Ulster Business School Masterclass

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"Getting out more": Engendering a Strategic Alliance and Acquisition Culture amongst Northern Ireland Organisations

Recent acquisitions of organisations such as Whale, Schrader and Hughes Insurance by overseas firms underline the potential for Northern Ireland organisations to make an international impact.

Reasons for these takeovers by mostly USA based organisations may be linked to common ancestry and language as well as European market access.  However, like most acquisition activity it is primarily driven because these local firms are innovative and efficient with real growth potential.

Although these acquisitions are good news for Northern Ireland, we should remember that recent statistics from the Federation of Small Business (FSB) illustrate that 99.9% of private sector firms here are in the SME sector.

With this in mind enhanced prosperity will only be achieved if support is given to SMEs to encourage them to think about how they can grow and prosper globally.

Businesses traditionally grow by introducing new products and services or extending older ones through incremental improvement, achieving more market share through effective pricing or promotion strategies and using new distribution channels to improve the reach of existing or new products or services. 

However, given increasing globalisation, now is time for organisations, regardless of size, to begin to think “outside the box”, and to embrace more radical growth strategies. 

One potential route for relatively quick growth is to create strategic alliances with other local or international organisations with a view to longer-term partnerships or even acquisition. 

Such a strategy is clearly fraught with difficulties, especially for organisations in the SME sector who lack resources, expertise and perhaps most importantly the ambition or motivation to expand. 

One of the biggest barriers that may need to be addressed when considering the business growth issue is the culture in the SME sector.

For example, it has been said that SME owner managers experience what has been called the “Mercedes effect” - where on achieving certain career and financial goals; which include driving a prestigious car or living in certain type of house; they are quite happy with their business and do not see benefits in engaging in risky growth strategies. 

Even if SMEs are more inclined to grow there may be understandable fears, especially in relation to strategic alliances and acquisitions.  For example, the perception may prevail that the firm is simply too small to consider this growth route and such activities should be left to larger players who have the practical, legal, cultural and linguistic experience and skills to realise such a strategy. 

Given these issues, we need to ask what government and industry support organisations can do to encourage growth and engender a culture where strategic alliances, mergers and acquisitions are considered as real and viable strategies for rapid growth? 

In terms of local government, the recent trade missions to the USA, India, China and South America, illustrate that our politicians take economic growth seriously. However, in the main such trips are designed to promote Northern Ireland as a place for international companies to do business. 

To really promote SME growth it is vital that more resources, both in the form of grants to fund scoping visits and access to advice and expertise, is given to local firms to allow them to collaborate and network more effectively with international partners during such trade missions. 

For local industry support bodies who are tasked with assisting business there is a need to show their commitment by offering more help on the issue of international growth.  Initiatives from organisations like the NI Chamber of Commerce who in partnership with the Ulster Bank have designed programmes to help local businesses access international markets are a good start. 

But, the issue of local firms engaging in more strategic alliances or, in the longer term, growing through acquisition activity needs to be promoted and practical advice offered on issues such as initiating a search for “target” companies or financing any acquisition.  

However, the SME owners as the business “culture shapers”, need to play the most active role if growth through strategic alliances or acquisitions can be realised.  Organisation culture change has been the focus for many academic studies, and it is acknowledged that various “points of leverage” can be targeted to engender change, ranging from recruitment and selection, induction, and performance management. 

Ultimately though it is the ability of organisational leaders to formulate and communicate core values in a meaningful way that will drive culture change and alter employee behaviour. SME owners will need to ensure that their behaviour reinforces the key priorities for the business.  If these are focused on driving growth through acquisition they must model this vision by seeking out opportunities to network and collaborate with all relevant stakeholders including government and industry body representatives, but most importantly other businesses leaders.

The content of this article is provided for information purposes only and does not constitute professional or other advice.

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