Strategic alliances among small retailing firms: Empirical evidence from the Netherlands

Strategic alliances of one sort or another have become common in the manufacturing industry (Harrigan 1985, 1986, 1988; Kogut 1988; Nielsen 1988). The term "strategic alliance" is used to refer to "a coalition of a number of organizations intended to achieve mutually beneficial goals" (Robinson and Clarke-Hill 1994, 2). One can make a distinction between vertical and horizontal alliances. Vertical alliances focus on supplier-manufacturer relationships (Bucklin and Sengupta 1993; Forrest 1990; Harrigan 1985, 1986, 1988; Mody 1993) or on manufacturer-distributor relationships (Anderson and Narus 1984, 1990; Anderson and Weitz 1992; Frazier 1983; Frazier, Spekman, and O'Neil 1988; Johnston and Lawrence 1988). Horizontal alliances consist of relationships between similar firms in the same industry, retailers for example. Over the past decades, the number of small and medium-sized retailing firms that have joined a strategic alliance has grown rapidly, and the strategic position of these alliances in the retail industry is significant. In 1994 in the Netherlands, the strategic alliances accounted for 44 percent of the total retail business (See Table 1). The figures in Table 1 show a growing market share for both strategic alliances and fully integrated retailers. The growth of the market share of the strategic alliances in the retail industry has led to considerable research interest, especially in franchising (Justis and Chan 1991; Peterson and Dant 1990; Stern and Stanworth 1994; Withane 1991). The two main forms of strategic alliances in retailing are franchising and voluntary association. The voluntary associations can be subdivided into wholesaler- and retailer-sponsored cooperatives. Except for ownership differences, wholesaler- and retail-sponsored cooperatives operate similarly. During the last decades, the scope of these cooperative efforts has broadened from concentrated buying power to a vast number of programs involving centralized consumer advertising and promotion, store location and layout, training, financing, accounting, and in some cases, a total package of support services (Stern and El-Ansary 1992, 339). The term "strategic alliance" in our study will refer to these modern voluntary associations in the retail industry. Table 1 MARKET SHARES OF STRATEGIC ALLIANCES IN THE DUTCH RETAIL TRADE Market Share (%) 1980 1985 1990 1993 1994 Non-allied SMEs(*) 44 31 24 20 18 SMEs within strategic alliances 29 35 40 43 44 Fully integrated retailers 27 34 36 37 38 Total 100 100 100 100 100 * SME: Small and Medium-Sized Enterprises Source: Center for Retail Research in the Netherlands (CRR) and Tilburg University (1995). Porter and Fuller (1986) and Dunning (1988) discuss a number of potential benefits a small retail firm joining a strategic alliance can enjoy, including: (1) Economies of scale and scope for buying and selling, as well as for the organizational infrastructure (for example, a central computer system for all members of the strategic alliance); (2) Quick and easy access to knowledge; (3) The reduction of the capital requirements and risks involved in development new service programs, products, or technologies; and (4) The possibility of influencing the structure of competition in the relevant markets. Participating in a strategic alliance will undoubtedly influence a firm's strategic behavior. In our study we will focus on the specific influence a strategic alliance has on the behavior of its small-sized retailing firms. HYPOTHESES Outsourcing Behavior Yasuda and Mulford (1990) report that in Japan the most important reasons retailers join a strategic alliance are: future developments and expansion; future security of the firm; increase of trust in the firm; ease of obtaining information; mutual assistance among small firms; and improving efficiency through cooperation. …