Free «The SOCAR and Migros: An Inquiry into a Strategic Alliance» Essay Paper

Franchise Description

Migros and its subsidiary company called Migrolino practice franchising as a way to obtain greater market places in various countries and provide diverse businesses with promotion and respective market niche in their industries. It is becoming increasingly apparent that the company's franchises belong to the industries that need promotion and development to the same extent as Migrolino does (Migrolino, n.d.). As a matter of fact, franchising is a fundamental component of strategic alliance management of Migros, so that it is widely applied. The company has entered Switzerland with 170 stores across this country, so facilitation of the firm's expansion is an important consideration (Fresh Plaza, 2012). Provided that the Swiss market is obviously competitive, Migrolino needs to rely on new value propositions, which is why the establishment of franchises with leading fuel and gas station brands was one of the most reasonable strategic decisions in this regard. In such a way, the company intends to maintain its strong presence within European markets.

 

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Concerning involvement of SOCAR in a franchise with Migrolino, it is appropriate to note that this company also entered the Swiss market and it sought for guarantees of its dynamic development in conditions, whereas major competitors come at play. As a result, a franchise of SOCAR and Migrolino offers convenient shopping at the road, so that people, who travel long distances or just have no time for regular shopping, can purchase all convenience store items at a gas station (Migrolino, n.d.). At the same time, their cars can be fueled, washed, as well as undergo basic technical service. This collaboration of two entirely opposite brands creates a credible value for a common target audience. Shopping during a travel can lead to fueling a car and vice versa, so both companies receive a valuable advantage: a constant flow of customers, who actually appreciate such a suitable offer.

Concerning the franchise in the context of expansion on Switzerland by both companies, first of all, a preexisting benefit of the franchise should be admitted. Migrolino as well as SOCAR is a strong brand, which is why the creation of the franchise is evidently a sound marketing move, as it received a profound coverage in local media, thereby raising awareness of unique values being proposed to the target segment (Bordonaba Juste, Lucia-Palacios, & Polo-Redondo, 2009). The other characteristic of this franchise is based on the fact that Migrolino opted for pioneering at the new market, so that cooperation with SOCAR and other major fuel brands was of vital importance (Migrolino, n.d.). Regarding SOCAR, the franchise was a sort of pioneering as well, otherwise the company would have to compete with Shell on a general principle. Provided that SOCAR has already introduced itself as an accountable partner for the Swiss markets, its progress with Migrolino was quite apparent: the company actually proposed new services at no expenses for itself.

All in all, the franchise presents a win-win situation, in which both organizations benefit almost to a similar extent (Fresh Plaza, 2012). This type of franchise can be recognized as one of the most appropriate manifestations of strategic alliance, as Migrolino and SOCAR managed to find a common ground for cooperation in similar objectives, market environments, and strategic orientations (Migrolino, n.d.). The identification of a similar target segment and the creation of unique value that can be proposed to it led to the formation of such a strategic alliance, and franchise was the most adequate form of its implementation (Fresh Plaza, 2012). Nonetheless, the franchise includes a number of benefits that are worth a more detailed discussion as they epitomize franchising and strategic alliances as such. On the contrary, there are a number of implications that should also be reviewed, since franchising does not represent pure benefits only, so drawbacks and potential threats are also worth attention.

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Benefits of the Franchise

Among numerous benefits of Migrolino's franchising SOCAR, first of all, a natural essence of this alliance should be indicated. As it has been already mentioned, since Migrolino is in strong need of a dynamic expansion within the market of Switzerland, pioneering and promotion of its brand are the top priorities (Combs, Ketchen, & Short, 2011). In the same way, SOCAR encounters the same objectives within its industry, meanwhile target segments of both companies are actually similar. However, as SOCAR and Migrolino utilize entirely different strategies, their collaboration is explicitly natural: they compensate gaps of each other, thereby promoting their business towards their own objectives by offering unique services to a common target group (Combs, Ketchen, & Short, 2011). Neither Migrolino nor SOCAR would not pursue such an ambitious move alone, as a vertical expansion in the environments of fierce market competitions presents great risks that both companies cannot afford to take at their present states within the Swiss market.

To be more specific, Migrolino manages to obtain a meaningful growth with this franchise, as more stores are planned to be opened. Offering unique services is not sufficient to sustain market competition, especially when the demand started respective growth. Moreover, SOCAR gas stations work 24/7, so that Migrolino has an advantage in comparison with traditional convenience stores (Wallace, 2012). As for SOCAR, the franchise allowed it to enter the Swiss market in a more accountable way. Switzerland considers Azerbaijan as one of its main strategic partners, but internal competition is still subject to offering quality and added-value services, so SOCAR could not ignore such a possibility (Wallace, 2012). These benefits are the most explicit outcomes for Migrolino and SOCAR, meanwhile there are some implications on such cooperation. The matter is that the franchising occurred to deliver not only individual strategic advantages but also some common incentives.

Migrolino and SOCAR cooperation resulted in the adoption of customer mobile applications for management of their purchases, accessibility of closest stores, and traceability of bonus program, in which SOCAR products and services are also involved. In such a way, both companies deployed technological advancements of contemporary business: the use of mobile applications facilitates customer experiences and provides their greater retention. Again, the franchising has played a significant role in this regard, as it actually initiated progress of Migrolino towards up-to-date and technology-driven business performance (Cox & Mason, 2009). Migrolino also managed to acquire a so-called customer balanced scorecard, in which primary and additional desires of the customers are addressed (White, 2010). By the inclusion of SOCAR in the bonus program, Migrolino triggers greater sales not only for its products but also for SOCAR's ones, so this company is more encouraged to perform under framework of the franchise. These incentives might not have stemmed from the franchise, but Migrolino as well as SOCAR shares a common context of their business, and this aspect largely determines the entire success of the strategic alliance.

A similar business context means that SOCAR and Migrolino strive for the acquisition of similar business paradigms: expansive growth, market entrance, and pioneering (Grace & Weaven, 2011). Apart from that, needs of the target segments actually coincide, as people, who travel, seek for grocery stores and gas stations at the same time, meanwhile people, who shop on a regular basis, find inconvenient to spend additional time for getting their automobiles fueled or repaired. As a consequence, these needs create a context that is successfully addressed by Migrolino's franchise of SOCAR. Migrolino, however, has established similar franchises with other fuel and gas brands, but SOCAR is expected to be the most suitable partner in this regard because other major brands do not need the franchise to the same extent as SOCAR does.

Eventually, the franchise limits risks of pioneering, especially in such a competitive environment of the market (Grace & Weaven, 2011). Pioneering is always associated with multiple risks, but the companies have a mutual support with additional values delivered together with their primary products and services (Singh, 2010). It is no surprise that organizations are in a distinct liability to each other, as any external impacts affect both companies even though one of them is not related to the nature of these influences (Singh, 2010). Still, the limitation of the risks is worth an additional emphasis because both firms do not risk anything at all by cooperating in such a way (Singh, 2010). Instead, they are able to gain advantages that are hardly attainable with their solo performance. A concept of franchising, however, is associated not only with strategic and marketing benefits but also with various threats and challenges, which both organizations can be exposed to. Thus, these implications must be given an account.

Drawbacks of the Franchise

In spite of the fact that a practice of combination grocery stores with gas stations is used quite often, there is a risk for Migrolino that it may suffer after franchising SOCAR, as long as its product units are not aligned with Migrolino's product lines (Winter, Szulanski, Ringov, & Jensen, 2012). This observation is mainly theoretical, but an empirical possibility of such a scenario must be not underestimated. Therefore, an appropriate positioning of the franchise is extremely necessary; otherwise, Migrolino could encounter difficulties with addressing its target segment (Winter et al., 2012). Hence, segmentation should also be concerned, due to the fact that SOCAR presents an entirely different type of products. Despite the fact that companies have found a common ground for linking their businesses to customers' needs and desires, this business context has to be placed in a distinct framework and clear objectives that should serve a function of milestones rather than mutual liabilities (Vázquez, 2009).