Strategic Alliance on Logistic Enterprises – Trend and Government Tactics Essay

Abstract It has been admitted by the global enterprises that Strategic Alliances is a means to create value for enterprises. Logistical services’ globalization and synthesization promotes the strategic alliances among logistical companies.

Under the circumstances, to view from macrofields, Chinese governments of all levels should try hard to break through departmentalism and regional protection so as to promote a domestic unified logistics market; to view from microfields, Chinese logistical companies should go into action actively, strengthen cooperative competition awareness, speed up information system construction, enter into an alliance with preponderant domestic and overseas enterprises in order to cope with the intense competition in concert.

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Key words Logistics, Logistical Enterprises, Strategic Alliances, Tactics 1 Introduction As a means to create value for enterprises, Strategic alliances have been admitted by the global enterprises. The challenge of logistical services’ globalization and synthesization promotes the trend of strategic alliances among logistical companies throughout the world. Logistical enterprises in China should go into action actively and enter into an alliance with preponderant logistical corporations in domestic and overseas so as to deal with the challenge in concert.

2 Logistical services’ trend . 1 Logistical services’ globalization As far as logistical services’ regional trend and global trend, logistical services’ globalization will be the main trend of the times in the 21st century beyond question. This is also the reflection of “logistical services are sure to break through national boundaries as world economy is changing more and more global today”. The expansion of logistical services’ geographical range originates in the change of ways of enterprises’ operation and the requirement of enterprises’ gaining better productive efficiency and results.

Most modern large-scale companies have achieved or are developing toward the separation of raw materials’ producing places, processing places and products’ selling places. In particular, as the development of global economic integration is changing faster, the trend of the separation of the above three places is also changing faster and more obvious with each passing day in order to gain raw materials of lower price, realize lower processing costs and achieve bigger selling profits. This pushes the expansion of logistical services’ geographical range at an unusual speed.

At the same time, it raises the capacity and efficiency of interchange of commodities to a high degree that the wide-ranging application of modern science & technology in the field of communication, transportation, and information. This pushes the expansion of logistical services’ geographical range and also makes the efficiency of logistical services to be higher and higher. A report published by Holland International Distribution Commission (HIDC) in the year 2002 points out that most large-scale manufactories are developing toward expansion enterprises now.

This so-called expansion enterprises almost include all companies of global supply chain and effectively control them by means of advanced computer systems. The report holds manufacturing industry has practiced the theory of Mass Customization, is speeding up the globalization of its operations continuously and has put forward the demand for total-process services. The logistical total-process services demand very flexible supply chain and impel logistical companies to practice logistical services’ globalization.

In addition, according to the World Investment Report published by the United Nations, there have been forty-four thousand transnational corporations in the world today. The output value of these 748 transnational corporations is twenty per cent that of the whole world. They control one-third of the world production, seventy per cent of the world external direct investment, two-thirds of the world trade, more than seventy per cent of the world patent or other technical transactions.

Their production & circulation operations are distributed over the whole world and form a huge global producing and selling system. As the principal part of demand for logistical services, the globalization of transnational corporations’ operations makes regional logistical services to be unable to meet their demand for logistical integration all over the world. They ask logistical companies to possess the global logistical service net and provide transnational, global logistical services for their global operations. . 2 Logistical services’ synthesization Facing intense market competition and rapidly changing market demand, to provide total-process logistical services, namely integration logistical services, has been the key to exist and grow for logistical companies. Logistical services will attach more importance to the efficiency and results of integrated operations of customers’ logistical system. The management and continuous improvement of customers’ supply chain will be core services of logistical companies.

Synthetical logistical services will make water, land, and air transportation integration, make all sorts of logistical functions integration. It is the important developing trend of logistical services now. The intersection in operations among logistical companies, such as shipping companies provide land transportation services, freight forwarding companies provide water transportation services or act as the opposite deputy each other or the expansion of services net in the whole world, speeds up the integration of logistical services and supply chain management.

For example, some big logistical companies have been made water, road, rail transportation integration and provide door-to-door international freight transportation. 3 The definition of strategic alliances Traditional economics stresses the competition among persons concerned, but neglects cooperation among them frequently. If competition engenders vitality and efficiency, cooperation can engender harmony and efficiency. The present economists’ analyses show the efficiency engenered by settling disputes by means of cooperation is the highest.

In the year 1995, well-known American scholar —Peter F. Drucker pointed out the greatest transformation happening in the field of industry and business was not the emergence of enterprises’ relationship based on possessive right, but the rapid increase of enterprises’ relationship based on cooperative partnership. The essential difference between Enterprises in the 21st century and ones in the 20th century lies in the former substitute net and ependent enterprises each other for depth-integration companies, and the former operate enterprises by means of open, suitable, whole point of view. Some western strategic management scholars asserted that competition would develop among enterprise alliances to a great extent in the 21st century. Defined from the resources, strategic alliance is that the participant enterprises’ behavior, namely participant enterprises seek for common interests in accordance with their resources’ heterogeneous & complementary and the principal of mutual benefit.

Strategic alliances include varied forms, such as the cooperation between powerful enterprises and powerful ones, the cooperation between strong enterprises and weak ones , the cooperation among weak enterprises; the loose cooperation among enterprises which isn’t involved in share exchange, the close cooperation among enterprises which relates to share exchange. In the recent ten years, strategic alliances have been gaining seventeen per cent of investment interests among two thousand companies which are very outstanding in the world. The digit is more than fifty per cent over ordinary companies’ figure.

An investigation in 1998 shows three-fifth of American Chief Executive Officers favor strategic alliances. The figure is very close to the digit in Europe or in Asia. The fact shows that Strategic alliances have been admitted by the global enterprises as a means to create value for enterprises. 4 Strategic alliances among logistical enterprises Strategic alliances among logistical enterprises is that two or more logistical companies come to an long-term mutual beneficial agreement so as to realize some specific strategic goals, such as realizing 749 esources share or opening up new market. The alliances share the appointed resources and capacity. As a result of complexity in logistical operation and limitation in logistical resources that a single logistical company possesses, it is often very difficult for a single logistical company to realize effective control and management in logistical services as a whole, to make total process logistical value and operation arrive at first-rate, to provide low cost and high quality logistical services, to bring high customer satisfaction degree.

However, by means of entering into alliances with other logistical companies concerning, under the circumstances of not investing large-scale capital, a logistical company can make use of partners’ logistical resources, add logistical services’ items, widen logistical services’ regions, provide total process logistical services for its customers, increase market share and competitive capabilities, receive benefits from joint marketing and selling management. Now strategic alliances have been a important strategy of many logistical companies.

It is by means of strategic alliances that Japanese logistical enterprises integrate their logistical market and consolidate their American & European logistical operation integration. For instance, Japanese well-known logistical company—Itochu entered into strategic alliances with GATX logistical company concerning logistical services cooperation in America and Asia in 2000. GATX would provide supply chain support for Itochu’s customers. Two companies would also develop electronic commerce operation in concert.

Itochu supposed the strategic alliances are the key to enter third-party logistics market. European postal companies have been sparing no effort to build strategic alliances with other logistical companies so as to turn into international large-scale postal providers in the recent years besides merger. For instance, France Postal Group came to an agreement concerning strategic cooperation with American Federal Express Corporation (Fedex) in 2001. According to the agreement, the customers of France Postal Group can enjoy air net services of Fedex. Suggestions for building logistical strategic alliances in China To be confronted with the trend of strategic alliances among logistical enterprises all over the world, Chinese logistical enterprises should also go into action actively and be in alliance with domestic and overseas excellent logistical companies in order to cope with the challenge of logistical services’ globalization and synthesization in concert. 5. 1 Advocating cooperative competition among logistical companies Logistics develops rapidly in the recent years in China.

But Chinese logistical enterprises’ development is just beginning and at the initial stage on the whole. Most of them apply their principal resources to short –term goal in operation. They usually have not long-term strategic goal and cooperative awareness. Some logistical companies reluctantly meet customers’ demand for logistical services when they don’t possess adequate logistical resources. The circumstances lead to a drop in the quality of logistical services and the loss of customers’ trust in a sense. These logistical companies finally will be unable to exist for a long time in the market.

It is one of important reasons why Chinese logistical enterprises emerge in large numbers and are eliminated rapidly. Therefore, governmental departments concerned should try hard to guide domestic logistical companies to train cooperative competition awareness. 5. 2 Building strategic alliances between domestic logistical companies and abroad ones Every domestic or overseas logistical company has some superiority & weakness and can help each other. It is the objective foundation of building strategic alliances among them.

On the one hand, transnational logistical corporations often have some superiority, such as abundant funds, complete overseas services net, rich experience of logistics operation, etc. But they are not familiar with Chinese specific conditions and have some cultural barrier. These are the transnational logistical corporations’ weaknesses. On the other hand, comparatively speaking, Chinese large-scale logistical enterprises often have fine relations with governments of different levels, relatively complete domestic logistical services net, and such.

But Chinese logistical enterprises usually have such weaknesses as rigid system, backward technology, inefficient, etc. 750 In accordance with superiority and weaknesses of one’s own, Chinese logistical enterprises should go into action actively and set up strategic cooperative partnership with abroad superior logistical enterprises. It is the efficient way that Chinese logistical companies rapidly raise their logistical technology and service capacity . 5. 3 Building strategic alliances among domestic logistical companies The current logistical market is excessive dispersal in China.

In other words, logistical market centralization degree is too low. There are too many logistical companies. But most of them are too small in scale. The items of logistical service are too few. For example, according to the investigation concerning Chinese third-party logistics market made by American Mercer Management Consulting in 2002, most of the present logistical companies in China are small-scale enterprises; there are few logistical companies whose market share exceeds two per cent; the market share of the biggest logistical company in China is one point four per cent.

However, American lead logistical company—CH Robinson holds five point one per cent in American logistical market. In addition, in accordance with the investigation made by Chinese Logistics & Purchasing Federation in 2003, the items of current logistical services in China merely centered on traditional transportation management and simple storage management; the great majority of logistical companies’ profit is from the above basic logistical services; some synthetic or value-added logistical services, such as logistical system designing and logistical information services, aren’t still main logistical services items.

As Chinese logistics market is changing more and more opening, Chinese logistical enterprises will go into a blind alley if they continue developing under the guidance of former line. The outlet of Chinese logistical enterprises lies in federation, reorganization and building strategic alliances. By ways of setting up strategic alliances, logistical resources possessed by various logistical enterprises can enjoy together among logistical companies. Moreover, logistical enterprises can provide various logistical services for their customers by means of using alliances’ logistical resources. . 4 Breaking through departmentalism and regional protection Logistics alliances exist in the market full of liberal competition and liberal combination. Such market is favorable for making logistical resources effective allocation on the whole. It is not probable to foster logistics alliances which have strong competence in the market divided. It is also improbable to gain better logistical efficiency & results. Consequently departmentalism and regional protection is the biggest barrier to build strategic alliances.

The governments of all levels should make great efforts to break through departmentalism and regional protection so as to be favorable for building strategic alliances among logistical enterprises. However, the current logistical enterprises and logistical facilities are often controlled by Chinese various departments. Most of them have no contact with each other and mainly meet their own logistical needs. They usually don’t look upon to achieve better economic results as the most important things.

Of course, this is also the far-reaching influence of the long-term planned economy system in China. Moreover, in view of their own benefits, the policy drawn up in many districts usually has the trend of regional protection. It impedes economic contact among regions to a great extent. The operation feature of logistics alliances lies in that their operation regions are very extensive. The narrow regional protection necessarily restricts logistics alliances’ operation and development.

Therefore, Chinese governments of all levels should try hard to break through various barriers among departments and regions, loosen the control of logistics market, lay down unified domestic trade & transportation policy, and promote a domestic unified logistics market. At the same time, logistical enterprises should enter market and become genuine market masters. By means of these measures will the basic conditions be created for building strategic alliances. 5. 5 Strengthening information system construction

Prompt information feedback and unified dispatch in logistical operation are very important for logistics alliances. But they need a complete information system. A complete information system conduces to strengthening close contact among the branches of logistical system and has them to realize integration by means of close cooperation during the logistical operation. Moreover, information system can make logistical system to operate in coordination based on integration. It can bring advantages and 751 otentialities of the branches of logistical system into full play. However, Chinese logistical information system is rather backward now. It has been the crucial link to develop third-party logistics with each passing day. According to the investigation concerned, only thirty nine per cent among logistical enterprises have relatively complete logistical information system. Therefore, Chinese logistical enterprises should increase investment in building information system.

Information construction can raise and improve logistical operation efficiency to a great extent, and conduce to establishing a new and more scientific operation system, and also conduce to realizing agile information feedback. At the same time, governments of all levels should also strengthen information system construction and try hard to build public logistical information center so as to provide information services for logistics alliances’ integration operation. 6 Conclusion Logistical services’ globalization and synthesization is the important developing trend of logistics in the world today.

As a means to create value for enterprises, Strategic alliances have been admitted by the global enterprises. The challenge of logistical services’ globalization and synthesization promotes the trend of strategic alliances among logistical companies throughout the world. Logistical enterprises in China should go into action actively and enter into an alliance with preponderant logistical corporations in domestic and overseas so as to deal with the challenge in concert. It is also the necessary way that Chinese logistical enterprises grow in strength and head for the world.

References

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