Strategic network

Essay by Liyifan520C, August 2007

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1. INTRODUCTIONNowadays, organizations are facing an increasingly turbulent business environment in which the application of new ideas, and moving with boldness and agility to innovate, may be the primary competitive and survival advantage. Under such circumstances, the use of resources and competencies of other organizations becomes extremely important, and the skills of managing these networks become vital. Companies not only build close relationships with their target customers, but also develop close bonds with other firms. "Inside organizations, enterprises are realizing the value of interdependencies rather than differences and independencies, through initiatives such as simultaneous development processes, concurrent engineering…resource management networks and value system management" (Leibold, 12). In a dynamic global market, to strengthen their competitive position in the target market, managers often intend to enlarge their connections with all available resources, such as suppliers, distributors, even competitors.

The strategic network is just a well-functioning informal structure which creates benefits for the companies.

The companies in strategic networks have close business relationships. Firms are viewed as connected to each other in multiple networks of resources and other flows. It results in firms being in complex relationships that are simultaneously competitive and cooperative. How strategic networks influence the relative profitability of firms is becoming the centre of the strategy research.

This essay is going to first discuss what a strategic network is, the two important types of strategic networks and the process of formation of strategic networks. It also provides an explanation on the essence of networks. In strategic networks, there are some key issues to be considered. Thereafter the advantages and disadvantages of strategic networks as well as how strategic networks can be viewed as a source of competitive advantage will be dealt with.

2. What is a strategic network?Jarillo (1997:7) described strategic networks as an arrangement by which companies...