Strategic Alliances In The Food And Beverage Industry

Abstract

Strategic Alliances are an important component of an effective Total Quality Management program (TQM) and of business growth. The Food and Beverage industry was studied as part of a long-term longitudinal research program, covering diverse industries, to determine the extent of penetration and effectiveness of strategic alliances and TQM. The results indicated that 62% of respondents participate in strategic alliances and 82% practice TQM. Over 74% of firms that did participate reported achieving or exceeded alliance goals and, significantly, 73% experienced increased business revenue. Approximately 11.84% of participants reported that costs exceeded expectations while 15.13% enjoyed lower costs. Some methods to enhance strategic alliance effectiveness are discussed.

Total Quality Management (TQM) is a philosophy that includes the idea that to achieve the highest level of quality one must extend the quality system and program as far back in the Supply Chain as possible, i.e., to the supplier(s), the supplier’s supplier and beyond if applicable (first, second, third, etc., tier suppliers), and as far forward as possible, i.e., to customers¹. TQM also embraces the following five concepts namely; continuous improvement (a never ending search for perfection), bench-marking (learning from the “best-of-the best or “best-in-class”), use of empowered employee teams⁶, just-in-time practices (JIT) (use of strategic alliances and few suppliers²), and knowledge of tools (at least 51 tools including Statistical Quality Control³).

JIT practices include the use of strategic alliances; which may be with first, second and third tier suppliers and/or with customers; to achieve competitive advantages as well as to improve quality throughout the business system of an enterprise.² A Strategic Alliance is a formal agreement to supply a good(s) or services(s) and to jointly expand knowledge, develop applications and commercialize new products, with the rights of co-ownership, and commercial exploitation of the inventions within the boundaries of the Alliance particulars. Alliance partners work together to serve the ultimate consumer by doing together what each partner could not do alone. The Strategic Alliance agreement includes Supply, Technology, Intellectual Property, Legal and Termination/Disengagement sub-agreements and, generally, has a term of at least 3 years but not usually more than 5 years. The objective of a Strategic Alliance is to achieve competitive advantage for each partner through productivity and quality improvements and significant innovation.²

This research was undertaken to determine the penetration of TQM and strategic alliances in the Food and Beverage industry. The intent is to re-study this industry in about 4 to 5 years to understand the evolution of TQM and strategic alliances from the baseline reported herein. The authors comprise the Strategic Alliance Research Group that expects to study a broad array of US industries on these subjects.⁵ The reader is referred to the authors’ Web site at www.tsarg.com for the organization’s vision, mission, objectives and recent research.