| dc.description.abstract | Alliances have become an important tool for achieving sustainable competitive
advantage. The main reason for strategic alliances is the attempt to decrease costs
or risks. Firms can attain the benefits of vertical integration through long-term
strategic alliances among firms to share the costs, risks, and profits of business
operations. The motivation for this study was based on what has become common
within the oil industry not only in Kenya but globally; joint ventures. Being
Kenya's major source of commercial energy, petroleum accounts for 80% of the
country's commercial energy requirements. Thus the objective of this study was
twofold; to identify the kinds of strategic alliances in the major oil companies in
Kenya and the issues they are based on and to find out how these alliances are
managed and the problems encountered. Being a case study of the five main oil
companies in Kenya an interview guide was sent in advance to Mobil Oil, Shell-
BP, Caltex, Total, and Kenol-Kobil to give them ample time for preparation. This
was followed with an in-depth face-to face interview. These are well-established
firms whose information was needed to understand this industry and achieve the
objectives of this research.
The greatest challenge here was with the mam respondents - the major oil
companies-who preferred to remain anonymous despite giving very valuable
information. It is in the interest of this study that their identities forever remain
protected. The Ministry of Energy, the Petroleum Institute of East Africa as well
as one of the independent petroleum dealers were also interviewed to get a bigger
picture of the oil industry in Kenya.
As Doz and Hamel have stated in their book, "Alliance Advantage", no company
can go it alone. For industry giants and ambitious start-ups alike, strategic
partnerships have become central to competitive success in fast-changing global
markets. More than ever, many of the skills and resources essential to a company's
future prosperity lies outside the firm's boundaries, and outside management's
direct control. Indeed, right now a plethora of new and imaginative strategic
alliances is transforming industries from transportation to communication, health
care, life sciences, media and entertainment, information technology, aerospace,
and beyond. Hence the challenge: If the "capacity to collaborate" is not already a
core competence in an organization, they better be busy making it so. It is in this
light, that the recent collaborative arrangement between Kenya Shell and Mobil
Oil could be seen. Hitherto averse to any arrangements of this nature with its
competitors, Kenya Shell and Mobil Oil started a joint venture in March 2004 and
now run a Joint depot in the industrial area of Nairobi. This arrangement has had
to make Mobil relocate from its former premises just on the neighborhood to share
facilities with its otherwise arch rival. Kenol Kobil, Total and Calrex went into
this arrangement much earlier and have over the time managed to strengthen it.
These ventures start right from procurement of crude and other petroleum related
products. The Ministry of Energy advertises a tender for the Country's oil
requirements per quota, which is 80,000 metric tones. All the oil companies are
then asked to bid and the winner of the tender consolidates requirements for the
entire industry. This marks the first phase of these alliances. The joint processing
of crude, transportation via the Kenya Pipeline and storage and stock management
at the various depots across the country represents the second phase. The
management of the joint terminals is rotational among the members and has staff
seconded from the parent companies. Functionally, the terminal manager reports
to the companies involved in the joint venture. The selection of staff focuses
strictly on skilled and motivated people. They are then provided with training,
challenging work, clearly defined performance objectives and rewards for a job
well done. These are geared towards achieving the four 4+ 1 strategic intents - cost
reduction, operational excellence, capital stewardship and profitable growth and
developing the organizational capability.
Despite all these rather success stories, alliance design and governance are at the
core of every successful joint venture. Typically, managers devote much attention
to the formal design of an alliance at its inception. The legal structure, governance
structure, gain - sharing terms, and exit clauses are the subjects of protracted
bargaining and detailed scrutiny (Doz and Hamel, 1998; Alliance Advantage).
Yet, too often, the underlying assumptions about the strategic logic of the alliance
have been poorly tested and are most fantasy than reality. Worse still, senior
management often disengages once the deal is done, naively hoping that the
alliance will fly along on autopilot. The challenge of sustaining the ongoing
process of collaboration attracts little top management attention. Clever deal
making and grand visions are not enough. Executives should focus attention on
the process of value creation within alliances over time. It is recommended that the
design of an alliance takes into account the operational scope, that is, the activities,
tasks, and operational domains that are combined in the alliance and the way they
relate to the economic and strategic scopes of the partners and their learning from
each other. It is not the deal per that creates value, but the capacity of two
partners dynamically and creatively maneuver their alliance through a thicket of
uncertainties, changing priorities, organizational frictions, and competitive
surprises.
Despite the in-depth coverage of this research and its findings, there still exists a
gap that future researchers could explore. A study in the area of learning would
she light on how partners have accessed and utilized skins in these joint ventures.
It would reveal how companies have determined the value of information and how
they have managed its flow. | en |
