). For example, pooling data analytics expertise could improve risk assessment models, leading to better loan matching and reduced default rates.

However, the choice between competition and cooperation depends on market dynamics. If the market becomes saturated or tightly regulated, collaboration might be more effective. Conversely, aggressive competition could lead to rapid market share gains but at the expense of profit margins.

Conclusion

International strategic alliances often fail due to cultural, managerial, operational, and legal challenges, requiring diligent management and alignment. E-Loan and Lending Tree exemplify competitive online lending companies that can improve their positions by leveraging their unique resources while exploring opportunities for strategic collaboration. Co-opetition presents a promising strategy for enhancing innovation, reducing costs, and expanding their market reach in the increasingly digital financial landscape.

References

• Agarwal, S., & Ramaswami, S. (1992). Choice of foreign market entry: Retrospective and prospective analyses. Journal of Business Research, 24(2), 195-216.
• Brown, T., & Gupta, A. (2010). The emergence of online financial advisory services: Empirical evidence. Financial Services Review, 19(3), 190-208.
• Ghemawat, P. (2001). Distance still matters: The hard reality of global expansion. Harvard Business Review, 79(8), 137-147.
• Hitt, M. A., Li, D., & Xu, K. (2007). International strategy: From local to global and beyond. Journal of World Business, 42(3), 273-283.
• Jones, T. M., & Shaikh, S. (2002). Online lending services: A new frontier in financial innovation. Journal of Financial Innovation, 6(1), 45-64.
• Ritala, P., & Tidström, A. (2014). The coopetition paradox—Entrepreneurial cooperation in a competitive environment. Industrial Marketing Management, 43(2), 157-168.
• Shenkar, O., & Odell, P. (2001). Institutional and strategic challenges for international strategic alliances. Journal of World Business, 36(3), 262-273.
• Hitt, M. A., Gillenson, M., & Xu, K. (2007). Strategic management of e-business: A review and research agenda. Journal of Management, 33(5), 700-727.