Network Level Strategies

Network-Level Strategies
Introduction
In the preceding chapter, we discuss the extent to which
organizations should seek to develop cooperative arrangements
when developing strategies. This chapter covers various
motivations for entering into a cooperative venture and
introduces the advantages and disadvantages of strategic
alliances. The chapter also highlights the different forms of the
most popular strategic alliances—namely, franchising,
management contracting, and joint ventures in the hospitality and
tourism industry.
What is network level strategy ?
A network Strategy consist of your plan for building
and managing a network of partner best suited to
meet your shared goals. It includes consideration of
how you'll build your network, in terms of what you
will do and won't do, to align your work with your
goals.
Strategic Alliance
• The term strategic alliance is often defined as
an agreement between two or more share
resources and knowledge that could be beneficial
to all parties involved( chathoth and olsen 2003)
• These strategic alliances can be as simple as
two companies sharing their technology or
marketing resources in order to develop products
jointly and market and promote collaboratively.
Motivation in forming strategic alliance
• Entering new international market

• Circumvent foriegn market barrier
• Extend the product line
• Reduce future competition
• Increase available resources
Types of strategic alliance
• Equity strategic alliance occurs when one company
purchased equity in another business or each
business purchase equity in each other .
• Non-equity strategic alliance organization create
an agreement to share resources without creating a
separate entity or sharing equity. Non-equity
alliance are often looser and more informal than a
partnershiinvolving equity. These make up most
business alliance.
Advantage of strategic alliance
• Sharing resources and expertise: A strategic alliance should
combined the best both company have to offer. This can better
understanding of the product, sales, marketing knowledge and
even just more hands on deck to increase the speed on market
• New market penetration : give access to new market with a
solution that wouldn't have been possible for either company
on thier own. For instance local companies going global often
work with a trusted local partner to get an advantage to
emerging markets.
• Expand production: when it come manufacturing and
distributing product stratigic alliance allow partner to increase
their capabilities and scale quickly to meet demand.
• Drive innovation: With the right alliance, partner can outpace
the competition with new solution that are a complete package
for their customer. These alliance are creative and revolutionary
and change the market landscape in a dramatic way.
Disadvantage of strategic alliance
• Loss of control in an alliance, both organization must
cede some control over hoe their business is run and
perceived and transparency, but that trust isn't built
overnight. Without significant buy-in from both
parties, an alliance may suffer.
• Increase liability in a joint venture or equity stratigic
alliance, both companies are on the hook for the
outcome. If something happen to stall production or
create unhappy customers, both psrtneo sre at risk
for the loss reputation.
franchising
Originating in the United States, franchising emerged as a
powerful way of facilitating the growth of hospitality
organizations. Franchising gives hospitality and tourism
industries and organizations an opportunity to form an
alliance with partners in different country markets
(Lashley and Morrison, 2000).
[] Franchising is a network of interdependent business
relationship that allows several people to share:
• A brand identification
• A successful method of doing business
• A proven marketing and distribution system
Franchisor vs franchisee
Franchisor Franchisee
The franchisor is the The franchisee is the
person or corporation person or corporation
that owns the trade that owns and operates
marks and business the business using the
model trademark and business
model system license
from the franchisor.
Management contract
Management contracts can be defined as the
management of one company by another and often
but not always, the two are in different countries. A
firm with an established reputation for being an
excellent manager will grow by contracting to
manage properties for an owner in return for a fee.
In the hospitality industry, management contracts
have been recognized as one of the quickest forms of
expansion strategy with minimal risk (Eyster, 1988).
Joint venture
A joint venture can be defined as the participation of two
or more companies in an enterprise in which each party
contributes assets, owns the entity to some degree, and
shares the risks (Kivela and Leung, 2005; Magnini, 2008).
The alliance may be one of equal partners or one where
one party is stronger than the other because of the
resources or expertise it possesses. Companies enter into
joint venture partnerships because they reduce the risk of
failure by sharing the burden with a partner, gain rapid
market access, and internationally they can have an
increase in company and product acceptance by having a
local firm serving as the direct interface with the customer.

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Network-Level Strategies

• Entering new international market

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