Business alliance definitely workable in Indonesia<\/p>\n
By Bob Widyahartono<\/p>\n
JAKARTA (JP): Business alliance is emerging as a new strategy
\nto meet diversifying markets and a changing environment.<\/p>\n
The concept underlying business alliance in Japan was
\nintroduced by Yoshiya Teramoto, a professor at University of
\nTsukuba, who defined it as \"economy of scope\".<\/p>\n
Given the emerging trends, business top executives are being
\nforced to shift their emphasis of business management from an
\n\"economy of scale\" to an \"economy of scope\".<\/p>\n
Will it work in our Indonesian setting taking into account the
\nlegality in which the new Corporate Business Act is still not
\nenacted while the existing regulation fails to cover several
\nforms of alliances.<\/p>\n
The strategy of \"economy of scope\" is a way to generate a
\nsynergistic effect in management of business resources by running
\ndiversified operations.<\/p>\n
Basically, business alliances represent a corporate endeavor
\nto add value and create advantages which are difficult for a
\nsingle company to attain.<\/p>\n
In the \"economy of scope\", process of combining its resources
\nwith complementary resources of other companies, even Small and
\nMedium Enterprises (SMEs) can cultivate or create new business
\nfields.<\/p>\n
Such alliances also give large corporations the organizational
\nflexibility they need to meet diversifying market requirements.<\/p>\n
This economy of scope is made possible by the existence of
\nmanagerial resources, including technologies and marketing
\nchannels which can be applied to different kinds of products and
\nservices.<\/p>\n
Business alliances offer an umbrella concept for joint
\nventures, joint investments, consortiums of companies with
\ndifferent specializations, backward\/forward business integration,
\nand the like.<\/p>\n
These collaborative arrangements are not one-time
\ncooperations, but are spread over a period of time. The form of a
\nbusiness alliance depends on the phase and pace of
\nindustrial\/business development and also the level of competition
\nin the countries involved.<\/p>\n
However, business alliance means doing collaborative
\narrangements with other firm(s). This model does not cover
\nagreement involving full ownership forms such as: mergers,
\nacquisition, or internal ventures. Business alliances are surely
\nnot hostile take-over of small and medium firms by large ones.<\/p>\n
In this kind of arrangement, provisions are made for the
\npooling of core technologies and strategic resources among
\nparticipating companies for the mutual benefit of the group.<\/p>\n
Most alliances carry out Research and Development followed by
\nproduction and marketing. Participating companies are enabled to
\ndevelop jointly new products, use outside resources, and
\ndiversify their business.<\/p>\n
Irrespective of the stage of national development, business
\nalliances have the potential to open up new avenues for business
\ndiversification and economic growth in any country including
\nIndonesia.<\/p>\n
The first type is alliances between SMEs in different business
\nfields. More and more SMEs could be participating in these
\nalliances, which offer opportunities to exchange business know-
\nhow and technical expertise.<\/p>\n
Rapid progress in microelectronics and other process
\ntechnologies and quickly diversifying market needs opportunities
\nfor them to pool technologies and create new market niches.<\/p>\n
The second type is alliance between large and SMEs. Large
\nautomobile manufactures in Japan create, for example, business
\nalliance with SMEs in the electronics field.<\/p>\n
These large companies seek alliances with SMEs which can help
\nthem to upgrade their technology. The SMEs, on the other hand,
\ncan transact business with any number of large companies.<\/p>\n
The third and last type is international alliances with
\nindustries in developed countries. The alliances between Toshiba
\nand Olivetti and between Toyota and General Motors are two
\nexamples.<\/p>\n
They are aimed at mutual learning on long term strategy basis,
\nrather than at cost or complementary technology sharing. Inter-
\norganizational networks must accommodate different business
\nbehavior and value systems.<\/p>\n
Could business alliance feasibly work in our Indonesian
\nbusiness meeting?<\/p>\n
First of all, the enactment of Corporate Business Act which
\nprovides for the definition covering the criteria of size, amount
\nof employees, capital and turn-over for each category.<\/p>\n
How could a company from small be considered ripe for
\nescalation in category and what are the rules of demotion from a
\nlarger scale to a smaller one.<\/p>\n
Furthermore, the rights, responsibilities and scope of
\noperations of the small, medium and large enterprises should be
\nclearly stipulated.<\/p>\n
Once the categorizations are set along the lines of the
\nCorporate Business act, then clear cut criteria should be made
\nwith regard to tax rules in entering business alliance for the
\nparticipating partners.<\/p>\n
Will there be tax incentives for such alliances as in the case
\nof Japanese ones?<\/p>\n
Again this opportunity should be legally founded and covered
\nby the new Corporate Business Act which is now in process of
\nfinalization by our Indonesian Parliament.<\/p>\n
The writer is a senior lecturer at Trisakti University in
\nJakarta.<\/p>",
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