International Strategic Alliances — A new paradigm for Ghana’s development
The current economic difficulties the nation is going through has spurred a lot of debate among the citizenry and particularly economic pundits regarding the way forward for the resuscitation of the economy.
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While some attribute the current economic difficulties to massive unemployment and the need to generate employment in sufficient numbers to absorb the teeming youth, others diagnose the nation’s economic woes as an underperformance of its manufacturing sector due to a myriad of problems.
In the view of others, Ghana’s present economic difficulties could be attributed to high inflation with its attendant high interest rates. Others are also of the view that, Ghana’s present difficulties could be attributed to the underperformance of its export sector in relation to imports thus creating a perpetual balance of payment problems.
In an interview granted to the Daily Graphic not long ago by NPP presidential hopeful Alan Kyeremanten, he proposed that a way out of the nation’s current economic difficulties would be an appeal to the various multinational firms operating in the country to halt the repatriation of their profits until such time that the economy improves.
In as much as all these prognosis are good for Ghana’s recovery out of its present difficulties, the question that I have often asked myself is why doesn’t the government consider the need to launch a strong policy on international strategic alliances between local and multinational or foreign firms as a way out of easing the tensions in the economy.
In this regard, credit would be given to the government for its recent initiatives which has resulted in a programme to resuscitate the Komenda Sugar Factory and also its policy on public private partnerships for infrastructure development.
What is an international strategic alliance?
An international strategic alliance has been defined by business professors John B. Cullen and Praveen Parbotech as ‘‘co-operative agreements between two or more firms from different countries to participate in business activities.
These may include any value-chain activity from research and development (R&D) to sales and service’’. The most common of international strategic alliances are franchising, distributorship, licensing, farm-ins and international joint ventures.
Rationale
Firms resort to various international strategic alliances for several reasons. First and foremost, a firm may resort to a strategic alliance as a way of gauging the market strength of its products, to cut or eliminate risk, to satisfy governmental laws and regulations and also to ease itself gently into a country due to its lack of knowledge of local cultures and local tastes and preferences among other factors.
Examples
It is an undeniable fact that strategic alliances have been used to good effect by a number of multinational companies as a launch pad into several countries because of its obvious advantages.
For example, McDonalds used the power of its strategic alliance with Sinopec of China to establish its presence in China. McDonalds successfully exploited Sinopec’s ownership of more than 32,000 petrol filling stations to establish restaurants at Sinopec’s gas stations. General Motors of USA also successfully established a strategic alliance with Renault of France to market light pick up vehicles in France which was the preference of the French. Coca Cola also established a strategic alliance with an Italian coffee maker, Illycaffe to market itself in Italy among a host of examples.
The case for Ghana
It is very regrettable to say that a few of the strategic alliances which were ventured into by some Ghanaian companies got still born.
It would be recalled that during the era of E.L. Quartey jnr as managing director of the defunct Ghana Airways, he struck a successful strategic alliance with Ethiopian Airways. As part of the alliance, there was code sharing by Ghana Airways and Ethiopian Airways on routes operated with Ethiopian Airways aircraft with Ghanaian crew on board.
The benefits reaped from this strategic alliance were immeasurable. The alliance helped Ghana Airways to extend its reach beyond its traditional routes and also benefited immensely from the technological advantages in aircraft maintenance and ground handling training offered by Ethiopian Airways.
Another strategic alliance which has remained still born in Ghana is the alliance between Total Petroleum and On the Run Restaurants and Shops (now Bonjour) the first of which was inaugurated with fanfare by Dr Kwesi Nduom, then Minister of Energy.
It is envisaged that if this strategic alliance had matured into full bloom, it would have gone some way in solving the unemployment problem in the country to some extent.
One could imagine the impact on employment in Ghana with about 400 fully functional shops and restaurants operated by Bonjour at Total filing stations all around the country not discounting several small drive through food joints operated by other local or foreign fast food chains at other filling stations operated by Goil, Shell (Vivo), Engen etc.
Need for strategic alliances in Ghana
I have often lamented the demise of two South African companies which set up in the country and folded up within some few years of operations.
These are Pep Stores and Supreme Furnishers. It is very obvious that these companies did not do their market surveys well or under estimated Ghanaian tastes and preferences.
I am of the firm opinion that these companies would have succeeded in Ghana if they had been guided on the local tastes and preferences of the Ghanaian consumer and if they had struck some meaningful strategic alliance of some sort with a Ghanaian clothing retailer and a furniture retailer. This would have helped them a lot to gently ease themselves into the market.
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One can imagine the modest impact they would have made on the economy in terms of revenue generation and employment if they had set up even 50 shops apiece between them throughout the whole country.
I also often lament the closure or liquidation of several state owned companies especially as well as a few private ones which could have struck meaningful strategic alliances of some sort with international partners. The government in no way should have allowed entities like GNTC, Black Star Line, GIHOC, State Hotels, Ghana Airways, ATS, Vodi Technik especially to fold up when there were viable opportunities for their sustenance through international strategic alliances of some sort.
It is suggested that a sure path the government could chart to reverse the fortunes of the country is to take a critical look at encouraging international strategic alliances between local and foreign companies. In this regard, the government should encourage the formation of viable strategic alliances between local and foreign companies through specific policy interventions.
This is because viable strategic alliances between local and foreign companies would bring the advantage of minimising profit repatriations through foreign exchange transfers which at the present time is a bane to the economy and has also contributed significantly to the depreciation of our currency. It would also increase employment, contribute to rapid skills and technology transfer among others.
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A veritable area for strategic alliance would be for the government to encourage the formation of a strategic alliance between a local airline like Antrak Air with British Airways and Delta Airlines to fly passengers arriving from London and New York directly to Kumasi and Tamale and other neighbouring cities like Lome, Monrovia, Cotonou and vice versa etc.
This will yield the desired benefits to the local airline in the area of building the expertise of its staff in ticketing and reservations, aircraft maintenance and logistics, training etc. It will most importantly prevent a situation where foreign airlines will be licenced to operate exclusively on the west coast flying arriving passengers from Europe and America to the detriment of the local airlines with its attendant issues of capital flight.
Recently, Delta Airlines reached an agreement with Kenya Airways to fly arriving passengers from New York to Monrovia and also fly passengers travelling form Monrovia to Accra for onward connection to New York on Delta Airways flights. Clearly, this agreement should have rather been entered between Delta Airlines and a local airline through an effective strategic alliance partnership.
Benefits to Ghana
It is very obvious that strategic alliances between local and foreign companies through appropriate policy prescriptions holds a lot of promise for the nation. For one thing, it will halt the decline of local industries, generate employment and contribute to a meaningful skills and technology transfer. Most importantly, a successful policy of strategic alliances between local and foreign companies anchored on strong policy prescriptions will further help in arresting the decline of the national economy most importantly by halting currency depreciation through wholesale repatriation of profits.
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For example, a meaningful strategic alliance between Vodafone and the defunct Ghana Telecom instead of letting Ghana Telecom crumbling under the sheer weight of intense competition at least has breathed life into the company. Most importantly, it has also helped retain 30 per cent of all profits generated from Vodafone’s business in Ghana since Ghana is entitled to a 30 per cent stake in the company.
It must be emphasised that in the era of the dearth of investment capital, strategic alliances is the preferred option. This is easily achievable when the appropriate corporate governance structures are put in place. GB
The writer is a lawyer with specialisation in international business law.
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