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STRATEGIC PARTNERSHIP TYPES AND COMPETITIVENESS OF SMALL AND MEDIUM ENTERPRISES IN KENYA: A
STUDY CLEARING AND FORWARDING COMPANIES AT JOMO KENYATTA INTERNATIONAL AIRPORT.
Adembo, N. A., & Deya, J.
- 1523 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
Vol. 5, Iss. 4, pp 1523 - 1539, November 2, 2018. www.strategicjournals.com, ©Strategic Journals
STRATEGIC PARTNERSHIP TYPES AND COMPETITIVENESS OF SMALL AND MEDIUM ENTERPRISES IN KENYA: A
STUDY CLEARING AND FORWARDING COMPANIES AT JOMO KENYATTA INTERNATIONAL AIRPORT.
Adembo, N. A.,*1 & Deya, J.2
*1 Msc. Scholar, Jomo Kenya University of Agriculture & Technology [JKUAT], Nairobi, Kenya
2 Ph.D, Lecturer, Jomo Kenya University of Agriculture & Technology [JKUAT], Nairobi, Kenya
Accepted: November 1, 2018
ABSTRACT
The objective of this study was to identify the types of strategic partnership and how their effectiveness in
enhancing competiveness in the clearing and forwarding SMEs; with focus on Joint venture, marketing and
distribution and supplier partnerships. In addition the study was to identify the type of partnership that best
enhance competitiveness of a firm .The study used descriptive case study design where a convenient sample was
used to create a sample frame, 22 SME business in the clearing and forwarding and 110 respondents were
considered. The study used structured and semi-structured questionnaires to collect data which was analysed
using MS Excel Spreadsheet and relationship among variables established using correlation analysis. The study
found that the key strategic partnerships studied create competitiveness through co-operation rather than
competition. The study also established that strategic partnerships provide partners with an opportunity to tap
into resources, knowledge, capabilities and skills of their partners to gain competitiveness. In summary the study
affirmed that strategic partnership especially non-equity strategic alliances are positive and significantly
correlated with organizational competitiveness. The study therefore concluded that strategic partnerships create
interdependence between the partner firms which bring benefits in the form of intangible assets and capabilities.
These assets (superior skills) and capabilities (superior resources) are the main sources of competitiveness for a
firm. The study recommended that though strategic partnerships are a basic necessity for the growth of SMEs,
the partners must clearly understand the key objective of entering into an agreement, in addition with the
explosion of e-commerce the SMEs should shift their focus towards partnerships that enable them gain
technological advantage. Therefore Technical/functional, relational and developmental competencies must be
balanced and continuously developed.
Key Words: Joint venture, marketing, distribution, supplier partnerships, Strategic Partnerships
- 1524 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
INTRODUCTION
Micro Small and Medium Enterprises (MSMEs) play
an important role in promoting economic growth in
many countries both in terms of labor absorption,
growth and economic development (Idris & Primiana,
2015). MSME sector in Kenya has over the years been
recognized for its role in provision of goods and
services, enhancing competition, fostering
innovation, generating employment and in effect,
alleviation of poverty. Consequently, the sector has
been identified and prioritized as a key growth driver
for achievement of the development agenda as
envisaged in Kenya Vision 2030 (Kenya National
Bureau of Statistics [KNBS], 2017). However, due to
the numerous challenges in accessing resources,
MSMEs may not achieve this objective without
mutually beneficial strategic partnerships.
According to Delloitte (2004) in a resource document
there are three ways through which corporations can
partner with SMEs. i) Supporting SMEs involved in the
distribution of their products or services aimed at
increasing access to markets; Lowering distribution
costs and promoting a more vibrant and diverse local
economy; ii) Supporting SMEs in their supply chain
which aims at; Reducing costs; Increasing local
supply; Improving quality control; Reducing
vulnerability of supply; Complying with government
requirements; Branding benefits and Developing an
environment where a vibrant SME sector injects
innovation into the corporate world. Supply linkages
range from arms-length market transactions to very
close, long-term, inter-firm cooperation. iii) Providing
general support where there is no immediate link
aimed at developing long term links to the
The Women Enterprise fund[
WEF] underscores the importance of strategic
partnerships in the realization of women
empowerment objective which aims at increasing the
number of women linked to large enterprises from
156 in June 2012 to 500 by 2017 (WEF,2013).
Whereas various terms and concepts have been used
to define the term strategic partnerships, a consensus
exists in the meaning. For instance, Bain et al., (2006)
defines Strategic partnerships as agreements
between firms in which each commits resources to
achieve a common set of objectives. Companies may
form strategic alliances with customers, suppliers, or
competitors. By implementing such partnerships,
companies can develop competitive positioning, grow
entry to new markets, complement critical skills, and
divide the risk or cost of major development
Supriyadi and Ekawati (2014) define
strategic partnership as a formal agreement between
two commercial enterprises, typically formalized by
one or more business contracts but falls short of
forming a legal partnership or, agency, or corporate
affiliate relationship. In addition, some are using the
term strategic alliances that are defined as "the
pooling of specific resources and skills by the
cooperating firms to achieve common goals, as well
as goals specific to the individual partners (Supriyadi
& Ekawati, 2014). According to Tuimala and Lukka
(2002), Strategic partnership can be described as a
process in which participants willingly adapt their
basic business practices with an intention of reducing
duplication and waste at the same time as facilitating
improved performance. In a strategic partnership,
two businesses are intertwined either from the
marketing, supply chain, integration, technological, or
financial standpoint, or some combination thereof.
These partnerships may either involve SMEs at the
same level or SMEs partnering with large enterprises.
Strategic partnership can therefore be viewed as an
instrument for competitive advantage which is
intended to enhance performance of the organization
through the synergy that is derived from combined
efforts of the partnering organizations. However,
Spear (2014) cautions that before entering into a
partnership, there is need to size up the other party
and carefully evaluate the risks and benefits of
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entering into the agreement to ensure that it will
meet your profit goals and fulfill your customer
expectations.
Global evidence reveals that strategic partnerships
taken by companies have resulted to a competitive
advantage for the firm. A number of empirical studies
reveal that strategic partnerships are an important
source of both tangible and intangible resources that
most organizations lack. A study by Talebi et al.,
(2017) investigated the effects of strategic alliances
on the performance of small and medium sized
enterprises (SMEs) of the automotive parts
manufacturers industry in Iran. Findings revealed that
there is a significant and positive relationship
between the dimensions of strategic alliances in
terms of; new opportunities, entrepreneurial and
innovative capabilities, social capital, and
internationalization of business, and competitive
advantage with the performance of SMEs. Talebi et
al., (2017) also confirm Joshi and Dixit (2014)
assertion that SMEs form an alliance with other
enterprises due to the lack of financial, physical and
managerial resources, and eventually this alliance
allows the contribution of major financial and non-
financial resources among these businesses. The
United Nations Conference on Trade and
Development [UNCTAD],(2005) established that
corporate joint ventures, technology licensing and
other forms of inter-firm alliances offer advantages to
all the firms involved through information sharing,
joint problem solving, cooperative resource sharing
and collective implementation among them. A
theoretical review study by Idris and Primiana (2015)
on effect of competitive strategy and partnership
strategy for small industry performance conducted in
Indonesia found a positive relationship between
competitive and partnership strategy and small
industry performance. Idris and Primiana (2015)
assert that the cooperation strategy is formed to gain
access to markets, offer superior products, eliminate
threats from market forces, gain unique expertise
and other resources not available in the company.
Statement of the Problem
The dynamic innovations steered by technology and
changing customer needs have made competition to
be more severe, alternatives are being introduced
rapidly and many firms are struggling for the right of
market share and to gain competitive advantage over
their rivals (Porter, 2010). The current environment
also makes it difficult to maintain differential
advantages that accrue fm changes in product,
promotion, or price. Many of today's products, albeit
manufactured in different global locations, have
become homogenized and indistinguishable to the
customer (Mentzer & Williams, 2001). This requires
leaders to be on top of the game in aligning
organizations to take advantage of the opportunities
that emerge with the changes. According to Delloitte
(2016) and supported by the Economic Survey 2017
by the Kenya National Bureau of Statistics [KNBS],
2017), SMEs in Kenya are often faced with resource
limitations that cause them to be vulnerable to
various environmental changes. Consequently, most
SMEs are unable to meet the high levels of
s and to
differentiate themselves from competitors
particularly when competing against bigger
companies. This has necessitated the need for
strategic partnerships as an alternative way of gaining
a strategic and competitive advantage (Harris,
McDowell & Gibson, 2011; Hakansson & Snehota,
2007). In recognition of the important role of
strategic alliances in youth and women
empowerment, the government of Kenya has tasked
the Women and Youth Enterprise funds to link
women and youth SMEs to large enterprises as one of
their mandate (WEF, 2013; YEF, 2013).
Whereas strategic partnership has been proposed as
one of the strategies to remain viable for all types of
businesses (Harris et al., 2011), a high failure rate has
been reported across the globe. A survey by IMD
(2014) reported that 31% of the companies surveyed
reported failure of the partnerships formed in the
USA, while PricewaterhouseCoopers (2009)
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established that 60-70% of strategic alliances tend to
fail. This high failure rate of alliances necessitates the
need to identify what types of alliances are most
effective so as to develop robust alliance formation
guidelines and processes. Most studies done on this
topic have dwelt on alliances in general with no
attempt to disaggregate them by alliance type.
Moreover, whether strategic partnerships have
translated to competitiveness of SMEs in the Clearing
and Forwarding sector is yet to be determined in a
Kenyan context. Little empirical research has been
done to measure the gains made from alliances in this
sector. Much of the past research on strategic
alliances has focused on SME companies with diverse
and complex operations in the developed world such
as Idris and Primiana (2015) in a study on effect
of competitive strategy and partnership strategy for
small indust
strong link between competitive strategy and
business performance and partnership strategy and
business performance. No attempt was made to
determine the variance caused by partnership
strategy as a single variable on business performance.
influence on SME firm performance using
study will investigate further, alliance types in terms
of joint ventures, supplier partnerships and marketing
partnerships in attempt to disaggregate strategic
partnerships into functional areas. This study also
focused on biotechnology sector that limits
generalizability to other sectors. Talebi et al., (2017)
sought to determine the impact of strategic
partnerships on performance on SMEs in the
automotive part manufacturing industry in Iran.
In Kenya, Most studies have focused on the financial
sector. These include; Equity bank (Muiruri, 2015),
UNICEF (Ngoto, 2015), KCB (Kangogo, 2016; Warui,
2014) which limits generalizability to other sectors
hence the need to replicate the study to other
industries for a better generalization of results. On
the other hand, Matiya (2013) looked at challenges in
clearing and forwarding activities at the Dar es
Salaam port without a specific focus on challenges of
strategic partnerships among these companies. While
this may give insights on challenges in the clearing
and forwarding activities, it fails to provide adequate
information for decision making by strategic partners.
Other researchers who have studied this subject
include; Pooe et al., (2015); Supriyadi and Ekawati,
(2014); Kamau and Bosire (2016), Haris et al., 2011,
Ngoto (2015) and Muiruri (2015). However, none of
these studies has focused on the Clearing and
Forwarding sector and addressed the objectives as
conceptualized in this study. This study evaluated
partnerships by alliance type so as to determine
which partnerships pay off. Thus it looked at
partnership types in terms of joint ventures, supplier
partnerships and marketing and distribution
partnerships among clearing and forwarding
companies operating at JKIA cargo center.
Study Objectives
The study sought to determine the effectiveness of
strategic partnerships on the competitiveness of
SMEs in the Clearing and Forwarding sector operating
at JKIA cargo center in Kenya. The specific objectives
were:-
To establish how effective supplier partnerships
are on the competitiveness of SMEs in the
Clearing and Forwarding sector at JKIA
To establish how effective of joint ventures
partnerships are on the competitiveness of SMEs
in the Clearing and Forwarding sector at JKIA
To establish how effective marketing and
distribution partnerships are on the
competitiveness of SMEs in the Clearing and
Forwarding sector at JKIA
To find out the type of strategic partnership that
has a stronger correlation to competitiveness in
Clearing and forwarding SMEs
- 1527 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
LITERATURE REVIEW
Theoretical Review
Resource Based View Theory.
This theory was named by Birger Wernerfelt in 1984.
Though the genesis of the theory can be traced to
Coase (1937), Selznic (1975), Penrose (1959), Stigler
(1961) & Chandler (1962, 1977), who stressed on the
importance of resources and its implication on
Organization performance (Ngoto, 2015). The central
proposition of Resource Based Theory is that
organizational survival hinges on the ability to
procure critical resources from the external
environment. The business strategy selected should
thus permit the firm to best explore its main
competencies relative to opportunities in the outside
environment.
The resource-based view stresses the resources
as the key determinants of competitive advantage
and performance. It adopts two assumptions to
analyze sources of competitive advantage, (Barney,
1991; Peteraf & Barney, 2003). First, the model
assumes that firms in the same industry may be
heterogeneous with focus to the resources they
control. Secondly, it assumes that resource
heterogeneity may continue over time because the
resources used to implement firms strategies are not
absolutely mobile across firms implying that some of
the resources cannot be exchanged in factor markets
and are not easy to accumulate or imitate. Penrose
(1959) opines that resource uniqueness is an essential
condition for resources to contribute to
competitiveness. According to Barney (1999, 1991) a
sustainable competitive advantage is achieved
by unique resources being rare, valuable, non-
imitable, non-tradable, and non-substitutable, as
much as firm-specific goals.
The Transaction Cost Theory
The basic principle of the Transaction Cost Theory is
the assumption that markets at times fail to allocate
factors services and goods efficiently due to among
others, natural and government-induced externalities
(Kogut 1988). This in turn results in higher costs of
organizing exchange through market than organizing
exchange internally. These costs are usually referred
to as natural externalities, ownership externalities,
and technical externalities. Strategic alliances come in
to bring the cost of these transactions under a
common cooperative structure thereby enabling the
partners to reduce the cost involved hence avoiding
opportunism among exchange partners (Beamish &
Bank, 1987). According to transaction costs
economics, firms purposefully establish
collaborations when costs of writing and executing
contracts are too high because of small number of
bidders, asset specificity and hold up issues, a high
degree of uncertainty or significant incentives for
partners to act opportunistically and that at the same
time, it is inefficient to internalize the production
process because firms lack competences (Williamson,
1975). According to Hennart (1988), the equity link
between strategic partners and their ventures is
preferable coordination through spot markets or
contracts.
The Dynamic Capabilities Theory
The theory was advanced by Teece (1997), explaining
how companies accomplish seemingly contradictory
requirements. The First they should both be
adequately stable to deliver value in their own unique
way. The second crucial aspect is that they must be
flexible and adaptive enough to change fast when
situation demand it. Teece et al., (1997) defines
build and reconfigure internal and outside
competences to tackle the ever shifting environment.
This ability to achieve new forms of competitive
advantage by being flexible and fast in dealing with
changing market environments is what D. J. Teece
and Pisano (1994, p. 552) referred to as dynamic
capabilities (). Teece et al (1997) further
elaborated that, winners in the current business
world are those firms that can show timely
responsiveness with quick and flexible product
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innovations coupled with the management capability
to successfully coordinate and redeploy internal and
external competencies. When firms focus on core
competences they create unique integrated systems
which strengthen production
and technological expertise. This is a systemic
advantage that competitors cannot duplicate
(Prahalad & Gary 1990). Conversely firms lack the
organizational capacity to grow new competences
quickly therefore creating a challenge to
compete effectively.
Agency Theory
An agency is defined as the relationship between two
parties, where one is a principal and the other is an
agent who represents the principal in transactions
with a third party. Agency relationships occur when
the principal hires the agent to perform a service on
the principals' behalf (Matiya, 2013). Studies describe
the risk-sharing problem as one that arises when
partners lack similar attitudes towards risk. Agency
theory According to Jensen & Mecklin (1976) as cited
by Ngoto (2015) broadened the risk-sharing literature
to embrace the agency problem that is common
when cooperating parties do not have unified goals.
Principals commonly delegate decision-making
authority to the agents which gives rise to agency
problems because of inefficiencies and incomplete
information. The principal agent problem or agency
dilemma concerns the difficulties in motivating one
party (the "agent"), to act in the interest of another
(the "principal") instead of his or her own interests.
The principal and the agent could favor different
actions because of the different risk preferences
although share a common unit of analysis; the
contract. Common examples of this relationship
include corporate management (agent) and
shareholders (principal), or foreign supplier
contracting a clearing and forwarding company to
deliver goods to a customer.
Cconceptual Framework
Figure 1: Conceptual Framework.
Source: Author (2018)
Supplier Partnerships
A policy is in place to regulate the partnership
Information exchange between suppliers and the company
Joint operational planning with its suppliers
Risk sharing and reduced costs
Joint Venture partnerships
Innovation capability
Market access
Financial resources
Marketing and Distribution Partnerships
Mutual trust
Shared marketing Risks & rewards
Commitment in marketing and sales.
Communication and information sharing in marketing
Competitiveness of SMEs
markets Access
Price/cost reduction
Product Delivery
Independent Variables
Dependent Variable
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Empirical Review of Strategic Partnerships
Supplier Partnerships and Competitiveness of SMEs
Supplier partnership is the long-term relationship
between the organization and its suppliers. It is
designed to leverage the strategic and operational
capabilities of individual participating organizations to
help them achieve significant ongoing benefits in one
or more key strategic areas such as technology,
products, and markets. (Li, Bhanu, Ragu & Rao, 2006).
While Kamau and Bosire (2016) looks at Supplier
partnership as a commitment over an extended time
to work together for the mutual benefit of parties,
sharing relevant information and the risks and
rewards of the relationship. Strategic partnerships
with suppliers enable organizations to work more
effectively with a few important suppliers who are
willing to share responsibility for the success of the
products. Strategic partnership can therefore be
viewed as a tool for competitive advantage which is
intended to enhance performance of the organization
through the synergy that is derived from combined
efforts of the partnering organizations.
Joint Ventures and Competitiveness of SMEs
Joint ventures have been lauded as the best type of
alliances for companies venturing in international
markets or those in need of financial resources.
Lopez and Ariza( 2013) argue that the joint venture
model is the best model by which companies,
including SMEs, expand their activities and exploit
opportunities to enter new markets abroad. The
foreign firm seeks a local partner who knows the
market, the culture, the financial institutions and
possible tax advantages and ensures that the
resulting International Joint Venture (IJV) is
considered a local firm hence acquiring
competitiveness in the local market. Lopez and Ariza
(2013) further assert that joint ventures help
eliminate the agency problem of opportunistic
behavior that has been blamed for causing failure of
most partnerships. Due to joint ownership, partners
agreements because; an equally-shared ownership
increases collaboration and commitment of the
partners. Consequently, this situation of balance
among the partners could increase the level of
perceived security and minimize the fear of
exploitation or opportunism hence alliance partners
will be more committed in provision of required
resources for the partnership.
Marketing and Distribution Partnerships and
Competitiveness of SMEs
According to Uddin and Akhter (2011) this type of
alliance are also called non-equity alliances. To
ensure competitive advantages two or more
companies form an alliance in a contract basis rather
than a separate company. The authors however
caution that non- equity strategic alliances are
unsuitable in a multifaceted venture that success
necessitates transfer of implied knowledge and
expertise because of their relative informality and
lower commitment. Nevertheless, Marketing
partnerships also have the potential to bring positive
returns to a company. Kotler and Keller(2009)
describe four categories of strategic marketing
alliances which are; product or service alliance- one
company licenses another to produce its product or
two companies jointly market their complementary
product or new product. Promotional alliance;
whereby one company agrees to promote another
-
one company offers logistic services for another
ng collaborations where
companies join in a special pricing collaboration such
as air lines and taxi services providers or hotels and
tour companies. Marketing alliances have the
potential to contribute to competitiveness of partner
companies by facilitating access to superior product
technologies, production capacities, and increased
market shares.
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METHODOLOGY
This study adopted a descriptive cross sectional
survey design. Babbie& Mouton (2010) recommend
this design where the researcher wants to collect
original data for describing a population that is too
large to observe directly. The Target population which
represented the sampling frame was the Clearing and
Forwarding companies operating in Jomo Kenyatta
International Airport cargo center registered by the
Revenue Department of Nairobi city and Kenya
Airports Authority records. Primary data
was collected using a questionnaire with both closed-
ended and open ended questions. Only dully filled
questionnaires were used in the final analysis. The
data collected was then coded and entered into the
computer using SPSS Version 17.0.
RESULTS
Types of Strategic Alliances
Respondents were also asked to indicate the most
common types of strategic partnership that their firm
had entered into in the last 5 years focusing on the 3
types being studied. Fifty two (52%) percent of the
respondents indicated that their businesses
frequently entered into marketing and distribution
partnerships with partners followed by Joint venture
partnership at 36% and Supplier Partnerships at 12%.
Marketing and distribution partnerships were
possibly favoured because of the ever changing
economic environment coupled with uncertainty
surrounding each business operation which
corroborates the study by Spear, 2014 that marketing
and distribution partnership was one of the most
common and oldest forms of alliance.
Table 1: Types of partnerships Used
Type of Partnership
Frequency
Percentage
Supplier Partnership
9
12%
Joint Venture
28
36%
Marketing & Distribution
40
52%
Total
77
100%
Source: Research Data
Given the long-term nature of joint ventures and the
fact that firms transfer tacit knowledge from one to
another, it seems the SMEs avoided more of such
partnerships or the SMEs were not in financial
positions to enter in such partnerships. Firms that
were in joint venture partnerships confirmed being in
such partnerships with big or multinational freight
forwarding companies for the purpose of accessing
the global market which confirms the study by Lopez
and Ariza( 2013) which argued that the joint venture
model is the best model by which companies,
including SMEs, expand their activities and exploit
opportunities to enter new markets abroad. Equally,
equity strategic partnership may prove hard for an
SME given the fact that there is need for formation of
a new company by two or more firms where they
control its operations in proportion to the shares held
in the new outfit.
Reasons for Forming Strategic Partnerships’.
The respondents were requested to indicate the main
motivating factors for their firms to enter into
strategic alliances.
Table 2: Percentages of Motivation to Form Partnerships (%).
Why my company joined a partnership
1
2
3
4
5
A
To reduce operational costs/risks
0
18.2
22
36.4
23.4
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B
To give superior customer value
0
6.5
9.1
48.1
36.4
C
Access to global distribution networks
0
6.5
9.1
44.5
40
D
Boost profits
18.2
45.5
18.2
18.2
0
E
To enjoy tacit knowledge
0
13
14.3
45.5
27.3
F
Ensure continuous supplies of resources
9.1
7.8
19.5
36.4
27.3
G
To augment resources and capabilities
0
0
10.4
49.4
40.3
H
Current technology access
0
5.2
20.8
37.7
36.4
Source: Research data
From the study it was evident that firms joined
partnerships to augment resources and capabilities at
89.7% as the main reason the firms formed strategic
partnership with other organizations. The local
businesses also desired entry into unfamiliar markets
at 85.5% .Providing superior customer value was also
a key reason at 84.5%. This showed that these
reasons were the main motivating factors as they
equally generated the highest percentages. The SMEs
main motivating is expanding their market presence
through Joint venture and Marketing and distribution
partnerships. This concurs with Harris et al., (2011)
that strategic partnerships enable SMEs to
compensate for resource limitations and inadequate
internal infrastructure, moreover, forming a strategic
partnership can save costs and give access to new
markets, which otherwise is not possible for many
firms. This concurs with the study by Bouka, (2015) a
firm may be competent in one area and require
expertise in another areas implying that most firms
are not fully self-sufficient; as such, joining a strategic
alliance thus permits the firms to readily access
knowledge and expertise in an area that a company
lacks e.g. a company may have excellent technology
for production but lacks a good promotional strategy.
Conversely, low percentages were recorded for the
need to maximize profits for the organization at
18.2%, the study therefore concluded that
profitability was not the main driver for formation of
the three types of partnerships by the SMEs, or the
SMEs were not willing to disclose their profitability
status.
Table 3: Cronbach Coefficient Alpha for Motivation to Form Partnerships’.
Cronbach Coefficient Alpha
Variables
Alpha
Raw
0.914381
Standardized
0.915471
Cronbach Coefficient Alpha with Deleted Variable
Raw Variables
Standardized Variables
Deleted Variable
Correlation with
Total
Alpha
Correlation with
Total
Alpha
A
0.899340
0.894899
0.910396
0.888368
B
0.975035
0.878357
0.964506
0.883571
C
0.959645
0.880109
0.946938
0.885137
D
-.495067
0.981377
-.481285
0.988031
E
0.990245
0.880804
0.993550
0.880964
F
0.937432
0.894691
0.924442
0.887130
G
0.939892
0.882288
0.930479
0.886597
H
0.914928
0.887106
0.907268
0.888643
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The Cronbach Coefficient Alpha for Raw and
Standardized variables was (0.914381) and
(0.915471) respectively. This is greater than the set
threshold value of (0.7). This showed that the items
selected for the study had a high covariance and
hence captures the expected score of the entire study
population and therefore the scale used in this study
is reliable and records the true value of concept.
Key Alliances Formed by the SMEs
The respondents were also required to provide
description of specific strategic partnership that they
had formed in the last 5 years. Various alliances were
mentioned as having been formed in the period
requested. However, five of the partnerships which
seemed key to the SMEs were repeated by nearly all
the respondents. The summary of the findings are
presented in table 4 below.
Table 4: Key partnerships formed by the SMEs
Type of Partnership
Partnership Description
1.Blocked space agreements
Agreement in which the forwarding agent has a continuous
reservation (allotment) for space at one or more flight / date
combinations with an airline, warehouse etc
2. Shipper+ Consignee agreements
Agency agreements
3. Delivery agreements
Agreements with courier companies for door delivery.
4. Warehouse handling agreements
Agreements with warehouses for handling services e.g packaging,
cargo build up.
5.System Agreements
Agreements for technogical access to the Tradex system, booking
systems with CCN and airlines.
Source: Research data
As indicated in the table above, nearly all the
partnerships mentioned fall were aimed at providing
better service solution for the firms, ensuring market
access and ensuring superior customer value. The
findings further reinforced the perception of the
respondents that the firms preferred non-equity
strategic alliances to equity alliances.
Effectiveness of Strategic Alliances
This study used eight-factor index to measure the
effectiveness of the key strategic partnerships in the
clearing and forwarding SMEs. This study found that
strategic alliances enhanced the effectiveness of the
providing organizational learning and competence
which included internalization of tacit knowledge and
embedded skills, improving performance through
profit maximization and growth of customer base.
The partnerships were also effective in cost and risk
related issues due to potential to reduce and diversify
risks and sharing of costs thereby minimizing some
costs like marketing and those involved in research
and development. These alliances were also effective
for strategic reasons which are product, competition
and technology related. The respondents indicated
that their firms expanded its market position, gained
access to new technology and achieved competitive
advantage over its rivals. The findings indicate that
partnerships are more effective in the protection and
growing the market status, 89.6% of the respondents
concur with the statement.
- 1533 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
Table 5: Effectiveness of Strategic Partnerships measured in percentage (%).
Source: Research Data
Table 6: Cronbach Coefficient Alpha for Effectiveness of Strategic Alliances.
Cronbach Coefficient Alpha
Variables
Alpha
Raw
0.981334
Standardized
0.985284
Cronbach Coefficient Alpha with Deleted Variable
Raw Variables
Standardized Variables
Deleted Variable
Correlation with
Total
Alpha
Correlation with
Total
Alpha
A
0.955435
0.978827
0.958123
0.982459
B
0.980355
0.976391
0.977025
0.981745
C
0.894755
0.979908
0.901554
0.981141
D
0.993783
0.975891
0.992949
0.981141
E
0.955161
0.980272
0.952950
0.982654
F
0.888898
0.980045
0.883363
0.985255
G
0.979719
0.893741
0.984869
0.984869
H
0.885653
0.980322
0.892980
0.984898
I
0.929818
0.979990
0.928810
0.983561
Source: Research Data
The Cronbach Coefficient Alpha for Raw and
Standardized variables is (0.981334) and (0.985284)
respectively. This is greater than the set threshold
value of (0.7). This showed that the items selected for
the study have a high covariance and hence captures
the expected score of the entire study population and
therefore the scale used in this study is reliable and
records the true value of concept.
Strategic Partnership and Competitiveness
Respondents were also asked to assess the
contribution of strategic alliances towards the
competitiveness of their businesses. Majority of the
respondents felt that strategic alliances had helped
them to offer satisfactory products and services to
their customers at approval rating of 81.9%. The
study thus implied that Strategic partnerships are a
key component in achieving competitiveness.
Effectiveness of Strategic Partnerships
1
2
3
4
5
Ability to increase profit.
0
14.3
23.4
35.1
27.3
acquire specific competencies
0
9.1
15.6
45.5
29.9
Build relationship with customers
0
6.5
26
31.2
36.4
Reducing various risks
0
9.1
14.3
40.3
36.4
Protect and grow market status.
0
0
10.4
53.2
36.4
Resources are used efficiently
0
18.2
9.1
45.5
27.3
Accessibility to current technology.
0
13
19.5
45.5
22.1
Increased sales volume
0
6.5
16.9
31.2
45.5
Adaptation to technology
6.5
9.1
18.2
29.9
36.4
- 1534 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
Table 7: Percentages of Competitiveness (%)
Competitiveness
Variables
Specific Variables
1
2
3
4
5
Service Delivery
(A) Superior service delivery to customers
9.1
13
16.9
48.1
13
(B) Distinguished products (unique and desired
by customers)
23.4
19.5
18.2
22.1
16.9
Market Access
(C) Expands global distribution network and
market position
5.2
3.9
9.1
39
42.9
(D) The cooperation and coordination enhanced
our firms agility in the market
13
10.4
26
41.6
9.1
Cost reduction
(E) Products and services are offered at a lower
cost
6.5
16.9
14.3
44.2
18.2
Source: Research Data
Table 8: Cronbach Coefficient Alpha for Competitiveness Variables.
Cronbach Coefficient Alpha
Variables
Alpha
Raw
0.786926
Standardized
0.646894
Cronbach Coefficient Alpha with Deleted Variable
Raw
Standardized
Deleted Variable
Correlation with
Total
Alpha
Correlation with
Total
Alpha
A
0.912394
0.638437
0.881488
0.389759
B
0.147719
0.814789
0.071603
0.707988
C
0.551592
0.772015
0.564111
0.530890
D
0.724734
0.705495
0.685057
0.479774
E
0.927699
0.639707
0.859338
0.400355
Source: Research Data
The Cronbach Coefficient Alpha for Raw and
Standardized variables is (0.786926) and (0.646894)
respectively. This was greater than the set threshold
value of (0.7). This showed that the items selected for
the study had a high covariance and hence captures
the expected score of the entire study population and
therefore the scale used in this study is reliable and
records the true value of concept.
Regression Analysis
The study aimed at finding the effectiveness of the
types of strategic partnerships in competitiveness of
the SMEs in the freight forwarding sector. Various
variables that define strategic partnerships and
competiveness were thus analysed to establish the
existence of any form of linear relationship. From the
analysis, the respondents indicate that there is a
positive correlation between the presence of
strategic partnership and competiveness; an increase
in market share, responsiveness to market changes,
cost reduction and delivery dependability. All the
three variables recorded a positive figure; this shows
that the strategic partnerships types studied have a
positive effect on competiveness. A study done by
Delloitte (2004) in a resource document on
reveals that there are three ways through which
- 1535 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
corporations can partner with SMEs. i) Supporting
SMEs involved in the distribution of their products or
services aimed at increasing access to markets;
Lowering distribution costs and promoting a more
vibrant and diverse local economy; ii) Supporting
SMEs in their supply chain which aims at; Reducing
costs; Increasing local supply; Improving quality
control; Reducing vulnerability of supply; Complying
with government requirements; Branding benefits
and Developing an environment where a vibrant SME
sector injects innovation into the corporate world.
This study also concurs with Barajas, Huergo and
Moreno (2011) in a study done to analyze whether
research joint ventures (RJVs) have a positive impact
on SMEs performance considering two dimensions:
technological and economic results .found that RJVs
have a clear positive effect on technological
capabilities of firms. The study also revealed that
cooperation has an indirect and positive effect on
productivity thanks to increments in intangible assets.
They opine that cooperation could be a suitable
strategy to access external knowledge when
resources constrains are an obstacle to innovate.
Supriyadi (2014) supports this finding that there
exists a positive impact of the strategic partnership
on innovation capability of a firm which was equal to
0.657.
The illustrations of the regression analysis in this
study were represented below based on the key
strategic partnerships formed by the firms in the past
5 years.
Table 9: Regression Analysis (significance @ 5% level)
Variables
Adj. R2
β
Marketing and distribution
partnership
0.91
0.923*
Supplier Partnership
0.73
0.841*
Joint venture partnership
0.64
0.826*
*p < 0.05
The findings indicate that there is a significant
positive relationship between strategic partnerships
types studied and the competiveness of SMEs in the
clearing and forwarding industry. The relationship
between Marketing and distribution partnership and
competitiveness was established to be stronger and
the most significant, this is evidenced from the
outcome of coefficient near to 1 (one) as 0.923.
Discussion
When SMEs join partnerships they do so for various
reasons, some of which include enhancing productive
capabilities, to reduce uncertainties in their internal
structures and external environment. Others form
strategic partnerships to gain competitive advantages
that enable them increase profits, or to gain future
business opportunities that may enable them to
achieve higher market values for their output
(Webster, 1999). While other studies emphasize that
the reason firms join strategic alliances is to achieve
higher control and more operational flexibility and
realization of market potential. Operational flexibility
results from reaching out to new skills, knowledge,
and markets through shared investment risks. This
current study found that the SMEs in the freight
industry formed strategic partnerships with other
firms for various reasons ranging from the need to
provide superior value to clients, to enlarge market
share, to resources and capabilities and even to
minimize costs and risks.
The motive for strategic alliances is therefore driven
by the desire to address internal organizational
problems, economic benefits, the need to engage in
strategic positioning and political manoeuvring with
governments and market rivals. This study however
noted that firms forming partnerships in the clearing
and forwarding industry are driven less by
- 1536 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
internalized organizational issues such as costs and
benefits as opposed to the current market positions
of each firm, their joint resource capabilities and
technological asymmetries relative to the firms
engaging in such transactions. An SME is therefore
driven to form an alliance mainly by is strategic
intentions to position itself in the market rather than
the economic rationalities.
CONCLUSION
Faced with the key market forces which prevent the
SMEs from using hierarchy or full ownership as a
solution, they resort to strategic partnerships which if
executed successfully, can deliver access to new
markets or customers, accelerate new product
competitive positioning. They help companies expand
their capabilities without the added step of creating
those capabilities in-house. Companies therefore
perform more efficiently and adapt more quickly than
they would on their own. Strategic partnership has
thus become one of the popular solutions employed
to counteract market forces that might threaten it.
Partnerships pool together the assets and capabilities
with uncertainties and liabilities of the partners
involved.
The strategic partnership types studied create
interdependence between the partners which bring
benefits in form of intangible assets. Previous studies
have documented positive outcomes for companies
engaging in strategic partnerships.
Partnership decisions are focused on the evaluations
of present and future benefits that a firm stands to
gain while operational focus on transaction cost
calculations. From the study it is evident that
strategic partnerships are not driven by the expected
direct impact on costs, profits, and other tangible
benefits except by indirect positive outcomes from
their intangible benefits.
From the intangible benefits a firm may end up
gaining dominant or leadership position in the market
lead to their competitiveness in terms of superior
service delivery, differentiated and unique products
and even profitability.
RECOMMENDATIONS
The study recommended that the SMEs should
include competitive intelligence in its strategic
alliance practices, technological intelligence will
specifically due the explosion of e-commerce in the
clearing and forwarding industry have huge benefits
in the level of automation, cost reduction and
efficiency in service delivery that the SMEs can
achieve. The firms should therefore adopt
instruments to gather market intelligence, product
intelligence, technological intelligence, and strategic
alliance intelligence to complement its strategic
alliance practices to ensure it positions itself
strategically in terms of innovation and customer
value-add as compared to rivals.
The firms should also form strategic partnerships
driven by the need to differentiate its products and
services within one or a number of target market
segments. It was not clear whether the firms formed
strategic partnerships in order to serve any
differentiated market segment. Use of strategic
partnerships geared towards differentiated strategy
will help the SMEs to gain more competitiveness
compared to its competitors in terms of market
capture.
Suggestions for further research
The results of this study are based on strategic
partnership and their effectiveness on the
competitiveness of a small and medium sized
organization, the similarity versus complementarity in
a partner choice should be investigated if strategic
alliances are basically about gaining access to useful
resources not possessed by one firm in order to gain
competitiveness over competition at the end. It
should therefore be investigated to establish which
organizational attributes hold key in choosing
partners is it products, market positions,
technologies, human resources, managerial styles, or
reputation of an organization?
- 1537 - | The Strategic Journal of Business & Change Management. ISSN 2312-9492(Online) 2414-8970(Print). www.strategicjournals.com
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