Partnership Establishment Management · Aoife, Teresa, Kenny, and Tommy) means so much to me. In...

Partnership Establishment Management for

the Extended Enterprise

Catherine Dunne BTech., M.Eng.Sc.

Submitted for the degree of Doctor of Philosophy to the

National University of Ireland, Galway

Research Supervisor: Professor Hari Jagdev

Research Director: Professor Jim Browne

Research location: The Computer Integrated Manufacturing Research Unit

(CIMRU), National University of Ireland, Galway

Date Submitted: October, 2008

i

Declaration

I hereby declare that the work presented in this thesis is my own, except where duly

acknowledged and that it has not been used to obtain a degree in this university or

elsewhere.

Catherine Dunne, October 2008

ii

Executive Summary

Globalisation is forcing original equipment manufacturers (OEMs) to consider

forming network type partnerships, such as the extended enterprise (EE), in order to

achieve a sustainable competitive advantage. However, the success rate of

partnerships is found to be low, with the selection of unsuitable partners identified as

a major cause. Therefore, partnership establishment plays a significant role in the

success of a partnership. An examination of the key elements in partnership

establishment reveals that very few formal partnership establishment processes exist,

and those that do are not sufficiently supportive of partnership establishment. This is

further complicated when an OEM from a developed country, such as one of the EU

countries, seeks a partner from a developing country, such as China. Thus a critical

question is how can distributed organisations be supported to establish an EE

partnership that increases the chances of the optimum partner being selected, while

being conducted efficiently and effectively.

With a view to realising this goal, a Partnership Establishment Management (PEM)

framework is developed. A process perspective is employed in order to help

organisations effectively manage their distributed partnership establishment process.

This structured approach enables both OEM and candidate partner profile

information to be presented in a generic machine readable format, a mechanised

matching process to take place and partnership establishment to be managed

effectively. This is achieved via the three elements that make up the PEM

framework namely: (a) a critical success factors model, (b) a support system

architecture, and (c) an implementation methodology. Furthermore, a self

assessment scorecard and a web enabled software prototype called the ePartner

Manager has also been developed. A case study analysis method is used to validate

the framework in an industrial setting. Analysis of the case studies reveals that the

framework facilitates; (a) globalisation and competiveness, (b) availability of

information, (c) distributed partnership establishment, (d) process focused

partnership establishment, and (e) generic company profiling and automated

searching.

iii

Published Work

The following is a list of papers presented and published based on the work

presented in this thesis: -

• Xiao, G., Dunne, K., O’Sullivan, D., 2006, “Development of an Online

Supplier Selection Module”, International Journal of Manufacturing

Technology and Management, Vol 7, No. 1, pg 52-67

• Hongxin, Li., Dunne, K., Pedrazolli, P., 2005, “Integration of Business

Processes in Web-Based Collaborative Product Development”, International

Journal of Computer Integrated Manufacturing, Vol 18, Issue 6, pg 453-463

• Dunne, K., Browne, J.: Profiling for partner selection in an Extended

Enterprise environment, Proceedings of the eChallenges Conference, 27-29

October, Vienna, Austria, 2004

• Dunne, K., Browne, J., “Collaboration Initiation Practices – Experiences from

Case Studies”, 10th International Conference on Concurrent Enterprising, 14-

16 June, Seville, Spain, 2004

• Dunne, K., “Sourcing and Selecting Distributed Collaboration Partners”,

Proceedings of the Third International Conference on Electronic Commerce

Engineering, DRAGON special session, 24-27 October, Hangzhou, China,

2003

• Dunne, K., Browne, J., “Semantic Web – Fact or Fiction”, Proceedings of the

China Europe Network on the NET (CENNET) project 2nd Workshop on

Digital Manufacturing and Business, 10-14 October, Shenzhen, China, pp 192-

200, 2003

• Fazakas, K., Dunne, K., “A Proposed Collaboration Initiation for EU-China

Joint Venture Formation”, Proceedings of the 10th International Conference on

Concurrent Engineering, 26-30 July, Madeira, Portugal, Editors, J. Cha, R.

Jardim-Goncalves, A. Steiger-Garcao, pp 1219-1225, 2003

• Klaar, O., Dunne, K., Grein, G., Joerg, M., Mahl, A., Lossack, R., Grabowski,

H., “Computer Supported Collaboration Establishment in Multicultural

Environments” Proceedings of the eBusiness and eWork Conference, 16-18

October, Prague, The Czech Republic, 2002

iv

• Xiao, G., Dunne, K., “Decision Support for Cross Cultural Collaboration in e-

Business”, Proceedings of the Joint International Conference of Industrial

Engineering and Enterprise Management [IE&EM2002] & International

Conference on Electronic Commerce Engineering [IceCE2002], 19-21

September, Beijing, China, 2002

• Dunne, K., Browne, J., “Collaboration Initiation: The Europe-China

Experience”, Proceedings of the China Europe Network on the NET

(CENNET) Project 1st Workshop on Digital Manufacturing and Business, 14-

15 April, Beijing, China, pp 188-196, 2002

• Dunne, K., Browne, J., “ Supporting International Engineering Networks”,

Research Report 2002, AMT Ireland, 2002Dunne, K., Browne, J., “Faster

Implementation of PDM Systems”, Research Report 2002, AMT Ireland, 2002

• Dunne, K., Browne, J., Jagdev, H., “RapidPDM: Faster Implementation of

PDM Systems”, Proceedings of the PDT Europe 2001, 24-26 April, Brussels,

Published by QMS, pp 85-93, 2001

v

Foreword

The research in this thesis was funded under the following projects: -

DRAGON - Development of an interactive engineering portal for open

networks, Project number: - IST-2000-29366

CENNET - China Europe Network on the NET, Project Number: - IST-2000-

28739

The research has evolved through interdependent experiences with many other

researchers including: -

Xiao, G., “Development of an Online Supplier Selection Module”, M.Eng.Sc,

CIMRU, National University of Ireland, Galway, 2003

Fazakas, K., “A proposed Portal supported Collaboration Initiation process for

Sino-European partnerships”, M.App.Sc, CIMRU, National University of

Ireland, Galway, 2003

The author would like to acknowledge the research work conducted by the

DRAGON project consortium, and Guochao Xiao and Katalin Fazakas that

contributed to this thesis.

vi

Statement of Confidentiality

Any person who wishes to gain access to this thesis, which includes confidential

information, should seek permission from CIMRU.

Please contact: -

Professor Jim Browne,

Computer Integrated Manufacturing Research Unit,

Tel: 00-353-91-750414

Email: [email protected]

vii

Acknowledgements

I would like to take this opportunity to thank the many people who supported me

whilst researching and writing this thesis.

Firstly, thanks to Professor Jim Browne for giving me this opportunity, and for all his

guidance. Also, thank you to Professor Hari Jagdev for his advice and input to the

thesis.

Thanks to all those who contributed to the development of this thesis both in Europe

and China. A special thank you to all those in the DRAGON project who helped

give me a firsthand insight into European Chinese collaboration.

Thanks to friends who have encouraged and helped me complete this thesis. In

particular, I would like to thank Ingrid, Sharon, Kathryn, Neil, David (Tormey),

Elena, Kati, and Sylvia. A special thanks to David (Mulligan) who gave endlessly of

his time to advise me, and whose software skills enabled the ePartner Manager come

to life.

The constant encouragement and love of my extended family (Dad, Mam, Mairin,

Aoife, Teresa, Kenny, and Tommy) means so much to me. In particular, thanks to

Mam for her care and attention when proof reading my thesis, and thank you to my

sister Aoife for being my library companion.

Without the endless patience, understanding, love and support of my husband Phil I

would never have been able to complete this PhD. Words cannot express how much

I appreciate your love and support.

viii

Dedication

To Phil……never liked you, always loved you…..

ix

Table of Contents

DECLARATION ...................................................................................................................................................................... I

EXECUTIVE SUMMARY ........................................................................................................................................................ II

PUBLISHED WORK .............................................................................................................................................................. III

FOREWORD ......................................................................................................................................................................... V

STATEMENT OF CONFIDENTIALITY ...................................................................................................................................... VI

ACKNOWLEDGEMENTS...................................................................................................................................................... VII

DEDICATION ..................................................................................................................................................................... VIII

LIST OF FIGURES ............................................................................................................................................................... XIII

LIST OF TABLES ................................................................................................................................................................. XIV

CHAPTER 1: INTRODUCTION ......................................................................................................... 1

1.1 STATEMENT OF THESIS ................................................................................................................... 1

1.2 THE CHANGING BUSINESS ENVIRONMENT ......................................................................................... 2

1.3 IMPLICATIONS FOR PARTNERSHIPS .................................................................................................. 11

1.3.1 Generic Company Profiling ........................................................................................... 11

1.3.2 Requirements Centred Partnership Establishment ....................................................... 12

1.3.3 Extensive Partner Sourcing ........................................................................................... 12

1.3.4 Structured Partnership Establishment .......................................................................... 13

1.3.5 Effective Mechanism for Partnership Establishment .................................................... 13

1.4 RESEARCH OBJECTIVES ................................................................................................................. 14

1.5 SCOPE OF THE RESEARCH .............................................................................................................. 16

1.6 RESEARCH METHODOLOGY ........................................................................................................... 18

1.7 THESIS STRUCTURE ...................................................................................................................... 21

CHAPTER 2: PARTNERSHIPS ........................................................................................................ 24

2.1 INTRODUCTION ........................................................................................................................... 24

2.2 PARTNERSHIPS – AN OVERVIEW .................................................................................................... 25

2.2.1 A Definition of Partnership ........................................................................................... 25

2.2.2 Background to Partnerships ......................................................................................... 27

2.3 DRIVERS FOR PARTNERSHIP FORMATION ......................................................................................... 29

2.3.1 Organisational Strategy ............................................................................................... 29

2.3.2 Organisational Structure .............................................................................................. 31

2.3.3 Market Conditions ........................................................................................................ 32

2.3.4 Government Policy ....................................................................................................... 34

2.3.5 Technological Developments ........................................................................................ 35

2.4 PARTNERSHIP TYPES .................................................................................................................... 36

x

2.4.1 Variant Descriptors for Partnership Types .................................................................... 38

2.4.2 Partnership Type Traits................................................................................................. 43

2.5 KEY ENABLERS FOR AN GLOBAL PARTNERSHIP .................................................................................. 50

2.5.1 Partnership Strategy and Leadership ........................................................................... 52

2.5.2 Structure and Performance Measurement ................................................................... 54

2.5.3 Teams ........................................................................................................................... 55

2.5.4 Cultural Harmonisation and Trust ................................................................................ 56

2.5.5 Inter Partner Communication ....................................................................................... 58

2.6 PARTNERSHIP SUMMARY .............................................................................................................. 59

2.7 CONCLUSION ............................................................................................................................. 60

CHAPTER 3: PARTNERSHIP ESTABLISHMENT ............................................................................... 63

3.1 INTRODUCTION ........................................................................................................................... 63

3.2 DEFINING PARTNERSHIP ESTABLISHMENT ........................................................................................ 64

3.2.1 Establishing Partnerships – A Process .......................................................................... 65

3.3 PROCESS THEORY - AN INTRODUCTION ........................................................................................... 66

3.3.1 Tenants of a Process ..................................................................................................... 67

3.3.2 Modelling a Process ...................................................................................................... 69

3.4 KEY PARTNERSHIP ESTABLISHMENT PROCESS ELEMENTS ..................................................................... 70

3.4.1 Partnership Requirements ............................................................................................ 70

3.4.2 Sourcing Potential Partners .......................................................................................... 77

3.4.3 Evaluation Methods ..................................................................................................... 80

3.4.4 Negotiation Theory ....................................................................................................... 85

3.5 EXISTING PROCESS MODELS .......................................................................................................... 90

3.6 TECHNOLOGIES TO SUPPORT PARTNERSHIP ESTABLISHMENT ............................................................... 93

3.6.1 Web Technologies ........................................................................................................ 93

3.6.2 Semantic Web ............................................................................................................... 95

3.6.3 Ontologies .................................................................................................................... 98

3.6.4 Web Services................................................................................................................. 99

3.7 PARTNERSHIP ESTABLISHMENT – A PROCESS PERSPECTIVE ................................................................ 101

3.7.1 Customers ................................................................................................................... 102

3.7.2 Services ....................................................................................................................... 103

3.7.3 Transformation Processes .......................................................................................... 103

3.7.4 Actors ......................................................................................................................... 103

3.7.5 Inputs and Outputs ..................................................................................................... 104

3.7.6 Technology ................................................................................................................. 104

3.8 CONCLUSION ........................................................................................................................... 104

xi

CHAPTER 4: THE PEM FRAMEWORK ......................................................................................... 107

4.1 INTRODUCTION ......................................................................................................................... 107

4.2 RATIONALE FOR A NEW FRAMEWORK ........................................................................................... 107

4.3 THE PEM FRAMEWORK ............................................................................................................. 110

4.4 CRITICAL SUCCESS FACTORS MODEL ............................................................................................. 112

4.4.1 Strategy and Leadership ............................................................................................. 113

4.4.2 Structure and Organisation ........................................................................................ 116

4.4.3 Culture and Climate .................................................................................................... 119

4.4.4 Sourcing and Selection ............................................................................................... 122

4.4.5 Technology and Communication ................................................................................ 125

4.5 SUPPORT SYSTEM ARCHITECTURE................................................................................................. 128

4.6 IMPLEMENTATION METHODOLOGY .............................................................................................. 133

4.6.1 Define Strategy and Terms for Partnership ................................................................ 135

4.6.2 Generate Offer Profile ................................................................................................ 137

4.6.3 Generate Request Profile ............................................................................................ 139

4.6.4 Source and Select Potential Partners .......................................................................... 140

4.6.5 Evaluate Potential Partners ........................................................................................ 141

4.6.6 Select Partner and Establish Partnership.................................................................... 143

4.7 PEM: AN INTEGRATED SYSTEMS APPROACH .................................................................................. 144

4.8 CONCLUSION ........................................................................................................................... 148

CHAPTER 5: VALIDATION OF THE PEM FRAMEWORK ................................................................ 150

5.1 INTRODUCTION ......................................................................................................................... 150

5.2 CASE STUDY ANALYSIS ............................................................................................................... 151

5.2.1 Validation Methodology ............................................................................................. 151

5.2.2 Profile of Organisations Analysed .............................................................................. 153

5.2.3 Data Collection Methods ............................................................................................ 157

5.2.4 Validation Criteria ...................................................................................................... 159

5.3 VALIDATION OF THE CRITICAL SUCCESS FACTORS MODEL .................................................................. 160

5.3.1 Implementing the Best Practice Checklist................................................................... 161

5.3.2 Strategy and Leadership ............................................................................................. 162

5.3.3 Structure and Organisation ........................................................................................ 163

5.3.4 Culture and Climate .................................................................................................... 164

5.3.5 Sourcing and Selection ............................................................................................... 164

5.3.6 Technology and Communication ................................................................................ 165

5.4 VALIDATION OF THE ARCHITECTURE: EPARTNER MANAGER ............................................................... 167


xii

5.4.2 Offer Portfolio ............................................................................................................. 171


5.4.4 Request Portfolio ........................................................................................................ 173

5.4.5 Attribute Manager ..................................................................................................... 174

5.4.6 Define Attribute .......................................................................................................... 175

5.4.7 Search Results ............................................................................................................. 176

5.4.8 Initiatives .................................................................................................................... 177

5.4.9 Evaluation Results ...................................................................................................... 178

5.4.10 Summary of Case Study Findings ........................................................................... 179

5.5 VALIDATION OF THE IMPLEMENTATION METHODOLOGY ................................................................... 182

5.5.1 Define Strategy and Terms for Partnership ................................................................ 183



5.5.4 Source and Select Potential Partners .......................................................................... 184

5.5.5 Evaluate Potential Partners ........................................................................................ 184

5.5.6 Select Partners and Establish Partnership .................................................................. 184

5.6 CONCLUSION ........................................................................................................................... 186

CHAPTER 6: CONCLUSIONS & RECOMMENDATIONS ................................................................. 187

6.1 INTRODUCTION ......................................................................................................................... 187

6.2 THESIS SUMMARY ..................................................................................................................... 187

6.3 OVERALL CONCLUSIONS ............................................................................................................. 189

6.4 RECOMMENDATIONS FOR FUTURE RESEARCH ................................................................................. 191

Appendix ................................................................................................................................... 193

xiii

List of Figures

FIGURE 1-1: SUPPLY CHAIN FOR THE AUTOMOTIVE INDUSTRY ............................................................................. 2

FIGURE 1-2: EVOLUTION OF MANUFACTURING IMPERATIVES [JAGDEV AND BROWNE 1998] .................................... 4

FIGURE 1-3: THE EXTENDED ENTERPRISE BASED ON BROWNE AND ZHANG [1999] ................................................. 6

FIGURE 1-4: NETWORK LIFECYCLE MODEL [ADAPTED FROM THOBEN ET AL, 2003] ............................................... 17

FIGURE 1-5: RESEARCH METHODOLOGY ........................................................................................................ 20

FIGURE 1-6: THESIS STRUCTURE .................................................................................................................. 22

FIGURE 2-1: SCOPE OF REVIEW ................................................................................................................... 25

FIGURE 2-2: DEGREE OF HETERONOMY VERSUS INTEGRATION OF PARTNERSHIP TYPES ........................................... 37

FIGURE 2-3: SUMMARY OF PARTNERSHIP THEORY ........................................................................................... 59

FIGURE 3-1: IDEF0 METHODOLOGY ............................................................................................................. 69

FIGURE 3-2: PHASES OF NEGOTIATION [GREENHALGH, 2001] .......................................................................... 86

FIGURE 3-3: DUAL CONCERNS MODEL [LEWICKI ET AL., 2007] ......................................................................... 87

FIGURE 3-4: PARTNERSHIP LIFECYCLE MODEL ................................................................................................ 90

FIGURE 3-5: PARTNERSHIP ESTABLISHMENT PROCESS [MITSUHASHI, 2002] ........................................................ 91

FIGURE 3-6: WORK CENTRED ANALYSIS MODEL [ALTER, 1999] ...................................................................... 102

FIGURE 4-1: THE PEM FRAMEWORK .......................................................................................................... 112

FIGURE 4-2: THE SUPPORT SYSTEM ARCHITECTURE ....................................................................................... 130

FIGURE 4-3: FUNCTION VIEW OF THE SUPPORT SYSTEM ARCHITECTURE ............................................................ 132

FIGURE 4-4: OVERALL PARTNERSHIP ESTABLISHMENT PROCESS ....................................................................... 134

FIGURE 4-5: IMPLEMENTATION METHODOLOGY ........................................................................................... 136

FIGURE 5-1: VALIDATION METHODOLOGY ................................................................................................... 152

FIGURE 5-2: IMPLEMENTING THE PEM SCORECARD ...................................................................................... 162

FIGURE 5-3: HOMEPAGE AND LOGIN PAGE OF THE EPARTNER MANAGER .......................................................... 168

FIGURE 5-4: PERSONAL PROFILE MANAGER ................................................................................................. 169

FIGURE 5-5: GENERATE OFFER PROFILE VIEW .............................................................................................. 170

FIGURE 5-6: OFFER PORTFOLIO VIEW ......................................................................................................... 171

FIGURE 5-7: GENERATE REQUEST PROFILE VIEW........................................................................................... 172

FIGURE 5-8: REQUEST PORTFOLIO VIEW ..................................................................................................... 173

FIGURE 5-9: ATTRIBUTE MANAGER VIEW .................................................................................................... 174

FIGURE 5-10: DEFINE ATTRIBUTE VIEW ...................................................................................................... 175

FIGURE 5-11: SEARCH RESULTS VIEW ......................................................................................................... 176

FIGURE 5-12: INITIATIVES VIEW................................................................................................................. 177

FIGURE 5-13: EVALUATION RESULTS VIEW .................................................................................................. 178

xiv

List of Tables

TABLE 2-1: VARIANT DESCRIPTORS FOR PARTNERSHIP TYPES ............................................................................. 40

TABLE 2-2: PARTNERSHIP TYPE TRAITS .......................................................................................................... 44

TABLE 3-1: PARTNERSHIP REQUIREMENTS CRITERIA ........................................................................................ 71

TABLE 3-2: EUROPEAN-CHINESE PARTNERSHIP REQUIREMENTS CRITERIA ............................................................ 76

TABLE 3-3: EVALUATION METHODS ............................................................................................................. 82

TABLE 3-4: CULTURAL INFLUENCES ON NEGOTIATION ADOPTED FROM LEWICKI ET AL. [2007] ................................ 88

TABLE 3-5: ANALYSIS OF PARTNERSHIP SELECTION PROCESSES .......................................................................... 92

TABLE 4-1: STRATEGY AND LEADERSHIP BEST PRACTICES CHECKLIST ................................................................. 115

TABLE 4-2: STRUCTURE AND ORGANISATION BEST PRACTICES CHECKLIST .......................................................... 118

TABLE 4-3: CULTURE AND CLIMATE BEST PRACTICES CHECKLIST ....................................................................... 121

TABLE 4-4: SOURCING AND SELECTION BEST PRACTICES CHECKLIST .................................................................. 124

TABLE 4-5: TECHNOLOGY AND COMMUNICATION BEST PRACTICES CHECKLIST .................................................... 127

TABLE 4-6: AN INTEGRATED PARTNERSHIP ESTABLISHMENT APPROACH ............................................................ 145

TABLE 5-1: PROFILE OF ORGANISATIONS USED TO VALIDATE THE PEM FRAMEWORK ........................................... 153

TABLE 5-2: ANALYSIS OF DATA COLLECTION METHODS [CRESWELL, 2003] ....................................................... 158

TABLE 5-3: SET OF VALIDATION CRITERIA AND ASSESSMENT GUIDELINES [CORMICAN, 2005] ............................... 159

TABLE 5-4: MAPPING METHODOLOGY ONTO PROCESS TENANTS ..................................................................... 182

Chapter 1: Introduction

1


1.1 Statement of Thesis

1.2 The Changing Business Environment

1.3 Implications for Partnerships

1.4 Research Objectives

1.5 Scope of the Research

1.6 Research Methodology

1.7 Thesis Structure

1.1 Statement of Thesis

The selection of the right partners is a critical element of an Extended Enterprise

(EE) strategy. Although most companies understand the importance of selecting the

right partner, they often do not spend enough time understanding their individual

needs and defining their requirements. As a result there is a greater risk of an

incorrect selection decision, which may ultimately lead to a failed relationship. This

has negative repercussions for the other parties along the EE from down through the

supply chain and forward through the customer chain.

Two main issues need to be considered in relation to partnership establishment.

Firstly, the role and effects of partnerships and partnership establishment within the

EE need to be understood. Since an EE, and all parties involved, exist and compete

as a unit, it will influence all partner selection activities. Secondly, emphasis needs

to be placed on the planning stage of partnership establishment. A clear

understanding and accurate presentation of a company and its requirements, and of

potential partners and their offers will support the supplier selection process and

improve the chances of a successful partnership. The development of a suitable

approach to support companies from developed regions such as Europe in managing

the selection of an EE partner from a developing country such as Chinese using

technology where appropriate is addressed by this thesis.


2

1.2 The Changing Business Environment

The environment within which manufacturing organisations are operating is

continuously being challenged. Competitiveness is consistently identified as a factor

challenging business. Although the influence of competitiveness has not changed,

the rationale behind it and the manner in which it is dealt with by companies has. In

recent years, globalisation has been seen as contributing to increased competitiveness

[Kuivanen, 2008; Hartungi, 2006; Hans, 2008]. In simple terms globalisation aims

to create a single global market with common policies applied by all countries

worldwide, and the elimination of borders between countries, governments, the

economy and communities [Hartungi, 2006]. Although globalisation in this form

will be very difficult to achieve, it has significantly influenced the current strategic

thinking of many companies. Globalisation has meant the market place within which

companies compete and consumers buy is no longer local or national, but has moved

towards a global market. In other words local companies no longer have sole control

of the local market, but are experiencing competition from advanced and efficient

foreign manufacturers. This has put local/national companies under pressure. One

industry that has successfully globalised their operations is the automotive industry

partly attributed to the high labour intensity of their activities [Taylor & Taylor,

2008]. A hierarchical structure is used to control this industry as illustrated in Figure

1-1 below.

OEM1st tier

suppliers

2nd tier

suppliers

Figure 1-1: Supply Chain for the Automotive Industry


3

This includes the Original Equipment Manufacturer (OEM) which has overall

control of the final product, and all other parties involved in the supply chain. Under

the OEM, suppliers of components and subassemblies to the OEM are known as 1st

tier suppliers who supply and communicate directly with the OEM. Numerous other

supplier tiers can exist below the 1st tier (e.g. 2nd tier and 3rd tier suppliers). These

lower level tiers supply and communicate with the tier directly above them, whilst

having no contact with the 1st tier even though the component/sub assembly they are

producing may be part of the final product. The relationship between the OEM and

its 1st tier suppliers is addressed by the Extended Enterprise (EE). Evidence of the

automotive industry’s globalisation is provided by Taylor and Taylor [2008] who

found the number of partnership being formed significantly increased between

OEMs and 1st tier suppliers. There is also a trend towards partnerships that are

technologically driven and that wish to engage in co-design of products and

components [Choy et al., 2004]. Globalisation of developed countries into

developing countries represents a significant challenge due to the lower qualification

and technical standards of developing countries. However, requirements of some

sectors of the automotive and other industries that involve labour intensive, low skill

work are suitable for outsourcing to developing countries. This is summarised by

[Spatz and Nunnenkamp, 2002, p. 5] who states that “outsourcing, the fragmentation

of value chains and the integration of low-income countries into the international

division of labor are reasonable options in this industry, too”. Trends show that in

China European companies are formed partnerships, such as Joint Ventures (JV),

without having an existing supply chain in China [Fang, 2006].

Technological developments such as the Internet have enabled sophisticated market

mechanisms to be developed. Information and communication technology have

facilitated consumers to globally source products and increase their awareness of

choice. National and international market barriers have been broken down rendering

markets more dynamic, which has increased competitiveness between companies

[Hartungi, 2006]. Trends also show the evolution of products and markets as being

an imperative strategy to be implemented by companies to retain their competitive

advantage as illustrated in Figure 1-2 below [Jagdev and Browne 1998].


4

Figure 1-2: Evolution of Manufacturing Imperatives [Jagdev and Browne 1998]

A number of strategies have been developed to addresses the emerging trends

outlined above. Organisational strength aligned with market strengths is where

competitive advantages can be gained [Jagdev and Thoben, 2001]. They highlight

the need for companies to continuously evolve their products and processes to keep

up with the dynamic market. The concept of the extended product is also emerging

[Thoben and Jagdev 2003]. This concept expands on the traditional concept of a

tangible product to include intangible aspects such as services throughout the

lifecycle of a product. The rationale behind this concept is to make products more

attractive to customers, and is also seen as an opportunity to gain a competitive

advantage over competitors. For example, end of life collection and information

services on new models may come as part of the overall car product. In both cases

the exploitation of newly developed information and communications technologies

such as the Internet is viewed as a way to increase competitive advantage. Where

markets in the global arena are in the developmental stage companies are adopting

strategies to gain entry to them before their competitors.

In summary, companies are taking strategic actions to maximise their competitive

advantage, reduce costs and expand their market presence. These actions for a

growing number of manufacturing companies in developed regions such as Europe

have translated into forming dynamic enterprise networks with companies in

countries with emerging markets such as China. The view held by Hans [2008] is

Innovation

Time to Market

Quality & Reliability

Marketing

Production costs

Within

the f

ram

ew

ork

of

ever

incre

asin

g c

om

petition

1960s

1970s

1980s

1990s

2000s

Innovation

Time to Market

Quality & Reliability

Marketing

Production costs

Within

the f

ram

ew

ork

of

ever

incre

asin

g c

om

petition

1960s

1970s

1980s

1990s

2000s


5

that companies are unable to develop all the skills needed to meet current product

demands on their own. For example, due to the variety and complexity of

competencies required to deliver both the tangible and intangible assets of an

extended product it is envisaged that a number of business partners collaborating

together is required [Dunne, 2007; Thoben & Jagdev, 2003]. Larger companies are

increasingly spreading their value added activities over many countries. This allows

them achieve international success by pooling resources and expertise [Hans, 2008;

Choy et al. 2004]. Browne and Zhang [1999] echo this when they identify a shift

from “self-centred” closed enterprises to global open enterprises. In particular,

labour intensive industries, which do not use significant amounts of complex

technology, have shifted production from high wage economies to low wage

economies like China. Such countries generally are in a state of development, and

often the partners companies do not possess the required technical and management

skills. Therefore, the benefit for such companies is the provision of technology and

management training by the company from a develop country [Gao, 2004].

Competitive advantage is achieved by the companies from the developed countries

based on a low cost strategy.

A number of enterprise models are available which may be used to describe how

dynamic networks are structured and organised. The Extended Enterprise (EE)

business model developed by Browne et al [1998] in the 1990s is one which is well

know. Hirsch et al [cited in Standford-Smith, 2001] identify the EE model as an

important paradigm in the modern industrial environment and a suitable method to

offer extended products. It represents an expansion of Porter’s theory to include all

parties inside and outside the four walls of the original equipment manufacturer,

from the suppliers through to the customer as illustrated in figure 1-3 below.


6

Marketing

Product & Process

Design

Component

ManufacturerSuppliers Distributor

Production & Planning

Control

Assembly Customers

Supply Chain

Management

Customer Order

Fulf ilment

Co-Design, Product

Models

Customer Driven

Design

Figure 1-3: The Extended Enterprise based on Browne and Zhang [1999]

The EE represents a framework within which independent organisations come

together to pool their expertise to provide products to the market, something which

they could not do on their own. A general observation is made by Lamming [1993]

that the structure of the EE is created to provide an optimum combination of

complementary assets in subcontracting firms, with tiers of companies taking

responsibility for specific parts of the manufacturing process. The complementary

assets identified include suppliers, designers, manufacturer, sales & marketing, and

distributors. Interaction can take place between the various parties, functions and

activities resulting in collaborative processes along the value chain. For example,

where a supplier works with the component manufacturer and assembler in the area

of production and planning control its effectiveness can be improved. This is termed

supply chain management. Supply chain management transforms inputs into

finished products, and moves all necessary material and information from the

supplier through to the customer. In particular, the supply chain management

process of the EE includes all the activities directly involved in the co-ordination of

supplier capabilities, the planning of supply requirements and the delivery of these

requirements to the manufacturing process [Brown et al., 1998]. Where the supplier,

component manufacturer and assembler work together in the area of product and

process design, co-design takes place. This allows each party to focus on their core

competency and then pool their expertise in order to better meet the customer’s need


7

and gain a competitive advantage. Customer order fulfilment is the term given to

describe the assembler working with the distributor and customer to ensure the

product is delivered according to the customer’s expectations. The customer’s needs

are met through design co-ordination between the customer and the manufacturer in

the area of both product design and process design.

This model fully recognises the need to integrate the various parties in the EE. This

means that selection of an excellent partner, which is compatible with the other

members of the EE, is central to the EE succeeding. Through the development of a

trusting relationship over time it is not unusual for a supply chain management

arrangement to migrate into a combination of a supply chain and co-design

arrangement. Therefore, the capability of a partner to evolve the nature of their

relationship within the EE should be assessed when selecting a partner for the EE.

The difference between an EE and a supply chain relates to the flexibility of an EE to

be made up of different types and degrees of connection between the parties in the

form of partnerships. The importance of the EE is even more evident today with

companies focusing on their core competencies as competitive levers, the

globalisation of trade, standardisation of processes and the ready availability of

information across systems and time.

A second enterprise model commonly used to respond to globalisation is called the

Virtual Enterprise (VE). This involves companies who are distributed

geographically co-operating across company boundaries to form temporary

organisations to meet specific and often unanticipated market needs [Browne and

Zhang, 1999; Hans, 2008]. These needs can relate to any aspect of the global supply

chain and often are project based rather than addressing the entire produce life cycle.

Once these needs are met, the organisations dissolve. Given the short term nature of

these organisations the members retain their independence and continue to develop

their core competencies, while benefiting from the pooling of specialised resources

and markets of other members of the enterprise. Companies that engage in virtual

enterprises must be flexible, adaptable and want to maximise their core competency

[Browne and Zhang, 1999]. Such companies are often competitors, but for the

duration of the project work towards a common goal. Virtual enterprises can only

successfully operate through the use of advanced information and communication


8

technologies to overcome the geographical and time differences between the

partners. Since there is no physical head office and all partners equally share the

costs, risks and benefits dissolution is easy. This is critical for the concept to work.

A summary of the two enterprise models described above is given by Browne and

Zhang [1999] as being two complementary manufacturing strategies. They both

share the same objective, which is to meet competitive pressures as a group of pooled

resources and competencies rather than on their own. However, they differ in terms

of the duration and stability of both types of relationships. While the EE is a long

term relationship based on trust and mutual dependence, the VE is a short term

relationship where all members retain their independence. Information sharing is

critical to the success of both, but only serves to facilitate an EE, while is a must for

a VE to operate. The EE will typically include partners that represent all aspects of

the product value chain in order to manage the entire product life cycle. On the other

hand the VE will take on projects that focus on aspects of the life cycle. In terms of

the research conducted in this thesis the most suitable enterprise model of the two is

the EE model. In order to gain entry into a developing country such as China it

firstly requires a trusting relationship to be developed. Given the cultural traditions

of China and its difference with European culture this will take time and require the

partners to spend a lot of time face to face. Consequently, prior to benefiting from a

partnership a lot of time will have to be invested. Therefore, the VE model is

unsuitable, but collaboration arrangements for extended products or gaining market

entry may be delivered via the EE network model. The term collaborative

partnership is also used throughout the work interchangeably with EE.

Critical to any networked company is the concept of partnership. A partnership as

described by Trafford & Proctor [2006] is a collaborative grouping of companies

which can play a number of roles such as customer, supplier, service provider etc.

This grouping aims to create a collective competitive advantage which is greater than

the individual advantage of each member. Such partnerships offer companies the

chance to outsource non core activities, thereby allowing them to focus on their core

competencies, avail of a cheaper cost base and gain access to developing markets

before their competitors. The potential for partnerships formed between companies

to be mutually beneficial is based on the partnership working well. This can be traced


9

back to the right companies forming a partnership and the terms of the partnership

agreed between the two parties. The partnership establishment process therefore,

plays a significant role in the overall success of a partnership. It is a process that

addresses the complete set of activities necessary to form a partnership between two

companies. Forming inter organisational partnerships is very difficult, requiring

significant expertise and resources [Power et al, 2004]. When the two companies

involved are geographically dislocated, come from different cultures and are at

different stages of development these difficulties are further compounded. Due to

the recognised importance of partnerships, various techniques and tools have been

developed, with the aim of supporting this difficult activity. However, despite the

many aids available partnerships have been found to have a high failure rate [Chen et

al., 2008; Dunlop, 2006; Robson & Katsikeas, 2005; Li- Hua and Khalil, 2006;

Todeva & Knoke, 2005; Das, 2005]. Studies as discussed by Todeva & Knoke

[2005] and Chen et al. [2008] have shown the failure rate of partnerships to be

anywhere from 33% to 50%. The measures used to assess success or failure differ

greatly, and often include intangible factors. Therefore, it is difficult to form a

consensus on the area. A number of generic rationale for failure has been attributed

to objectives and expectations not being met, high set up costs, underestimation of

impact of cultural difference on partnership, instability due to a lack of trust between

the partners and the breach of confidentiality between the parties [Chen et al., 2008].

It has been found that International Joint Ventures are more susceptible to

misunderstandings due to the diverse cultures of the partners with an increased

number of conflicts and early terminations reported [Toveda & Knoke, 2005].

The chances of a partnership being a success would be greatly improved if the

effectiveness of the partnership establishment process was improved. In order to

bring about these improvements the current practices in use must be examined and

critically analysed. Literature available on this area offers some explanation as to

why current support methods are ineffective in bringing together two companies in a

partnership [Chen et al., 2008; Dunlop, 2006; Li-Hua and Khalil, 2006]. The

capabilities of organisations for partner selection are identified as being generally

very weak [Chen et al., 2008]. According to Nijssen et al. [2001], only a few

companies have formal procedures to find partners and tend to depend on industry

contacts for recommendations. Searching for potential partners is often based on


10

poor requirements definitions and limited sources, with a company’s pro-activeness

and experience in finding partners influencing how successful they are. Also, a lot of

selection business models do not address the sourcing step and begin with the

evaluation step, assuming potential partners have already been identified. A further

reason may be due to the increased number of partnerships being formed between

dislocated companies. This represents a complex challenge of how to facilitate

effective sourcing and selection of partners from very dissimilar business,

geographical and cultural backgrounds. The available methods are not equipped to

deal with the associated challenges posed by distance and culture.

Advances in information communication technology (ICT) offer both a challenge

and huge potential for enabling partnership establishment for the Extended

Enterprise. These advances to-date have not been fully exploited. Traditionally all

partnership formation between people or companies has been mediated by personnel

from both sides, with computers driven actions rarely involved. Through the

introduction of technical advances such as the semantic web and ontologies machine

to machine mediation during the setup stage is now possible. Although computer to

computer interaction is more common during the operation of an EE it is only in the

early developmental stage in the area of partnership formation. Inter and intra

connecting communication systems have been developed helping to break down

geographical and time based barriers. New technology in the area of semantic web

and description ontologies facilitate companies from all over the world to present

information about themselves in a standard machine readable format not possible in

the past. The web is a powerful medium to bring individuals with common goals

together [Gallear et al., 2008; Li-Hua & Khalil, 2006]. As confidence grows in the

web, its use to conduct business has greatly increased over recent years. Complex

products are globally accessible in a generally available market place [Hirsch et al,

2001]. Many examples of sales portals or electronic hubs such as Amazon and eBay

can be found. Technical developments such as Java or XML (eXtendible Markup

Language) have enabled the Internet to be a market platform. The Internet provides

a practical and cost effective infrastructure, where potential partners can be sourced

by manufacturing companies. Web enabled support can provide assistance 24/7 with

reduced human intervention when engaged in collaboration establishment.

Information communication technology offers companies a viable approach to


11

forming a partnership with a suitable company in a reasonable timeframe, along with

being cost effective. Exploitation of the above technologies will enable companies

profile, source and evaluate companies in the context of an extended enterprise

partnership across global locations.

1.3 Implications for Partnerships

The pressures of the global marketplace have forced companies to consider how it

affects their product, and how they manage their operations. In essence companies

are making the decision to focus on their core competencies to maximise their

competitive advantage, and to use technology advances to form partnerships with

distributed companies, who are made responsible for their non core activities.

Pressure to compete is intense and support for formation of partnerships is

inadequate [Chen et al., 2008; Choy et al., 2004; Maheshwari et al., 2006; Piddock,

2006]. The implications of partnership establishment extend from the process itself

to mechanised support. This research identified a number of issues that

manufacturers should consider when establishing partnerships in the extended

enterprise. These issues are broken into the following categories:

1.3.1 Generic Company Profiling

An implication of the partnership establishment process is the ability to compare sets

of information relating to two companies with the objective of finding a match. It is

a major challenge for a company to define the relevant information in a format that

can be compared. This can be particularly difficult when companies are from

different industries and although they are using the same terminology often have

different understandings of it. Therefore, support must be provided to allow these

sets of information, or profiles, to be defined in a generic manner. Partnerships

provide both parties with a competitive advantage if compatible and sharing a

common goal. Information such as product and operational details, managerial

skills, location, and market share are included in a company profile. Generic

company profiles allow the manufacturer and potential partner companies describe

their organisation in a succinct and accurate manner using a common description

method called a profile supported by a partnership ontology. This facilitates a


12

quicker execution of the partnership establishment process with increased chances of

suitable partners being identified. It is reasonable to expect that the right

information, in the right format will enable the right selection decision to be made.

Therefore, a generic company profiling ontology must be provided to improve the

partnership establishment process. This ontology must be reliable, accurate and

scalable.

1.3.2 Requirements Centred Partnership Establishment

The partnership establishment process must be requirements driven in order to select

the right partner. A clear understanding of the manufacturer’s needs is critical when

sourcing and selecting a partner and all stages of the process must be driven by these

needs. Product requirements and requirements related to financial, technical,

location and market status as well as previous track record with partnerships are

critical to assess potential partners. Chen et al. [2008] and Choy & Lee [2003]

identify the importance of gaining a thorough understanding of requirements prior to

sourcing potential partners. The manufacturer’s partnership establishment team must

assign sufficient effort and resources to clearly gather requirements and define them

in an appropriate manner. Team members must identify, understand and interpret the

user expectations and needs of the various internal departments. Requirements

engineering activities equip the manufacturer with a complete and optimised set of

information to apply during the sourcing and evaluation of a collaboration partner.

1.3.3 Extensive Partner Sourcing

Successful partnership establishment depends on sourcing partners from as large a

number of candidates as possible with comparable terminology that facilitates

machine based matching. Making the necessary information on each candidate

available and assessing each company in as short a time as possible is a challenge.

Therefore, it is important that company information is machine readable and supports

the assessment of partners. This can be difficult when company information is

distributed and written in terminology particular to the company, and manual

assessment methods are applied. In order to address this, a single location for

machine readable company profiles created using a common ontology, standardised


13

partner profiles, and an automated assessment method are needed. The larger the

number of companies available for assessment the wider the choice a company has, a

fact, which significantly improves the chances of forming a successful partnership.

An automated assessment method will speed up the process, and make it viable for a

company to consider a greater number of candidate partners. Piddock [2006]

emphasises the importance of extensive partner sourcing. Therefore, in a partnership

establishment environment it is critical that an infrastructure is provided with an

ontology, and with capacity to store extensive quantities of machine readable

company profiles, and that an algorithm based sourcing method is applied.

1.3.4 Structured Partnership Establishment

Execution of an efficient and effective partnership establishment process implies the

need for guidance in the form of a complete and structured sequence of activities.

The provision of an all inclusive, yet flexible structure is a challenge. Some

available processes models assume requirements are defined and potential partners

are identified prior to initiating the partnership establishment process [Maheshwari et

al., 2006; Mitsuhashi, 2002]. When the process begins it starts with the evaluation

step. Furthermore, many companies may not have sufficient resources to assign to

the sourcing step or may have been invited by a government to form a partnership

with a selected company without going through a requirements definition or sourcing

stage [Bayazit, 2006; Chen & Huang, 2007; Percin, 2006; Ramanathan, 2007; Sarkis

et al., 2007]. In order to avoid making the wrong selection decision due to badly

defined requirements and limited sourcing, it is important that an optimised and

streamlined method for applying the partnership establishment process is

communicated to the user. This method should include details of the activities to be

executed for each stage, the necessary inputs and outputs, enabling control, and

support mechanisms. Flexibility in terms of the application of the process model is

important.

1.3.5 Effective Mechanism for Partnership Establishment

The partnership establishment process involves a lengthy execution period with a

number of repeated activities. Therefore, a major challenge is to minimise execution


14

time and automate as many of these repeat activities as possible [Gallear et al.,

2008]. This is difficult if the repeated activities cannot easily be standardised to

render them suitable for automation. The use of manual tasks increases the risk of

human error and significantly increases resource costs [Choy et al., 2004]. Lengthy

execution periods prolong the start date of the partnership and the realisation of the

benefits expected. In order to address these problems information and

communication technology advancements must be adapted to improve the efficiency

of the process, whilst facilitating generic company description creation in a machine

readable format, and automated sourcing and evaluation. The usability and interface

of a mechanism must support ease of use by the manager responsible for partnership

establishment.

Based on the above implications it is clear that managers engaged in partnership

establishment must search and evaluate many aspects of a range of companies whilst

managing the selection process. Taking this viewpoint companies must consider

how they can conduct these activities in an efficient and effective manner. Also, it is

abundantly clear that managers engaged in this process must exploit information

communication technologies to ensure success. In particular technological

developments must enable company profiling and break down the geographical and

cultural barriers. Integration across the stages of the process is also required. A

structured approach and technical supports are needed.

1.4 Research Objectives

The main objective of the research undertaken by the author is to improve the

effectiveness of organisations involved in establishing partnerships in order to

increase the probability of selecting suitable partners and thereby engaging in

successful and beneficial partnerships. In particular, the research contribution will

provide support and guidance to dislocated organisations based in developed regions

such as Europe and developing regions such as China to engage in partnership

establishment within the context of the Extended Enterprise. The requirements

identified in the previous section namely: (a) generic company profiling, (b)

requirements centred partnership establishment, (c) extensive partner sourcing, (d)

structured partnership establishment, and (e) effective mechanism for partnership


15

establishment, will be considered and solutions proposed. Support will be provided

to those responsible to give them a clear sense of direction in relation to the

partnership establishment process. Managers will be assisted in creating clear and

concise machine readable profiles. Access to an extensive repository of potential

partner profiles will be provided, along with the automatic matching and initial

assessment of these companies. The development of a web enabled tool is

undertaken to facilitate definition, sourcing and evaluation in a distributed

environment.

Following a review of various partnership establishment methods and techniques

along with classification systems, a framework for managing partnership

establishment in the extended enterprise is presented. This framework is called the

Partnership Establishment Management (PEM) framework. The PEM framework

applies a systems approach to gathering the minimum critical information from

companies seeking partners and those offering their services and skills as potential

partners. This concise yet relevant set of information is then used to effectively

make key decisions along the guidance process. The framework is made up of both

theoretical structures and practical techniques to enable managers to operate more

effectively. The PEM framework is broken into the following key elements:

1. A critical success factors model

2. A support system architecture and

3. An implementation methodology

Also, in order to enable validation of the PEM framework to take place a best

practice checklist and a web enabled partnership establishment support mechanism

prototype called the ePartner Manager has been developed. This body of work is

brought together as a set of outcomes with the following aims:

An extensive review and summary of literature related to the areas of partnership

and partnership establishment.

The identification and development of a set of critical success factors, which

aims to enable effective Extended Enterprise partnership establishment practices


16

The development of a partnership establishment management best practices

checklist, which allows organisations compare their performance against best

practice

The development of a support system architecture, and its validation using a web

enabled software prototype called ePartner System

The development of a complete structured implementation methodology to assist

in the successful execution of a partnership establishment initiative

The application and validation of the PE framework using an industrial based

case studies

It is the author’s intention via these outcomes to add to the knowledge base in the

areas outlined, provide guidance in relation to partnership establishment in the

context of the Extended Enterprise, and prompt further research in that area.

1.5 Scope of the Research

Partnerships and partnership establishment are not new research topics. Extensive

research has been undertaken from various viewpoints (i.e. strategic, managerial and

process) and by a number of different fields (i.e. engineering, management, computer

science) to improve understanding and optimisation in the area. Given the breadth of

the topics it is necessary to define boundaries and parameters pertaining to the

research presented in this thesis. Therefore, this thesis will focus on the entire

partnership establishment process, rather than just one stage, in the context of the

Extended Enterprise environment only. With this in mind a selection of topics are

addressed including types of partnerships, process theory, industry and product

classification system, ontologies as a classification method, and support mechanism

for partnership establishment such as portals and web based information and

communication technologies.

As proposed by Thoben et al [2003] and illustrated in figure 1-4 below the lifecycle

stages of inter-enterprise networks include formation of the network, operation of the

network and the dissolution of the network.


17

Formation

of the NetworkOperation

of the Network

Enterprise

Networks

Dissolution

of the Network

Figure 1-4: Network Lifecycle Model [adapted from Thoben et al, 2003]

According to Chen et al. [2008] and Maheshwari [2006] companies have been found

to focus on the operation of the network stage to ensure the exchange of information

and goods is smoothly managed. Research gaps in the areas of the formation of a

network and its dissolution are identified by Piddock [2006] and Pressey & Qiu

[2007]. With this in mind, this thesis concentrates on the issues and requirements

relevant to the formation of an EE type partnership as part of a network. The latter

two stages (i.e. operation of the network to dissolution of the network) are considered

outside the scope of this thesis.

Given the earlier identification of cost reduction, product innovation and market

presence as viable strategies for manufacturing companies in developed countries,

such as those in Europe, America and Australia, to remain competitive, moving some

of their manufacturing operations to developing countries offers a way for these

companies to achieve all three strategies. With this in mind, this research will use

European manufacturing companies forming partnerships with companies in

developing countries as an example of developed countries. Examples of shifts in

production from developing regions such as Europe to developing regions such as

Eastern Europe, South and Latin America, Asia, and Russia is referred to in literature

[Hartungi, 2006; Li-Hua & Khalil, 2006; Fang, 2006; Harwit, 2004; Gao, 2004;

Jagersma & van Gorp, 2003]. Given the differences between countries from a social,

cultural, political and economic perspective the author has chosen China as a

representation of a developing country in order to develop and test this thesis. The

decision to select China was based on the existence of current links between China

and Europe and the strong desire of European manufacturing industries to form


18

partnerships with Chinese companies [Hartungi, 2006; Gao, 2004; Jagersma & van

Gorp 2003]. The European Union and Chinese government invests significant funds

each year to aid joint research between the two. Statistics show that there is an

estimated 50,000 foreign enterprises have already formed partnerships with Chinese

companies, with a large number of them the result of direct invitations from the

Chinese government [Fang, 2006]. The number of trade missions to China organised

by state organisation has increased over the last 5 years. For example Enterprise

Ireland has organised 2-3 trade missions in the previous 5 years with the President of

Ireland using the mission in 2004 to pay the first state visit of an Irish president to

China. Furthermore, China is a good example of a developing country which can

offer almost unlimited amounts of cheap labour, companies eager to learn western

management and operation techniques, and a huge market as yet unexposed to

consumerism. Also, researchers cite the preference of western manufacturers to

choose China over other countries for creating partnerships [Lau & Zhang, 2006;

Jagersma & van Gorp, 2003]. Therefore, the research carried out for this thesis deals

with both relevant generic partnership establishment theory and specific theory

relevant to a European manufacturing company wishing to form a partnership in the

context of the Extended Enterprise in China. The Extended Enterprise may be

viewed from numerous perspectives including logistics, quality, traceability,

Computer Integrated Manufacturing (CIM), or process. In this case a

relationship/partnership view of the EE will be taken.

1.6 Research Methodology

A wide variety of research methodologies are available to the researcher [Creswell,

2003]. Choosing a suitable method is dependent on factors including the nature of

the research, whether the area is in its infancy or not, and whether the use of live

examples is relevant or not. The research undertaken in this thesis includes the

development of managerial theory addressing real-world problems. Therefore, a

case or field based research method is selected. The case study method was chosen

as it facilitated an in-depth, detailed analysis of a small number of subjects where no

two were similar enough to allow comparison and where the research could not be

conducted through controlled experiments. Yin [2003], and Freeman Herreid [2006],

describe the case study method as involving an examination of real-world operations


19

and process and systems conditions in the setting where they take place. Mulligan

[2007] identifies the contribution a case study brings to understanding a complex

situation (e.g. social, political) made up of individuals, groups, and/or organisations.

Implementation of a case study method involves collecting information via formal

(structured interviews) and informal (observations) methods in the field. Collected

information may then be used for developmental and validation purposes where the

relevance and workability of the resulting managerial theory is improved.

The research methodology employed by the author includes a case study analysis. In

conjunction with the case study extensive literature is reviewed and the author’s

intuition applied. Figure 1-5 illustrates a graphical representation of the research

methodology adopted for this thesis. The research methodology, parts, steps,

approaches and aims are included. The application of this research methodology is

divided into three steps each with three main parts based on the CIM-OSA

(Computer Integrated Manufacturing – Open System Architecture) enterprise

reference architecture [Kosanke, 1999]. It is the progression from a generic view to

a partial view and then finally a particular view that is of interest for this thesis as

illustrated in figure 1-5 below. The research will first take a generic view of the

partner and partnership establishment domain. A focus on partnership establishment

in China will be used to represent a partial view of this domain for investigation and

framework development purposes. Lastly, a partnership case between a European

and Chinese manufacturing company will be utilised to test the contribution

developed as an instantiation of the particular view. Each view enables one or more

of the aims outlined in section 1.4 to be realised.


20

Partnership

establishment critical

success factors

Methodology Approach Generic Partial Particular

Step 1:

Domain

def inition &

research need

identif ication

Step 2:

Research

contribution &

thesis

development

Step 3:

Hypothesis

testing &

conclusions

Partnership

overview

Partnership

establishment

process

Partnership Establishment

Management (PEM)

f ramework

Literature

review &

analysis

Address

weaknesses in

research domain

Case studies

Case studies using


Management (PEM)

f ramework

Aim 6

Aim 1

Aim 2

Aims 3-5

Figure 1-5: Research Methodology

Step 1: Domain definition and research need identification: During this step a

thorough review and analysis of the research domain are carried out. The outcomes

of this work are the identification of a specific area within the domain where further

research is deemed necessary.

Step 2: Research contribution and thesis development: The research need

identified in the previous step is investigated during this step. The data collected

during the previous step along with the knowledge acquired during this step form the

basis of the proposed contribution to the area. The contribution addresses the

research need and the researcher’s views backed by their research findings. Iteration

is used to develop and refine the findings. The research findings namely the

Partnership Establishment Management (PEM) framework is introduced, presented

and explained.

Step 3: Hypothesis testing and conclusions: In order to test the contribution and

hypotheses proposed for validity this step is included. A number of case studies are

applied to the suggested contribution and hypotheses, and based on the results

conclusions can be made.


21

Peer reviewed literature and research findings from credited sources were used to

minimise the sources of error introduced by the input of such information to the

study. A structured interview technique was used during this study to gather the case

data. The researcher asked a number of generic questions, but free form answers

rather than multiple choice answers were applied. This gives enough balance

between a checklist of topics and freedom to raise relevant points to gather a rich

source of data, while minimising the source of error from constraint data collection

methods. A senior manager was interviewed in all cases, providing a sufficiently

wide knowledge of all the relevant areas of the organisation to be covered during the

interview. This prevents error introduced by contacts with different roles and

therefore different backgrounds and viewpoints in an enterprise. Strategies including

member checking (i.e. review and confirmation of results by interviewee) and

triangulated data (i.e. data from a number of sources) were employed to confirm the

accuracy and completeness of the data collected [Creswell, 2003].

1.7 Thesis Structure

The proposed structure of the thesis is illustrated in figure 1-6 below. As the reader

moves through the chapters the material becomes more focused.

Chapter 2 – documents a comprehensive literature review of best practices in the

area of partnership. Firstly, the concept of partnership is introduced. Important

drivers in relation to partnership formation are identified and discussed. A review of

models and partnership types currently available in literature is then presented.

Based on the above information a set of key requirements for partnership is

established. The overall objective of the chapter is to understand the concept of

partnership and its importance, and to define a set of key requirements for

partnership.


22


(Chapter 3)

Validation of the Partnership

Establishment Management (PEM)

Framework

(Chapter 5)

Partnership

(Chapter 2)

The Partnership Establishment

Management (PEM) Framework

(Chapter 4)

Conclusions &

recommendations

(Chapter 6)

DO

MA

IN D

EF

INIT

ION

& R

ES

EA

RC

H N

EE

D

IDE

NT

IFIC

AT

ION

RE

SE

AR

CH

CO

NT

RIB

UT

ION

&

TH

ES

IS D

EV

ELO

PM

EN

T

HY

PO

TH

ES

IS T

ES

TIN

G &

CO

NC

LU

SIO

NS

Figure 1-6: Thesis Structure

Chapter 3 – presents an analysis of the partnership establishment process. The

focus of the analysis is on available research, which identifies the key stages in the

process, support mechanisms in use, and emerging information communication

technologies (ICT). The chapter begins by defining what is meant by partnership

establishment. The process itself is then investigated and available support

mechanisms critiqued. The notion of an all inclusive process covering each stage of

the establishment process is then presented. Following a review of suitable enabling

ICT for the partnership establishment process, a process perspective on successful

partnership establishment is presented.

Chapter 4 – the requirements and success factors defined in the previous chapter

form the basis for a proposed partnership establishment solution to be presented in

this chapter. The chapter begins by identifying the need for a framework to guide the

partnership establishment process. Key elements of the framework are presented and

described in detail namely: a critical success factors model, a support system

architecture and an implementation methodology. The critical success factors model


23

provides a set of best practices to enable the effective execution of the overall

partnership establishment process. The architecture supports the used to adapt a

systematic approach to partnership establishment management, and lastly the

implementation methodology offers an overall set of steps to enable the

establishment of a suitable partnership. The final section of the chapter discusses

how all three elements are integrated to form the PE framework.

Chapter 5 – presents the specification, implementation, and validation of the PE

framework. This is achieved through case study analysis. Support system modules

are identified and developed in order to facilitate the execution and management of

the partnership establishment management process as presented in the previous

chapter. The critical success factors scorecard is used to test the theoretical concept

for efficient and effective partnership establishment. The ePartner system is a web

based software prototype to test the ontology based profiling system, and automated

sourcing and evaluation of potential partners. Lastly, the implementation

methodology is compared against the case company’s partnership establishment

process for the purpose of validating its scope and content. All the validation results

are included in the chapter. The aim of this chapter is to prove the thesis that the use

of a machine readable generic profiling approach during partnership establishment

improves the chances of selecting the right partner.

Chapter 6 – an overview of the study is provided along with a summary of the main

findings. In conclusion, the author generates a research agenda, which indicates, for

interested academics and researchers, directions for future investigation.

Chapter 2: Partnerships

24


2.1 Introduction

2.2 Partnerships – An Overview

2.3 Drivers for Partnership Formation

2.4 Partnership Types

2.6 Key Enablers for a Global Partnership

2.7 Partnership Summary

2.7 Conclusion

2.1 Introduction

In today’s dynamic global market, companies, distributed all over the world and

rigorous in their pursuit of forming successful partnerships, are more likely to

combat competition and improve their competitive advantage. With this in mind,

this chapter examines partnership. An understanding of partnership can increase the

chances of developing a suitable framework to source and evaluate potential partners

with the objective of establishing a mutually beneficial partnership between

dislocated companies. In this case the term dislocated refers not just to geographical

location, but also to cultural, political, social and developmental differences. The

application of such a framework can then increase the chances of a suitable partner

being selected and a successful partnership being established, whilst minimising

failure rates. A search for literature on partnership reveals a large and varied set of

information spanning from in-depth narrow studies to higher level generalisations.

Todeva & Knoke [2005] observes that literature in the area addresses topics ranging

from trust to how to manage collaboration in technically based product markets.

Therefore, it is necessary to define the boundaries within which the research for this

chapter will be carried out. The focus will be on supplier-manufacturer partnership

from the point of view of an OEM from a developed region in collaboration with 1st

tier firms in a developing country. Therefore, the partnership subject area is analysed

as illustrated in figure 2-1.


25

Partnerships

Key requirements for EE partnership

Overview of partnerships

Drivers for partnership formation

Partnership types

Partnership Summary

Figure 2-1: Scope of Review

An examination of the core elements of partnership is given. A set of drivers for

partnership formation is presented and discussed. This includes an outline of the

trends and their imperatives leading to the adoption of a partnership strategy.

Partnership types are classified and discussed. This is followed by a section of the

chapter that focuses on defining a set of key requirements that constitute a successful

partnership, which can assist in the selection of a partner. The final section brings

together all the findings in relation to partnerships into a summary.

2.2 Partnerships – An Overview

The objective of this section is to provide a brief overview of partnership from the

point of view of literature, and to scope it in terms of this thesis. This includes

presenting a definition of partnership and discussing its background and evolution.

Each of the above is detailed in the subsections that follow.

2.2.1 A Definition of Partnership

A number of different viewpoints for the term partnership may be found in literature.

Trafford & Proctor [2006] describes partnership at its very basic level as being a

dependency between two parties. This idea is expanded on by Lemke et al. [2003]

when they define partnership as a relationship between two firms, which involves a

commitment over an extended period of time, the sharing of information, as well as

the risks and rewards of the relationship. Some researchers define partnership in


26

terms of outcome, which may include an improvement in costs, productivity or

market status [Lau & Zhang, 2006; Agarwal & Wu., 2004; Hartungi, 2006].

Strategic views on partnership presented by various researchers relate to global

competitiveness and include factors such as geographical expansion and core

competency exploitation [Lau & Zhang, 2006; Hartungi, 2006]. Others consider

partnership in terms of a number of key attributes to distinguish them from loose

transactional arrangements. For example Lemke et al. [2003] defines a partnership

as exhibiting specific attributes including (a) personal business relationship; (b)

special product; (c) new product development; (d) relationship maintenance and (e)

nearby location. A process view is taken by Zeng [2003] when describing

“manufacturing companies often develop their products in Europe and the USA,

manufacture in Asia and Latin America, and sell worldwide”.

Determining the contribution and effectiveness of a partnership differs depending on

the perspective of the theorist. Measurement of a partnership (confined to basic

transactions) traditionally was based on the three attributes, price, delivery and

quality [Porter, 1990]. The evolution of supplier relationships to supplier-

manufacturer partnerships means these criteria are no longer sufficient. Therefore,

additional measurement attributes applicable to this research include (a) level of co-

operation, (b) duration of partnership, (c) value of resources exchanged, (d) level of

trust, and (e) economies of scale [Morris et al, 2004]. Lemke et al. [2003];

Maheshwari et al. [2006]; Piddock [2006]; and Sarkis et al. [2007] expand on these

attributes to include (a) high levels of commitment; (b) mutual dependency; (c) trust;

(d) risk and reward sharing and (e) long term orientation. Another view on the value

of partnership is given as facilitating OEMs to reduce manufacturing cost, increase

profitability and, therefore, increase profit margins [Chen et al., 2008; Choy et al.,

2004]. Alternatively, a number of researchers propose that the value of international

partnership for OEMs is the leverage of internal know-how, local skills and market

position to gain global status [Hartungi, 2006; Zeng, 2003].

Viewing partnership as sharing responsibility for a set of desired outcomes in

isolation is taking a simplistic perspective. In reality partnerships are much more

complex with many factors to be considered when forming, operating and

terminating such a relationship [Riemer et al, 2001]. In this view partnership is more


27

than working towards common goals; it is a process along its entire lifespan.

Successful partnerships are not possible without the groundwork at the start in

planning a partnership, and selecting appropriate partners. In other words

partnership establishment must be handled in a systematic manner as a business

process to ensure a successful partnership.

2.2.2 Background to Partnerships

Developments in operations management and industrial engineering have always

been pioneered by the automotive industry with other industries following their lead.

This can be seen in the area of inter organisational partnership where the automotive

industry is the world leader [Lemke et al, 2003]. Significant changes have taken

place in this area over the last 65 years [Dobler, 1996]. During World War I Henry

Ford decided it was more economical for Ford to employ their own expertise to make

their car parts internally. Then in the 1920s Alfred Sloan suggested that all inputs

should still be produced internally, but that parts-making divisions should be set up

to organise and control the huge numbers of employees [Womack, 1990]. This idea

was advanced by Henry Ford II in the 1950s when he sourced multiple independent

external suppliers for input parts based solely on lowest price per part. These early

partnerships of the 1950s saw OEMs engaged in mass production, and controlling

large numbers of suppliers. These suppliers constantly feared being dropped due to

dips in market demand, or being undercut by cheaper suppliers. Characteristics of

such arrangements included limited data exchange, aggressive buying tactics and

suppliers unwilling to provide details of product cost structures in case it was used

against them by buyers to reduce prices further [Lamming, 1993]. It is unfair to call

such relationships partnerships since the supplier was at the mercy of the OEM who

was often their largest customer and on whom survival depended. These

relationships tended to be adversarial in nature and became known as arms length

relationships [Lamming, 1993].

It took until the 1980s for OEMs to realise the key to competitive parts supply is for

the OEM and their suppliers to work together as a partnership [Womack, 1990].

OEM-supplier relationships evolved from arms length adversarial relations to a

strategic partnership. This evolution has seen the focus of the relationship change


28

from tactical to strategic. Partnership today is not simply confined to buying

products off the shelf but also extends to collaboration on every aspect of process

and product development. There is now a realisation that cost focus for a product

from its source to consumption by working together was more beneficial than

pushing for lowest prices from the suppliers. It should also be noted that selection

decisions are no longer based on price alone, but include the analysis of many factors

such as length of contracts, number of partners employed, and location of companies

in view of their strategic implications for both partners. Characteristics of such

relationships include open channels of communication and both partners sharing

information, a common goal and the profits [Chandra & Kumar, 2000]. The benefits

far outweigh the risks associated with forming partnerships making them a must for

companies wishing to remain competitive [Piddock, 2006]. Hans [2008] identifies

companies as making a conscious effort to positively influence their situation

through partnership.

Given the large number of suppliers that may be partnered along a product value

chain a functional tiered system was introduced to distinguish between those closest

to the OEM, and those that are linked directly to the supplier rather than to the OEM.

This concept is explained by Womack et al (1990) and Lamming [1993]. 1st tier

suppliers are responsible for directly supplying to the OEM, and often contribute

their specific expertise as part of the product development team. The 1st tier supplier

has a solid, long term relationship with its customers (the OEM). Remaining a

supplier is brought about by fulfilling expectation rather than by right. To fulfil the

required expectations the 1st tier supplier will use all available resources including

other suppliers termed 2nd tier suppliers. A 2nd tier is formed by the 1st tier suppliers

to obtain components or services to be input into the products to be supplied to the

OEM. This means that the OEM has no contact with the 2nd tier suppliers. The

research documented in this thesis focuses on the formation of partnerships between

1st tier suppliers and OEMs.


29

2.3 Drivers for Partnership Formation

From literature five drivers can be identified that greatly influence the strategic and

operational decisions made by manufacturing companies. These drivers, which are

discussed in further detail in the following sub sections, include:

1. organisational strategy

2. organisational structure

3. market conditions

4. government policy

5. technological development

2.3.1 Organisational Strategy

In order for OEMs to remain competitive it is important they adapt to the industry

trends affecting their industry. How an individual OEM will deal with such trends is

reflected in their overall strategy. A strategy is a high level plan made up of a

number of time based objectives that guide a company [Bozarth & Handfield, 2008].

Based on internal and external pressures, OEM’s in Europe are adapting

organisational strategies which involve forming partnerships with manufacturers in

developing countries such as China. The decision to form such partnerships can be

based on a number of factors that support the development of core competencies and

the outsourcing of non-core competencies. All value added activities undertaken by

a company can be referred to as competencies or skills which consumers are willing

to pay for. These skills may be divided into what are termed core competencies and

non core competencies. Core competency activities have a number of characteristics

including: they are what the company does best, are central to the source of the

OEMs competitive advantage, generally account for the majority of the value added

to the final product, and require a highly skilled labour force to execute them. Chen

et al. [2008] describes a core competency as an amalgamation of skills and

knowledge rather than products or functions. This gives the holder of a core

competency a unique source of leverage in the value chain in that particular area.

Activities under the category of non core competency have a number of

characteristics i.e.: they can be support activities such as accountancy in a

manufacturing company, require low skilled activities that add little overall value to

the product, and are sub components of a larger product being produced by the


30

manufacturer. Core competency development has become imperative since it offers

a greater opportunity for a company to increase their market share through

differentiation. Outsourcing non core competencies allows a company focus on

developing their core competency which protects them against their competitors,

gives them access to their suppliers innovations and shortens time to market. As a

result OEMs are using their overall strategy to reinforce the need to invest in core

competencies and create innovative products, whilst outsourcing non core

competencies to external organisations [Chen et al., 2008; Choy et al., 2004; Hans,

2008; Lemke et al., 2003; Zeng, 2003; Power et al, 2004]. Strategically intellectual

property rights and their protection is a concern of OEMs. Therefore, only non core

activities, which generally are not knowledge intensive, should be performed by

external organisations.

An influencing factor on the strategy typically adopted by European OEMs is the

product type they are producing. Where the product is inexpensive and produced in

large quantities using high levels of repetitive low skilled manual labour, an OEM

may strategically choose to produce this work in a developing country such as China

in order to reduce costs [Hartungi, 2006; Li-Hua & Khalil, 2006; Gao, 2004;

Jagersma & van Gorp, 2003]. The European cost base, which includes resources

ranging from labour, raw material, transport, capital running costs, and maintenance,

to equipment spare parts is increasingly more expensive than the rest of the world.

On the other hand countries such as China offer economies of scale based on a cheap

and plentiful labour force along with a readily available cheap energy and raw

material pool [Hartungi, 2008; Li-Hua & Khalil, 2006; Gao, 2004; Jagersma & van

Gorp, 2003]. According to Power et al. [2004] not only does outsourcing non core

competencies help reduce costs but also reduces the risks associated with large

resource outlays. Further factors such as hefty EU trade tariffs and the need to have

a manufacturing presence in a country in order to gain entry to the market are driving

OEMs based in Europe to make strategic decisions to form partnerships with

manufacturers in China [Li-Hua & Khalil, 2006]. On the part of Chinese

manufacturers the strategies driving them include improving their technical and

managerial skills in line with the rest of the world through financial and

technological investments [Gao, 2004; Li-Hua & Khalil, 2006; Lau & Zhang, 2006].

Gao [2004] describe technology transfer as a process in which technology,


31

knowledge and/or information developed in one organisation is applied and utilised

in another organisation. This complements government policies which aim to

develop Chinese manufacturing to a position of being able to compete on the world

market over the next 5-10 years. As a result of the strategies developed by

companies, partnerships represent a way to realise the objectives of both parties. The

way of collaboration has become a strategic component with companies focusing on

core competencies, and setting up global value constellations. The increased focus

on long-term relationships has implications for how partner selection needs to be

conducted [Browne, 1995].

2.3.2 Organisational Structure

Due to improvements in the area of ICT and inter enterprise integration, the

organisational structures adopted by OEMs have significantly changed. There has

been a move away from organisations employing insular structures where they were

isolated from others in their value chain. Instead cross collaboration networks are

now commonplace and deemed important [Lemke et al, 2003; Todeva & Knoke,

2005]. A network is where two or more companies come together with a common

goal and a commitment to share the responsibility and risk in order to achieve the

goal. Choy et al. [2004] notes that organisations worldwide are increasingly

focusing on achieving supply chain excellence, optimisation and integration with a

view to improving customer satisfaction and enabling profitable growth. This view

is echoed by Kinder [2003] who cites networks as a means of establishing closer

relationships between the various stages of the value chain. Network organisations

can take many forms. The example of the extended enterprise structure lends itself

to forming partnerships. The theory of the EE is that each member along the value

chain contributes their core competency which, when combined, produces an

optimised product. For companies, already part of such a structure, the requirement

for a new skill is met by adding a further partner rather than by attempting to learn

the new skill. Investment to train and become expert at a new skill is therefore not

required. In other words the EE structure is already set up for inter enterprise

integration and it drives OEMs to form further partnerships. Trends show a move

away from adversarial relationships with external suppliers to their inclusion as part

of the overall team. Where a collaborative structure is in use by an organisation they


32

will feel driven to form further partnerships where appropriate. The increased

availability of various network structures will make the concept of partnership more

amenable to others and drive their partnership formation activities. New

organisational forms have lead to the involvement of more decision makers. These

developments urge a more systematic and transparent approach to partnership

selection and formation [Browne, 1995].

2.3.3 Market Conditions

Manufacturing is no longer a local activity, but takes place in a global economy with

global standards being applied. Kuivanen [2008] defines a global company as more

than a multinational company, whose business, material and components are sourced

world-wide, manufactured off-shore and sold in many different countries perhaps

with local customisation. Therefore, strategic decisions are needed to decide what to

make and where to make or buy it, in the global economy [Browne, 1995]. OEMs

from developed regions are under pressure to have a presence in markets all over the

world, to defend current markets positions and to grow new markets as quickly as

possible [Choy et al. 2004; Todeva & Knoke, 2005; Jagersma & van Gorp, 2003].

This trend of manufacturing expanding globally is expected to continue [Kuivanen,

2008]. The emergence of the global market has become a significant driving force

behind OEMs forming partnerships with manufacturers in developing countries. The

scope has been significantly widened with the dropping of trade barriers, and

opening up of markets such as Eastern Europe and Asian countries such as China and

India. The market in China has been seen to open up hugely in recent years.

Historical, political and cultural impediments have rendered this market closed up to

the mid 1990s. China’s recent entry into the World Trade Organisation (WTO) has

meant some of their market policies have had to be re-aligned with those of the WTO

and the elimination of trade barriers. This has resulted in a more open Chinese

market and a more attractive proposition for companies from developed countries to

form partnerships [Fang, 2006; Gao, 2004; Lau & Zhang, 2006; Dunlop, 2006].

Since then the potential for foreign investors in this developing market has attracted

many western companies. China for example is made up of a population of

approximately 1.3 billion people. Consumerism on a small scale is visible only in

the larger cities but remains largely unexploited. This offers manufacturers a chance


33

to enter this huge market, and gain a customer base before their competitors. Also,

having a presence in the market early on increases the chances of establishing your

product as a preferred brand among consumers. A similar situation exists in relation

to other developing countries. Permission to sell a product in China is only granted

to companies producing in China. This drives European companies to have a

manufacturing presence in China. Limits are in place in relation as to how European

companies may enter the Chinese market. The formation of a partnership between a

European OEM and a Chinese company is seen as one of the main methods

employed by OEMs. Globalisation represents an opportunity to source the best in

class suppliers from all over the world. Where the optimum manufacturer-supplier

relationship is established, each may focus on their core competencies and maximise

their market share.

Trends show that the use of advanced information and communication mechanisms

for marketing purposes has lead to a rise in consumer expectations from products,

and their demands for increased product choice, increased customisation, and shorter

product life cycles [de Meyer, 2008; Power et al, 2004; Hans, 2008; Choy et al.,

2004]. According to Browne et al [1995], a clear trend, of re-integrating the sales

function with the production function to allow customers customise their product,

can be observed. This has lead to a customer order-driven system. As a result

product and market innovation along the lines of mass customisation together with

short time to market are imperative for companies to remain competitive. These

factors, along with market pressures such as inventory turnover, quality, customer

service, time-based competition and flexibility all point towards a need for greater

co-operation across the total value chain [Browne, 1995]. This increased

customisation demand leading to pressure for greater coordination of economic

activities is confirmed by Hans [2008]. In terms of partner selection, an OEM needs

to source long-term partners and develop a win-win relationship with them.

Together they need to adapt to changing market demands and to work closely. Also,

the manufacture of products in the market, where they are to be sold, reduces the

time to market.

An additional driving force relating to market conditions is localisation. Localisation

refers to the need to redesign a product according to location specific requirements.


34

That is when a product is designed with a particular user market in mind, but certain

aspects of the product and its functionality may not be suitable for a second user

market and, therefore, would not sell successfully in other markets. For example,

road conditions are very poor in China in comparison to those in Europe. Therefore,

the suspension on cars must be adjusted, to suit the Chinese road conditions, for their

use there. The extent of localisation to be applied to a product depends on issues

which include the product itself, the country’s culture, and/or national standards,

such as health and safety and electrical standards, for products [Rovi, 2008]. The

localisation of a product is beneficial if the OEM has a manufacturing facility in the

country to avail of local expertise on the local needs. In summary, market conditions

in developing countries are favourable for partnerships.

2.3.4 Government Policy

Changing government policies in developing countries such as China can be

considered as relevant driving forces for OEMs from developed counties to form

partnerships in developing countries. For example, political, social, economic, and

industrial reform along with entry into the WTO have all helped contribute to a

relaxation of restrictions on European companies forming partnerships with Chinese

companies [Lau & Zhang, 2006]. Partnership arrangements are now welcomed by

the government, and support offered via regulations and industrial policies.

Developing countries have been seen to have weak economies in comparison to

economies in the west. This is in part due to the antiquated capital, technology and

management techniques in operation in manufacturing companies and an

underdeveloped infrastructure. Therefore, as part of economic reform, foreign

investment is welcomed. In particular, the government wish to improve capital and

training (both for technology, and management and operational techniques) in

Chinese industry. For example, in order to realise these policies the Chinese

government will approach prominent European companies to invite them to form a

partnership with a chosen Chinese company. This affords European companies the

opportunity to enter the market. Further government policies that are relevant to

OEMs include: the Chinese government must approve a potential partnership

between two organisations prior to negotiating the terms of the partnerships, strict

regulations are in place regarding the share holdings and their transfer permissible by


35

a European company, the duration of a partnership, how foreign exchange accounts

are dealt with and employment of local labour to protect the Chinese economy and

keep it within the control of the Chinese government (Chen, 2004). In order to sell

products in China an EU company is advised to form a partnership with a Chinese

company. Although total control of an organisation through a wholly foreign owned

enterprise is possible permission is rarely granted by the government and it’s a

difficult and expensive option [Chen, 2004]. Government policy also prohibits the

sale of products outside the province within which they were produced. Therefore,

OEM’s are driven to form partnerships with companies in regions that are considered

lucrative for their given product. Therefore, close links with government officials

are important. The opening up of developing markets and more relaxed partnership

regulations have encouraged a lot of companies from developed regions to form

partnerships.

2.3.5 Technological Developments

There is no doubt that the advancements brought about by technology have made

partnerships over distributed locations possible leading to globalisation [Li-Hua &

Khalil, 2006; Choy et al., 2004]. Communication methods are highly sophisticated

with various solutions available facilitating cross geographical, and cross time zone

interaction and making document sharing possible. The provision of such support is

critical to enable globalisation and localisation to occur. With the advent of the

World Wide Web and the Internet available throughout the world, access to

information has never been easier. As a result more information is available to the

consumer and therefore, the information to make informed decisions and choices. In

other words the Internet behaves as a global information source available to all. The

Internet offers OEMs the possibility to form and run partnerships. Internet

developments have enlarged the OEMs choice set for suppliers. Inter enterprise

integration is easier with real time sharing of information possible. Exchange

standards also allow companies, regardless of technology used, to share information

in standard formats. The use of technology also reduces the need for human

intervention. Therefore, employees can spend their time on higher value added tasks.

Shorter lead times and customer demands have lead to technological developments,

which in turn have forced change in the manner in which partner selection is


36

conducted. There is a need to effectively share information and knowledge across

system borders, while at the same time protecting vital internal know-how. Trade

barriers are being eliminated, and the standardisation of communications systems,

management and manufacturing practices is becoming more prevalent in all

countries, including those in early developmental stages such as China.

2.4 Partnership Types

As described in the previous sections a variety of drivers or motivational factors can

lead an OEM from a developed region to form a partnership with an organisation

from a developing region. Given the difference in skills and capabilities between

such partners, and the level of control permitted by current local legislation, the

format of such partnerships will also vary. The degree of integration between the

partners, and the degree of heteronomy1 of the partnership for example are the two

determining factors that influence the form of the partnership undertaken by

European and Chinese organisations. Integration relates to the level of shared

information, resources and decision making actions between two parties, while

heteronomy is the amount of freedom an organisation has to make independent

decisions without external involvement. An increase of heteronomy leads to an

increase of external influence in areas of control and decision making in an

organisation. In recent years the Chinese government have removed barriers to allow

foreign enterprises establish a presence in Chinese industry for a limited number of

partnership forms. Partnership forms suitable between organisations from developed

and developing countries range from a simple exchange of goods for finance by two

independent organisations with little integration, to one organisation taking full

control over another organisation and the full integration of both organisations. With

this in mind partnerships can be classed into 3 main types. These are Peer to Peer,

Networks and Ownership. Determining the right type of partnership is critical to

ensure the relationship is as productive as possible for both parties. According to

Todeva & Knoke [2005] choosing the right form of partnership can be the difference

1 Heteronomy is when a company is unable to act freely and is controlled in some

way


37

between success and failure. Those applicable to current and future global

partnerships are summarised by the author as illustrated in figure 2.2.

The simplest partnership can take the form of a sub contract or a management

contract. Such partnerships involve an exchange of money for goods in the case of a

sub contract, and the exchange of money for managerial expertise in the case of a

management contract. Joint venture (JV) agreements represent the formation of a

new jointly owned organisation by two organisations that are legally separate, but

wish to collaborate by sharing their supplementary competences. These three

partnership types involve a relationship between two organisations with limited

integration and low levels of heteronomy. They are grouped under the heading “peer

to peer”.

Sub contract

Management

contract

JV

Supply Chain

EE

M&A

WFOE

Degree of Heteronomy

Deg

ree

of

Inte

gra

tio

n

Peer to Peer

Network

Ownership

VE

Legend

JV = Joint Venture

EE = Extended Enterprise

VE = Virtual Enterprise

M&A = Merger & Acquisition

WFOE = Wholly Foreign Owned Enterprise

Figure 2-2: Degree of Heteronomy versus Integration of Partnership Types

Supply Chain, the Extended Enterprise and the Virtual Enterprise partnership types

emerge where increased integration and heteronomy develops. Such relationships

are not confined to two parties, but instead include all members of the value chain.

Such partnership types may be grouped under the heading of “networks”. The final


38

group of partnership types is called “ownership” and includes merger & acquisitions,

and wholly foreign owned enterprises. Both ownership type partnerships represent

the full integration and heteronomy rights of one organisation over another.

2.4.1 Variant Descriptors for Partnership Types

Understanding the traits or characteristics of these partnership types will assist an

organisation in selecting a suitable partnership type to pursue. Based on a review of

relevant literature a number of partnership traits can be identified with a view to

comparing the different partnership types. They include time, supply chain focus,

partner role, location, and initiation strategy. Table 2-1 provides a summary of these

traits taken from literature each of which is discussed as follows:

Initiation strategy is the first partnership type trait identified. It is broken into

two variants namely; proactive and reactive. Where the benefit of a partnership

is foreseen and the formation of one planned, the initiation strategy can be said to

be proactive as is the case for the research undertaken here. Alternatively, where

market or other pressures force an organisation to form a partnership it can be

described as a reactive initiation strategy. This is discussed by Samli [2004] who

put forward a categorisation stemming from the high level strategy adopted by an

OEM. This is divided into the formation of a partnership as a result of a

conscious strategic decision for improvement versus a reactive decision due to

internal or external conditions.

Secondly, Riemer et al [2001] propose industry shift as a description trait. This

relates to whether or not a partnership is formed with an organisation in the same

area, or in a different but relevant area. Taking a supply chain perspective along

the value chain of a product’s life cycle the variants for this trait include vertical

and horizontal arrangements. Vertical partnerships involve organisations along

the value chain with different, but complementary core competencies co-

operating together. On the other hand horizontal partnerships usually consist of

competitors with supplementary resources from one stage of the value chain

cooperating against a common challenge. A resource perspective is taken by

Jolly [2006] for the same trait which categorises partnerships according to the

learning transfer that takes place between partners either as endogamic or

exogamic. Endogamic is where two partners have similar resources, and,


39

therefore, the capability for learning and resulting benefits of the partnership are

limited. At the other extreme exogamic partnerships are where two partners with

very different resources come together. This allows the partners to learn from

each other and renders the partnership highly beneficial. The focus of this

research is on vertical partnership.

Riemer et al [2001] suggest location as a partnership trait as can be seen in the

list on Table 2-1. This criterion is divided into global versus local partnerships.

Partners located in various parts of the world qualify as global partners, while

local partnerships are those close to the OEM in geographical terms. Global

partnerships are the subject of this work with the objective of supporting the

formation of partnerships between OEMs from developed countries and

organisations in developing countries (e.g. European and Chinese based

organisations).

A further description characteristic for partnerships is time, or the duration of the

collaboration. Variants in this category include short term partnerships such as a

VE, long term partnerships and partnerships that once established are expected to

be ongoing. Onetime partnerships only exist for short periods of time, for

example to coincide with a single specific project. Strategic partnerships are

more long term with close relationships existing between the partners over a

number of projects. Lemke et al. [2003] proposes a third instantiation, which is

termed long term no end. This is where the partnership once initiated is expected

to continue as long as the two partners businesses are in operation. The author’s

research falls into the category of long term strategic partnerships along the value

chain in the form of an EE.

40

Table 2-1: Variant Descriptors for Partnership Types

VARIANT

DESCRIPTORVARIANTS EXPLANATION REFERENCES

Initiation strategy Proactive Level of planning behind partnership formation Samli 2004

Reactive ranging from planned to unplanned

Industry shift Vertical Level of expertise similarity of the partners Riemer et al [2001]

Horizontal ranging from different to the same areas Jolly [2006]

Location Local Geographical proximity of partners to each other Riemer et al [2001]

Global ranging from national to international locations

Time Short term Duration of partnership which ranges from a Riemer et al [2001]

Long term short period of time to an ongoing arrangement Lemke et al [2003]

No end

Agreement Flexible contract-trust Basis on which partnership formed ranging from Riemer et al [2001]

Rigid Contract trusting partnership with loose contracts to Lemke et al [2003]

Rigid Contract - share ownership complete take overs where partner has no say

100% share ownership

Relationship Vertical integration Level of co-operation between partners ranging Todeva & Knoke [2005]

Collaboration from complete integration and trust to suspicion

Adversarial and supply of only necessary information

Takeover

Collabation focus Market transaction Area of collaboration agreed ranging from simple Jagdev et al [2001]

Function exchange of goods for money to co-development Todeva & Knoke [2005]

Product development work on products Lemke et al [2003]

Autonomy Legally separate Level of role equality between partners ranging Riemer et al [2001]

New jointly owned organisation from complete independence and both being

Legally separate but link across value chain partners equal to one being dominant

Legally separate but behave as single organisation

Majority share buy out or complete take over

100% ownership by foreign company

Responsiveness Dynamic Ability to change partnership arrangement Riemer et al [2001]

Stable quickly ranging from ability to inability


41

Agreement is another trait used to characterise partnerships. This can range from

a flexible contract based on a trusting relationship between the partners, a rigid

contract, a rigid contract with the OEM holding a share ownership of the

partner’s organisation to an agreement where the OEM has 100% ownership of

the partner’s organisation. Trust based agreements are developed through

personal relationships. Given the importance for example, placed by Chinese

culture on trust and personal relationships as part of business a trusting

agreement must be formed between EE partnerships in the context of this thesis.

The issue of trust is raised by Lemke et al. [2003] in his classification which

reaches from adversarial partnerships through to partnerships based on trust.

Where an agreement is based on trust a contract may be used to describe the

general terms of the partnership but the majority of decisions will be agreed

verbally and will not require the contract to be rewritten and resigned, a process

which is very time consuming. The three remaining variants base agreements

require a legally binding document to be drawn up and rigorously followed in

relation to some or all issues needed to operate and dissolve a partnership. In the

case of 100% ownership the partner has no authority over what decisions are

made. For the purpose of this thesis flexible contracts based on trust will be

pursued.

Todeva & Knoke [2005] identify the relationship variant as a trait to be

considered when describing types of partnerships. The variants may be divided

into those that become vertically integrated, those that collaborate, those that

maintain an adversarial relationship and, lastly, those where a takeover occurs.

This trait gives an insight into the levels of co-operation and control exercised,

and the extent of information sharing that exists between two partners. Vertical

integration is where a very close trusting relationship exists between the two

partners. Therefore, high levels of strategic control are applied to the less

dominant partner with both partners’ information systems integrated to maximise

their potential as a group rather than individually. Collaborative relationships

also represent close relationships where trust and mutual dependency occurs.

Moderate control is exercised by the OEM and information is shared under

controlled conditions. An adversarial relationship is where trust is often replaced

by suspicion of the other partner and their motives. Only information that is

absolutely necessary is exchanged with low level control sufficient via an arm’s


42

length arrangement. Collaborative type arrangements as part of the EE are the

focus of this thesis.

Collaboration focus is proposed by Todeva & Knoke [2005] and refers to the

form of collaborative work to be undertaken during a partnership and expected

outcomes. It ranges from market transactions to function development or product

development work. Jagdev and Thoben [2001] refers to market transactions as

being the straight forward exchange of goods for set prices. Functional work

focuses on building skills through joint manufacturing of components or parts,

rather than entire products. Full integration towards product development is

possible with increased formalisation, commitment and sufficient time having

elapsed in the relationship. This classification is echoed by both Lemke et al.

[2003]. Integration of resources is required for both function and product

development. The focus of this thesis is on functional development with a view

to it developing into product development over time.

The autonomy trait is identified by Riemer et al [2001], where autonomy relates

to the independence a company has to make its own decisions without external

influence. The variants range from legally separate, new jointly owned

organisation, legally separate but with a link across value chain partners, legally

separate but behaving as a single organisation, majority share buyout or a

complete takeover, to 100% ownership by a foreign company. A partnership

where both parties are legally separate is the simplest arrangement and is

generally used for market transactions where there is no benefit for a partner

being involved in the other’s decision making process. Where organisations wish

to maintain their autonomy for all activities other than the partnership, a new

organisation can be formed especially for the partnership. In some cases one

partner will be dominant and in others all partners will have an equal say when

decisions are being made. The term polycentric is used where both partners are

equal when making decisions. The EE utilises an arrangement where both parties

are legally separate but link together to form a single value chain. It is expected

the OEM will dominate decision making and control the relationship and that is

termed having a focal role. As the level of integration between partners increases

and they have equal share ownership the role can become equal. In this case it is

important that one of the partners is made responsible for the co-ordination of the

partnership. After that a dominant role can again be observed. Jagdev and


43

Thoben [2001] terms this a hierarchical versus non-hierarchical relationship.

Taking the example of a European lead EEs forming partnerships with Chinese

companies the party from the developed country is expected to fulfil a focal role,

with both parties retaining their legal independence but behaving as a single

organisation.

The final trait suggested to characterise partnerships addresses the responsiveness

of the value creating group. This responsiveness is divided into being either

dynamic or stable. Dynamic partnerships are unstable since they relate to

partners coming together to share skills for the creation of value for a specific

project or even only for a specific activity in a project for a short period of time.

At the other end stable partnerships use the same partners repeatedly for different

projects and therefore do not have to deal with continuous change in terms of

projects undertaken or the partners they are working with. A comparison can be

made between dynamic partnerships and the VE, and stable partnerships and the

EE. As stated previously the focus of this thesis is on the EE, and therefore,

stable partnerships.

It is important that organisations consider the variants relevant to their individual

situation to support their selection of an appropriate partnership type when engaged

in the partnership establishment process. The following section will link the

appropriate traits variants to the partnership types discussed earlier.

2.4.2 Partnership Type Traits

The three partnership groups and their related traits are detailed below and

summarised in table 2-2. A common feature of all the partnership forms presented

is the mutual dependency between the partners. The extent and form of that

dependency differs between them.

44

Table 2-2: Partnership Type Traits

Suppler

contract

Management

contractJoint Venture Supply Chain

Extended

EnterpriseVirtual Enterprise

Merger &

Acquisition

Wholly Owned

Foreign Enterprise

Initiation Reactive Reactive Proactive Proactive Proactive Reactive Proactive Proactive

Strategy

Industry shift Horizontal Horizontal Vertical Vertical Vertical Vertical Horizontal Horizontal

Location Global Global Global Global Global Global Global Global

Time Short term Short term Long term Long term Long term Short term No end No end

Agreement Rigid contract Rigid contract Flexible contract - Flexible contract - Flexible contract - Flexible contract - Rigid contract - 100% share

trust trust trust trust share ownership ownership

Relationship Arms length Arms length Collaborative Collaborative Vertical Collaborative Takeover Takeover

integration

Collabation Market Market Function/ Product Product Product Function Product Product

focus Transaction Transaction Development Development Development Development Development

Autonomy Legally Legally New jointly owned Legally separate Legally separate but Legally separate Majority share 100% share

separate separate organisation but link across behave as a single but behave as a buy out ownership

value chain organisation single organisation

partners

Responsiveness Dynamic Dynamic Stable Stable Stable Dynamic Stable Stable

References Todeva 2005 Mieghem 1999 Todeva et al 2005 Riemer et al 2001 Jagdev et al 2001 Jagdev et al 2001 Jolly 2006 Jagersma et al 2003

Jagdev 2001 Harwit 2004 Jagdev et al 2001 Todeva et al 2005 Todeva et al 2006 Jolly 2006

Chen et al 2007 Li-Hua et al 2006 Chen et al 2007 Bitzenis 2005 Bitzenis 2005

Choy et al 2004 Choy et al 2004 Chen et al 2008 Hans 2008

Choy et al 2003 Choy et al 2003 Chin et al 2008 Chen et al 2008

Peer to Peer Network OwnershipV

ari

an

t D

escr

ipto

rs


45

Peer to Peer

The three partnership forms that come under the category of peer to peer involve

simple contract based relationships between two parties only. No integration takes

place between the OEM and supplier sharing a supplier or management contract.

Generally they are short term agreements, which can be formed and dissolved very

quickly. Detailed information relating to the product specification for a standard

product, and the terms of supply are written into the contract during negotiations, and

are not discussed again unless there is a problem [van Mieghem, 1999]. Supplier

contracts are confined to market transactions of the OEMs non core competencies.

The OEM expects to receive goods that meet the standard specified, in the required

quantity and on the required date. On the other hand the supplier expects to receive

the payment of a set price at a pre-arranged time after delivery. Both partners retain

their individual autonomy and are legally separate. According to van Mieghem

[1999] this type of partnership is controlled by the OEM, and usually relates to

products that could be produced in the OEM’s own facilities but for strategic reasons

they have decided not to. They are often formed in response to an unforeseen event.

Management contracts are similar to supplier contracts since no integration or change

in autonomy takes place. Also, there is no flexibility in relation to the terms of the

contract. Instead of goods being purchased by the OEM, an organisation from the

developing country, such as China, will purchase supplementary services to transfer

organisational and management skills from the developed OEM to the Chinese

organisation. Both supplier and management contracts are used by European OEMs

as a stepping stone to gain access to the Chinese market. Supplier and management

contracts represent the loosest form of collaboration in terms of commitment and

integration between the partners. This type of partnership is used for EU-Chinese

partnerships where barriers exist for other partnership forms.

The second type of partnership in this category is Joint Ventures (JV). JV

agreements represent the formation of a new jointly owned organisation by two

organisations that are legally separate, but wish to use their supplementary

competences to create a trusting collaborative relationship to carry out functional and

product development work. In order to operate a jointly owned organisation

increased integration is necessary. Investments by each partner, mutual

interdependence, shared decision making and shared benefits and risks characterise


46

such partnerships [Todeva & Knoke, 2005; Harwit, 2004; Li-Hua & Khalil, 2006].

Although a contract defines the terms of the relationship it is flexible with most

changes and alterations verbally agreed due to the trust that exists between both

partners. International Joint Ventures (IJV) are described as including one partner

based outside the country where the venture operates. IJVs are the preferred

partnership method of both the Chinese government and Chinese business for

European companies to enter the market. The Chinese government tightly controls

the entry of foreign companies, with permission to create partnerships restricted to

certain industries, which the government wish to develop, or where an export

potential exists [Jagersma & van Gorp, 2003; Todeva & Knoke, 2005]. Therefore,

the initiation strategy is proactive rather than reactive. Typically they last 30-50

years with permission granted for an unlimited duration on rare occasions where

advanced technology is introduced to China by the European partner, technology

which the Chinese government deems of value to China. This makes them a very

stable form of partnership. Investment by a European OEM in a Chinese partnership,

also termed foreign direct investment, affords them certain control rights [Bitzenis,

2005]. If the share percentage invested by an OEM in a Chinese company is

between 0-25% the company is categorised as Chinese [Harwit, 2004]. A

partnership is categorised as a JV if the share percentage invested by the OEM is

between 25-50%. Investments greater than 50% give the OEM control over the

partnership with it being categorised as a foreign owned company [Harwit, 2004].

Traditionally, the Chinese government only allows maximum share investments by

OEM in Chinese companies to be 49% so that control of the companies remains in

Chinese hands. But this is rapidly changing as the number of JVs in China grows

and their regulations become more relaxed.

Network

Increased integration is evident in the second category of partnership forms termed

networks. The first type is supply chains. This is where an OEM initiates a number

of long term supplier agreements along a product value chain termed a supply chain

[Chen & Huang, 2007; Choy et al, 2004; Choy & Lee, 2003; Riemer et al, 2000;

Jagdev and Thoben, 2001]. Typically these suppliers will be globally distributed and

the OEM will proactively work towards improving their supply chain by forming

close links with their suppliers. It should be noted however, that the OEM and each


47

of the suppliers will remain legally separate. Each of the partners has their own

competency to bring to the product development process which when combined

provides the group with a competitive advantage not possible individually. The

difference between a supplier contract and a supply chain is that information and

supplementary resources are shared between all the partners along the value chain in

order to collaborate to reduce time-to-market of the product resulting in reduced

costs and better meeting customer needs. Therefore, detailed process and product

information integration is needed to co-ordinate all members of the supply chain.

Trust is also an important factor to ensure the supply chain is optimised. A contract

is drawn up between the OEM and each supplier but is flexible. This type of

relationship is stable with the same set of suppliers working with an OEM over a

long period of time without change.

The development of closer relationships and increased integration between the

partners along the value chain is termed an Extended Enterprise (EE). An EE is

described by Jagdev and Thoben [2001] as the “seamless exchange of relevant

operational information on top of existing long term (and successful) relationships

that distinguishes the extended enterprise from other forms of long term

collaboration such as supply chains”. The degree of integration across information,

decision systems, and production processes is such that, although made up of a

number of legally separate companies, an EE behaves as a single enterprise operating

within four walls co-ordinated by the OEM. The exchange of information, know-

how and resources is facilitated and enabled through advanced ICT. Partners along

an EE merge their supplementary resources through collaboration to achieve a

common goal in product development. This requires close trusting relationships to

be developed and maintained through careful planning. Where mutual dependency

exists between the partners at the start of the relationship trust can be developed. As

the partnership evolves the partners may not be as dependent on each other but will

have greater trust. As with supply chains, a contract is signed to formally agree the

partnership, but it is flexible enough to deal with the evolution of the partnership.

Verbal agreements are more common during its lifetime as boundaries become more

blurred. This requires the existence of a trusting stable relationship between the

partners. This type of partnership is only beginning to emerge in developing


48

countries such as China with it available only in certain industries, where it is viewed

as benefiting the industry by the China government.

The third partnership type in this category is the Virtual Enterprise (VE). The VE as

the name suggests involves dynamic partnerships being established for short periods

of time for single projects. The aim of a VE is to meet a specific market

need/opportunity that must be responded to in a very short time or it will no longer

be relevant. Therefore, the establishment of a VE must be done very quickly in

reaction to a need, and dissolved as soon as the need is met or no longer exists.

Generally the partners are experts in different areas and are globally distributed.

Since the partnerships only exist for short periods of time the partners remain legally

separate, but for the duration of the project behave as a single organisation sharing

the risks and benefits. Due to the brief duration of the projects the partners rarely

meet and must be capable of forming, operating and dissolving the partnership

rapidly. Therefore, without advanced information and communications technology

to form and operate these partnerships they would not be possible [Hans, 2008].

Secondly, without trust between the partners this type of partnership would not be

possible since there is insufficient time to negotiate and re-negotiate the terms of the

partnership. It is not uncommon for organisations to be involved in a number of VEs

together due to the compatibility of their areas of expertise. This type of partnership

is not relevant in the developed country – developing country context due to the need

for developing countries to greatly develop ICT capabilities and areas of expertise.

Little evidence of network formations such as supply chains, extended enterprises or

virtual enterprises can be found in developing countries such as China. As

regulatory and social barriers are dropped and developing countries becomes more

open to foreign OEMs network formations will become a possibility to maximise the

opportunities available. In particular, the EE model will suit the establishment of

long term mutually beneficial partnerships. It is the formation of partnerships in the

context of the EE network model that this work examines.

Ownership

The final categorisation represents extensive levels of integration and heteronomy.

Although the terms Merger and Acquisition (M&A) are often used together they


49

have very different meanings. A merger is defined as when two equal companies

decide to work together by terminating their individual companies and forming a

single new company. For example Daimler Benz and Chrysler merged to form

Daimler Chrysler. Examples of mergers are rare. An acquisition is where a stronger

company buys out a weaker company and establishes ownership. Acquisitions are

sometimes viewed as negatively reflecting on a company, so the term merger is used

instead. Benefits of mergers and acquisitions include lower labour costs, economies

of scale, and access to technology and markets [Jolly, 2006]. The formation of a

M&A tends to be pre-planned and, therefore, a proactive strategy on the part of an

organisation. It usually relates to one organisation taking over another in the same

field because of management or financial difficulties on the part of the organisation

acquired. A second scenario may be a global supplier an OEM has worked with for

many years and over time invests in it until it leads to it acquiring the supplier

company. The M&A will contribute towards product development. In terms of the

length of such an arrangement it comes under the heading of the long term no end

variant. A rigid contract will be signed by both parties with one holding a majority

share ownership over the other. The organisation that is acquired loses autonomy.

Such a partnership brings stability to an organisation.

A Wholly Foreign Owned Enterprise (WFOE) is solely (100% share ownership)

owned by a company located outside the country where the enterprise operates

[Jolly, 2006]. This partnership form is used by European OEMs to gain ownership

of companies operating in the same area as them in developing countries such as

China [Jagersma & van Gorp, 2003]. The benefits of such arrangements include the

WFOE having full autonomy over the management of the company, and being able

to protect the intellectual property rights (IPR) on its products. However, without a

local partner, the OEM can expect the formation and operation of a WFOE to be

difficult and expensive and will have difficulty generating contacts with local

officials, something which is critical to success in China. The Chinese government,

through the Ministry of Foreign Trade and Economic Cooperation, only permits

WFOE in certain industry sectors which will bring about benefits such as advances in

technology, increased exports, introduce new product or quality improvement

[Todeva & Knoke, 2005]. According to Chen [2004] very few WFOEs are permitted

by the Chinese government. The independence gained is outweighed by the lack of


50

direct links to the domestic economy. A successful WFOE is made possible where

the European organisation has many years of experience in China, and has close

links with local government.

M&As, and WFOEs are starting to emerge for example in China. This will give the

OEM more choice in terms of the type of partnership they wish to initiate. They do

represent extremes of integration and heteronomy and this may not suit the

requirements of European OEMs. Having full ownership brings full responsibility

and the associated risks with it. It is only a small minority that will opt for these

partnership forms. The remainder will focus on the other partnership forms. In the

context of this research ownership partnership forms will not be addressed by the

author, since it is the view of the author that integration with a local partner is critical

to the success of a partnership in a developing country. Therefore, networks and in

particular what support is needed to successfully establish an EE partnership will be

investigated. There is general agreement among researchers that a true partnership

occurs at the network stage. According to Robson & Katsikeas [2005] very few

partnerships behave as a true partnership with shared decision making and resources.

Robson & Katsikeas [2005] also conclude that true partnerships provide the best

opportunity to achieve a competitive advantage. In general, a partnership portfolio

will contain a mix of many partnership types. Traditional emphasis has focused on

peer to peer type partnerships with little investment in creating partnerships with the

right organisations. More recently, publications have pointed to the need to improve

the partnership establishment process [Trim & Lee, 2008]. Companies are now

realising that a key element of partnership success involves forming a partnership

with external companies through a structured approach. The following section will

examine what enablers make up a successful EE partnership, which can be translated

into the key requirements sought when forming such a partnership.

2.5 Key Enablers for an Global Partnership

In recent years, the number of European OEMs expanding their supply chains to

include partners based in diverse locations, such as China, has been steadily

increasing. Researchers including Fang [2006], Gao [2004], and Harwit [2004] have

presented and discussed the Foreign Direct Investment (FDI) statistics in relation to


51

China. FDI in the order of 300 billion dollars is identified by Fang [2006] as being

invested in China during the 1990s with 53.5 billion dollars invested in 2003. This

translates into over 50,000 foreign enterprises operating in China leading to China

being described as the ‘workshop of the world’. Gao [2004] focuses on the

automotive industry identifying the majority of FDI coming from the US, Japan, the

UK, Taiwan, Singapore and South Korea. A further finding by Gao [2004] sees the

majority of this money and therefore partnership concentrated around the east coast

of China. According to Owen et al. [2008] partnerships such as the EE can provide

organisations with access to expertise in order to supply either global or local

markets with a view to obtaining international success. However, it is difficult to co-

ordinate partners over long distances and maintain communication and understanding

with the support of timely and accurate information. Typical problems associated

with distributed partners include poor leadership, poor co-ordination of collaborative

activities, difficulty communicating information and changes, absence of shared

strategic goals, mistrust, and misunderstandings. These problems are compounded

by the language and cultural differences of emerging partnering organisations. These

difficulties are reflected in the high failure rate associated with partnerships as

discussed earlier in the chapter. Despite large amounts of time and money being

invested in establishing and operating partnerships the low rate of return is

unacceptable. Reasons for this can be traced back to both poor partnership

establishment and partnership operation practices [Chen et al., 2008]. Issues relating

to partnership establishment of EEs will be dealt with in Chapter 3. In terms of

operating a partnership, regardless of how much care there is, there is always an

element of risk in bringing an external partner into an organisation’s value chain.

Organisations are usually willing to accept it in order to achieve the promised

competitive advantage. It only becomes a problem when the organisation is either

unaware of the risk or it is greater than anticipated, and the partnership fails. Wall

[2004] takes a positive view on failed partnerships stating that valuable lessons can

be learnt. He contends that whether a success or a failure the lessons learnt are

equally important as partner selection enablers. From that perspective risk taking is

an enabler. However, this only works if the lessons learnt are applied when engaging

in partnerships at a later date and the OEM can sustain the loss associated with the

failed partnership. Cox et al. [2003] is of the opinion that a good partnership needs

to overcome all risks. Other researchers such as Chen et al. [2008] and Choy et al.


52

[2004] recommend that finding the right partner and working hard to make it a

success is how it should be approached. Ohmae [2007] discusses the need for energy

from both partners to create a strong and productive relationship. Although the

author is not disputing the advice of the researchers above, it does not provide very

tangible advice to OEM organisations. To realise the benefits of a partnership as

documented in literature an OEM must carefully manage the partnership during its

lifetime from establishment through to its dissolution. This section identifies key

enablers that OEMs should consider in order to maximise the successful operation of

an EE partnerships. Although the author is focusing on the application of these

enablers to an EE partnership they are relevant to all other partnership types

identified in section 2.4. Each enabler serves to guide an organisation to focus on

certain aspects of a partnership, and to eliminate other non relevant factors. The

enablers are compiled based on a synthesis of literature. They include:

1. Partnership strategy and leadership

2. Structure and performance measurement

3. Teams

4. Cultural harmonisation and trust

5. Inter partner communication

2.5.1 Partnership Strategy and Leadership

Success of an EE partnership demands that a partnership strategy is applied during

the partnership lifecycle, and that effective management and co-ordination of the

partnership is exercised. The strategy should include the set of goals the partners are

aiming to achieve as a result of the partnership. Guidelines to support the partners

allocate their resources effectively and jointly develop their organisations in order to

achieve the agreed goals should also be part of the partnership strategy. This will

provide the partners with focus and enable them to benefit from the arrangement in

as short a time as possible. It is important that both partners have a shared vision in

relation to the partnership, otherwise it can be expected to fail. This vision is

described by Dunlop [2006]; Maheshwari et al. [2006] and Trim & Lee [2008] as an

overall goal of long term value creation and shared common goals. However,

although the partners should share the EE vision, this does not necessitate that they

share the same goals. Goals are based on current circumstances, so, given that both


53

partners will come from different situations, their goals may be different. It would

be expected that some goals will be shared by the partners and some goals will be

individual to each partner. What is important is that the amalgamation of goals will

help realise the overall vision of the partnership. It would also be expected that the

partnership strategy of both partners would be compatible with their individual

organisational strategies.

The success of a partnership is based on mutual benefits to all partners, a fact which

leads to an interdependency between the partners given the complementary yet

different skills each brings to the relationship [Morris et al, 2004]. Yet during the

course of the partnership, it is expected that both parties will learn from each other,

thereby diminishing their interdependency [Todeva & Knoke, 2005]. Learning can

take place due to exploitation of the other partner’s know-how or through common

experience as a partnership. The first type of learning points more towards

competition whilst the latter implies greater mutuality and interdependence.

Organisations also need to continuously improve and develop and this may result in

them wanting to change their position within an EE network. For example, in the

case of China, developments and advances are being made at a rapid pace [Fang,

2006]. Therefore, the nature of a partnership will evolve over time. Openness to the

nature of partnership and its evolution over time is required [Jagdev and Thoben,

2001; Ferdows, 2004; Petison & Johri, 2008]. This need for flexibility must be

incorporated into the strategy and leadership practices. Where knowledge exchange

and organisational learning is constrained due to incompatible organisational

structures and corporate cultures it leads to failed collaboration among unequals

[Todeva & Knoke, 2005].

Leadership is another important enabler linked to the partnership strategy. An EE is

made up of many organisations many of whom are in different geographical and time

zones. This makes co-ordinating activities and decision making very complex.

Todeva & Knoke [2005] highlights the complexity of dealing with conflict where the

partners are legally autonomous entities. According to Li-Hua & Khalil [2006]

therefore, success requires a new style of management. There must be seamless

integration between managers along the EE. Clear lines of authority must be

identified in the OEM and partner organisations to minimise confusion and save


54

time. A consensus and shared approach to decision making should be adapted along

the EE. Commitment from individual managers is needed, which in turn must be

visible across the EE and within each partner’s organisation. The stable nature of an

EE is an advantage. Through clear and open communication lines supported by

advanced ICT good leadership within the EE can be facilitated.

2.5.2 Structure and Performance Measurement

Structure and performance measurement represent the second enabler for an EE

partnership. The structure needed to operate an EE effectively and efficiently should

clearly identify the relationship between all personnel along the EE. An

organisational chart may be used to present this information. Partnership

responsibilities must also be clearly defined along the EE. The division of work

should be according to the expertise of each partner [Piddock, 2006]. This saves

time by eliminating replication of oversight of tasks and reduces the chances of

misunderstandings occurring. It is important the organisational structure is easily

understand by all partners regardless of location or role in the EE. Todeva & Knoke

[2005] identify the need for a practical governance structure that allows partners to

cooperate. Prior to adopting the structure it must be viewed and agreed by

representatives, usually managers, of all parties affected. The partnership structure

should not be in conflict with the partner’s overall structure. Communication and

control issues should also be considered as part of the partnership structure to

promote communication and knowledge transfer among the EE partners. For

example it is important that feedback and control structures are in place to promote

learning and understanding among team members along the EE. As discussed in the

previous section evolution is part of the EE. Therefore, like the partnership strategy,

the structure must be flexible enough to allow changes to be easily made to reflect

changes to the partnership. The provision of structure to the EE ensures each

individual within the OEM and their value chain partners collaborate in such a way

that it benefits the EE.

The measurement of the performance of an EE partnership is a vital part of its

successful operation. In order to sustain a successful partnership, realistic

performance metrics need to be applied and checked at regular intervals. Such


55

metrics offer a benchmark against which the operation of the partnership may be

assessed and improved where necessary. The performance metrics must be aligned

with the partnership strategy, and its associated targets. Improvements should be

introduced to the structure, operation and management of the partnership in response

to the performance measurement findings. Dyer [2000] suggests that the

performance expectations from a partnership should be considerably more than is

written in a contract. In that way if the measure results are below expectations there

is a good chance the targets written into the contract will be achieved. Where the

performance measurement indicates a failing EE the decision should be made to

disband it, or dissolve the partnership with a partner that is failing. Sufficient

resources (personnel, equipment and time) must be made available to conduct the

performance review and support provided from top management down.

2.5.3 Teams

A third requirement for successful partnerships is team based collaborative work.

Collaboration is central to EE partnerships. In order to collaborate, individuals from

various fields of expertise must join together. The area of expertise of an individual

will influence their perspective on collaborative issues, and how they should be dealt

with. This perspective will change with the individual’s area of expertise. Their

perspective and approach will also be influenced by their native culture and

language. Therefore, such differences need to be considered in relation to

collaborative work. Cross function teams are presented as a means with which to

achieve collaborative work across diverse groups along the EE. The success of cross

functional teams is discussed by Dyer [2000] and Trim & Lee [2008]. Increased

flexibility, faster responsiveness and the merging of cross functional information are

just some of the benefits expected. Knowledge from technical, design,

manufacturing, market and finance can all be merged through teams. Opportunities

to work in parallel, gain a more complete understanding of the collaboration project

in progress, and achieve consensus between diverse groups are possible. In other

words, collaborative work is conducted more efficiently when all relevant aspects are

addressed. Given the relevance of cross functional teams to the success of

partnerships, sufficient and appropriate resources to support them are required.

Training or recruitment should be provided to address any deficits in this area. The


56

team needs to be organic, flexible and agile in order to deal with any changes to the

partnership. All team activities should be driven by the partnership strategy.

Following the assessment of expertise in the partner company tasks should be

divided between the team members according to their expertise. The collaborative

work undertaken by the team must be guided by a team leader who assumes overall

responsibility for the effective execution of the collaborative work. Steps must be

taken to provide ICT equipment to all team members with a view to being able to

collaborate virtually. Cross functional teams with appropriate representations that

are well managed are key to operating a successful EE.

2.5.4 Cultural Harmonisation and Trust

An OEM working collaboratively with organisations from diverse cultures as part of

an EE must develop cultural harmonisation and a trusting relationship with them

[Myhr & Spekman, 2005; Kwon & Suh, 2005; Lee et al, 2001]. Failure to do so can

lead to misunderstandings and have significant negative effects on the partnership

outcomes. Culture in its broad sense is what links groups together. Knowledge,

values, experiences, attitudes, behaviour, language, and social etiquette are just some

of the attributes a group may share and that give it a unique culture. In business

terms the way an organisation operates and reacts to people and events is what makes

up its culture. The complexity is greatly increased when dealing with organisations

based in disperse geographical locations such as European organisations working

with Chinese organisations that have cultural differences based on history, climate

and religion among other factors [Wright et al., 2008]. According to Jagersma & van

Gorp [2003] and Trafford & Proctor [2006] success requires understanding of

cultural differences, acceptability through flexibility and learning, and 100%

commitment to the partnership by both partners at all levels. A compromising

agreement must be reached in terms of how the collaborative work will take place

whilst respecting each other’s cultures. To achieve such compromises resources and

support must be made available. Any decision made must be compatible with the

partnership strategy and goals. It is important that senior management are actively

involved and lead the creation of a new culture that brings together elements of all

cultures across the EE. Encouragement and reward can be utilised to facilitate the

process.


57

Cultural harmonisation and creating a trusting relationship are interlinked. Trust is

of significant importance for the development of an EE as advocated by Kwon &

Suh [2005]; Myhr & Spekman [2005] and Todeva & Knoke [2005]. Building an

open trust based relationship is the key to successful partnership development [Trim

& Lee, 2008]. In particular attaining mutual trust at each node of the EE is a critical

factor in operating a successful EE. Many definitions of trust may be found in

literature [Kwon & Suh, 2005; Myhr & Spekman, 2005; Wright et al. 2008]. These

may be summarised as one party’s confidence that the other party in the exchange

relationship will fulfil its promises and commitments and will not exploit its

vulnerabilities. As discussed earlier in the chapter the relationship formed between

an OEM and an EE partner depends only to a limited extent on a formal contract,

with mutual trust far more important in order to reduce the risk the organisation is

exposed to. This is only possible after trust has been built up and the informal

psychological contracts replace formal contractual terms. Where a repeated strategic

alliance is undertaken by experienced partners they are more like to rely on trust

rather than formal safeguards. Without trust significant amounts of time are spent on

negotiation and enforcing inflexible contracts. Investment in an organisation is also

avoided and information given in measured amounts. Such a situation renders new

values difficult to create. According to Mhyr & Spekman [2005] trust improves

knowledge sharing as there is less feeling of the possibility of confidential

information being misappropriated. It also supports investment in dedicated assets.

Todeva & Knoke [2005] does, however, warn that trust relationships are harder to

sustain cross culturally. All the difficulties mentioned above become more difficult

as the number of partners involved increases.

In the case of European OEMs forming EE partnerships with Chinese organisations

trust must be developed between individuals and between organisations. Guanxi or

‘connections’ is important. This relates to the preference, on the part of Chinese

organisations, to do business with people they know. Therefore, the OEM must get

to know an organisation before they can form a partnership with them. In the past

western organisations have been shown to be only interested in a quick profit and

short term business benefits when working with Chinese organisations. Therefore,

many Chinese organisations are suspicious of forming partnerships with

organisations of which they have no experience. Given that an EE represents a long


58

term partnership that is built on close relations between two organisations it is very

suitable for the Chinese way of doing business and will lead to success. Dyer [2000]

suggests that personal ties and interpersonal trust develop between employees in the

two organisations through job rotation or transfers between partner companies. A

further step that may be taken is for one partner to buy minority stocks in the other

partner’s company. This gives a mutual interest in the success of the partnership. By

unconditionally giving above what is expected the company will feel indebted [Dyer,

2000]. This represents the way forward in terms of OEMs based in developed

regions forming EE partnerships with organisations in developing regions. It is

important to develop inter organisational trust where a history of collaboration does

not exist between two organisation. This is different to interpersonal trust. Instead

of being based on personal relationships it is based on consistent processes and

routines used in the organisation. Personnel may come and go, but trust will not be

affected since it is not based on individual relationships. This is termed process

based trust by Dyer [2000]. Together, fairness, stability and predictability of an

organisations routines and processes, consistent policies and personnel represent

ways to build trust along an EE.

2.5.5 Inter Partner Communication

The final enabler for a successful EE network is inter partner communication.

Because of the large number of partners involved and the extent of information that

must be exchanged between partners as part of the product development process

communication is critical. This must be two way between the partners in the EE to

enable inter organisational knowledge sharing at strategic and operational levels

[Todeva & Knoke, 2005]. Therefore, an appropriate structure to facilitate the

communication of collaborative information, progress reports and decision

information between the members of the EE is required. Time zones and dispersed

geographical locations mean advanced information and communications technology

(ICT) is essential to support efficient and effective communication [Trim & Lee,

2008]. Suitable mechanism must be put in place to provide all members of the EE

with centralised access to information when they need it. ICT tools are needed to

capture and distribute information to the relevant parties. Not only is it important

that the information is available in real time it must also be accurate and transferred


59

seamlessly. Therefore, mechanisms are needed to co-ordinate communication and

sequence operations between the EE partners. The integration of partners’ software

systems is also required. Inter partner communication plays a role not just in the

execution of collaborative work but also facilitates the development of trust along the

EE [Choy et al., 2004].

2.6 Partnership Summary

Research in the area of partnership may be broadly divided into the three types of

partnership as discussed in section 2.4, the key enablers discussed in section 2.5

above, and the lifecycle stages of a partnership as described in Chapter 1, section 1.5.

Together these three elements and their interrelations may be represented in a cube

form developed by the author based on the CIMOSA cube as illustrated in figure 2-3.

Establishment

activity

Collaborative

activity

Dissolution

activity

Peer to Peer Network Ownership

Peer to Peer

establishment

activity

Peer to Peer

collaborative

activity

Peer to Peer

dissolution

activity

Inter partner

communication

Cultural

harmonisation

& trust

Teams

Partnership

Strategy &

leadership

Structure &

Performance

Measurement

Team

factor

Structure &

performance

measurement factor

Partnership

strategy &

leadership factor

INSTANTIATION

Network

establishment

activity

Ownership

establishment

activity

Network

collaborative

activity

Network

dissolution

activity

Ownership

collaborative

activity

Ownership

dissolution

activity

Cultural

harmonisation

& trust factor

Inter partner

communication

factor

Team

factor

Structure &

performance

measurement factor

Partnership

strategy &

leadership factor

Cultural

harmonisation

& trust factor

Inter partner

communication

factor

Team

factor

Structure &

performance

measurement factor

Partnership

strategy &

leadership factor

Cultural

harmonisation

& trust factor

Inter partner

communication

factor

KE

Y E

NA

BL

ER

S

Figure 2-3: Summary of Partnership Theory

The cube is divided along the X axis into the three partnership type instantiations i.e.

peer to peer, network, and ownership. Along the Y axis each of the five key enablers

for successful partnerships are represented i.e. partnership strategy and leadership,

structure and performance measurement, teams, cultural understanding and trust, and


60

inter partner communication. The third axis, Z, adds a three dimensional aspect to

the figure to represent the lifecycle stages i.e. establishment activity, collaborative

activity, and dissolution activity. As can be seen from this graphical representation

all three elements are interlinked. Each partnership instantiation will apply all three

lifecycle stages and will require all five success factors. How each is applied will

vary between each of the instantiations. For example a peer to peer, network type

and ownership type partnership will each go through an establishment phase, a

collaborative phase, and a dissolution phase. However, the effort involved in

establishing a peer to peer partnership can be expected to be significantly less than

establishing either a network or an ownership type partnership. Also, less effort is

required to operate and dissolve a supplier contract than an EE during the

collaborative phase. In terms of the enablers, each heading is applicable to each

partnership instantiation during each lifecycle phase. However, the effort and

importance of each will vary according to the instantiation and lifecycle stage. For

example, inter partner communication is critical during the establishment of a

supplier agreement, but minimum communication should be required during the

lifetime of the contract. On the other hand an EE requires significant inter partner

communication both during the establishment and during collaborative activities.

The review of literature further shows that work is needed in the area of

establishment activities for network type partnerships, and, in particular, for EEs.

The success rate of partnerships is found to be very low [Robson & Katsikeas, 2005;

Chen et al, 2008; Li-Hua & Khalil, 2006] with the selection of inappropriate partners

a major contributing factor. Therefore, the next chapter will examine partnership

establishment literature in order to understand current practices and trends in the area

of partnership establishment and to identify critical success factors for the area.

2.7 Conclusion

This chapter provided a review of partnership literature. A definition for partnership

from a number of viewpoints was explored. The background to partnership was then

identified and discussed. Key drivers leading to organisations engaging in

partnerships were reviewed. Available partnership types were then examined and a

typology of the traits of each presented. The remainder of the chapter concentrated

on enablers for the effective operation and management of a global partnership


61

namely partnership strategy and leadership, structured organisation and performance

measurement, cultural understanding and trust, inter partner communication and

collaboration, and appropriate partners selection. In conclusion, the chapter

demonstrated the links between the partnership types, the lifecycle stages and the key

enablers using the CIMOSA cube. The need to focus on the partnership

establishment activities in order to improve the chances of a successful EE

partnership was ascertained.

Upon analysis of the work reported in this chapter, to assist in the development of a

framework to support partnership establishment management for the EE the

following conclusions can be drawn:

• Global partnership is where dislocated organisations work towards an agreed

common goal. Therefore, a framework for effective partnership establishment

management should incorporate a support system that is web enabled.

• Partnership has evolved into long term collaborative arrangements that are

mutually beneficial to all partners. The framework should accommodate long

term collaborative partnership establishment.

• A number of drivers such as organisation strategy, organisation structure,

market conditions, government policy and technological developments have

increased the number of OEMs from developed regions of the world seeking to

form partnerships with organisations in developing countries. With this in

mind, an optimum framework should focus on developing a structure for

managing such partnership establishment.

• Partnership types can range from peer to peer, network to ownership. A

network type EE is identified as the optimum type for OEMs to retain their

global competitive advantage. Therefore, the new framework should focus on

developing a structure to manage the establishment of EE partnerships.

• In order to operate a successful partnership, OEMs must consider partnership

strategy and leadership, organisation and performance measurement, teams,

cultural harmonisation and trust, and inter partner communication. A

framework for effective partnership establishment management must therefore

accommodate these enablers in order to improve the chances of the optimum

partner being selected.


62

• Finally, research indicates that structured support is needed in the area of

partnership establishment. Therefore, the framework should adopt a process

approach to profile the OEM and potential partners, use extensive sourcing and

matching to identify potential partners, and support the evaluation and

establishment of an EE partnership regardless of location.

Chapter 3: Partnership Establishment

63


3.1 Introduction

3.2 Defining Partnership Establishment

3.3 Process Theory – An Introduction

3.4 Key Partnership Establishment Process Elements

3.5 Existing Process Models

3.6 Technologies to Support Partnership Establishment

3.7 Partnership Establishment – A Process Perspective

3.8 Conclusion

3.1 Introduction

Fundamental to the success of a partnership is the merging of compatible partners

[Trim & Lee, 2008]. Therefore, the partnership establishment process plays a critical

role in ensuring that the right partners are sourced and selected. This process is often

complex with strategic and operational factors among others to be considered,

thereby requiring systematic efforts and a high degree of organisation. As seen in

section 2.3, emerging trends show an increase in the number of partnership being

formed, particularly between organisations from developed and developing countries

that are geographically and culturally diverse. As a result there is a greater

dependency on an efficient and effective partnership establishment process, which

deals with the additional challenges of distributed partnership establishment. The

establishment process itself must be carefully managed. In particular, the two major

challenges of partnership establishment are:

1. The required information is presented in a generic form suitable for machine to

machine exchange

2. Appropriate support mechanisms are in place for partnership establishment

This chapter discusses in brief the concept of partnership establishment and includes

a definition of same. A review of process theory and the identification of the key

elements needed to ensure success are presented. Using this knowledge a review of


64

existing partnership establishment processes is conducted and gaps identified. A

process theory model is then utilised to describe how partnership establishment for

an EE may be realised using web based technologies to enable machine to machine

sourcing and the selection of partners. Finally, a process perspective on partnership

establishment is presented.

3.2 Defining Partnership Establishment

In order to define partnership establishment, literature in the areas of partnerships,

strategic alliance, outsourcing, and supply chain management are considered. As

with the term partnership, a number of terms are utilised to describe partnership

establishment terms, which in most cases are interchangeable. The outcome of

partnership establishment, the process itself, and its application are a number of

viewpoints that have been used by theorists to define partnership establishment. In

terms of output a number of theorists identify tangible products, resources, services,

or a co-developmental relationship as possible results of partnership establishment

[Liu, 2005; Todeva & Knoke, 2005].

Researchers that have taken a process view when defining partnership establishment

include [Faris, 1967], [Xiao, 2003], [Todeva & Knoke, 2005], [Wang & Kess, 2006]

Piddock [2006], Maheshwari et al. [2006], [Sarkis et al., 2007] and Dunlop [2006].

Xiao [2003] views the process as a “decision process to identify, evaluate and select

the most competitive and compatible suppliers using a certain set of criteria and

measures”. This decision making view through the use of criteria is shared by Wang

& Kess [2006], Sarkis et al. [2007] and Piddock [2006]. Wang & Kess [2006]

distinguishes between task related criteria and partner related criteria, while Piddock

[2006] suggests personal factors based on friendship, prior relationships and

reputation. According to Toveda & Knoke [2005] a partnership establishment

process “seeks to explain who collaborates with whom, at what rates, for how long,

and deploying what governance forms” the partnership should take. The view based

on industrial observations taken by Pidduck [2006] is that it is better described as a

negotiation process rather than a selection process. Dunlop [2006] suggests that the

right partner be identified and the relationship established before a deal is signed.

Maheshwari et al. [2006] describes partnership establishment as an activity involving


65

complex organisational innovation and change management. From this viewpoint

the process involves engaging in activities to develop complementary business and

human resources between a number of organisations.

An applications viewpoint of partnership establishment is taken by a number of

researchers including Cox et al. [2003], Chen et al [2008] and Todeva & Knoke

[2005]. For example, Cox et al. [2003] regard true outsourcing as a strategic activity,

and define it as “the process of transferring an existing business activity, including

relevant assets to a third party” where these business activities are not part of their

core competency. In this view supplier selection is more than just a set of activities

to be followed; it is a strategic issue which influences the competitiveness of the

entire supply chain. Todeva & Knoke [2005] describes partnership establishment as

“new business forms that enable the partners to enhance and control their business

relationships in various ways”.

It is clear from literature that partnership establishment is made up of a structured set

of activities leading to the selection of suitable partners, and agreement on the terms

of the partnership. The nature of the relationship between the OEM and its partner

will influence the partnership formation approach. For the purpose of the research

documented here the author views partnership establishment as a strategic decision

making activity that spans from the specification of requirements by both the OEM

and potential partners through to the identification and matching of appropriate EE

partners by the OEM and agreement on the terms of operation of the partnership. A

transfer of non core activities is envisaged with both parties working together on

product development and improvement tasks.

3.2.1 Establishing Partnerships – A Process

The significant effort required to successfully establish a partnership is documented

by researchers including Wang & Kess [2006] and Bayazit [2006]. It is a complex

process due to the range of issues that must be addressed. These include multiple

criteria, which may be divided into quantitative and qualitative factors, and the

difficulty sourcing and evaluating potential partners. The complexity is increased

when the process is conducted across diverse geographical locations and cultures.


66

When establishing a partnership it follows a series of steps, activities and decision

points that are engaged in from the point when a partnership need is identified to

when a partnership is in operation, which can be termed a process. It is important a

systematic approach is applied to ensure consistency of execution to increase the

chances of a successful partnership being formed. However, partner selection

literature is found to be very limited in terms of the process itself. This is confirmed

by Hans [2008] who found that the identification of the right partners is not being

sufficiently considered by approaches available. Extensive literature is dedicated to

theory used within the process such as criteria definition, potential partner evaluation

methods, negotiation and partnership establishment, but not to linking them together

in an entire process. There is a need for guidance to progress through the steps,

activities and decision points that make up the entire process, a fact recognised by

only a few researchers in the field [Piddock, 2006; Trim & Lee, 2008; Sarkis et al.,

2007; Maheshwari et al., 2006]. An understanding of process theory will therefore

help the development of a systematic approach towards partnership establishment.

3.3 Process Theory - An Introduction

The study of the behaviour of a complex system is known as systems or process

theory with both terms used interchangeably. For the purpose of the research

documented here the term process theory will be used. Although it can be traced

back to antiquity, modern process theory was pioneered by Ludwig von Bertalanffy

in the 1950s to represent interdisciplinary fields of science. In terms of operations

management process theory thinking offers “an approach to a problem which takes

a broad view, which tries to take all aspects into account, and which concentrates on

interactions between the different parts of a problem” [Checkland, 2000]. The term

process is widely defined in literature and may be summarised as a set of elements

connected together to work towards achieving a common goal only possible as a

whole and not as individual parts [Blanchard and Fabrycky, 2006; and Maier and

Remus, 2003]. The basis of process theory is that everything is made up of processes

and sub processes. Therefore, the value added by the process as a whole, beyond

that contributed independently by the parts or sub processes is primarily created by

the relationship among the parts. It is also recognised that the interactions in a

process are not static, but are dynamic. A process that continuously interacts with its


67

environment is termed an open process [Wennberg et al, 2006]. In order to

understand the concept of a process more fully the following section identifies the

traits of a process.

3.3.1 Tenants of a Process

The characteristics or tenants commonly associated with an open process are

summarised by the author into nine key headings based on those identified in

literature [Checkland, 2000; Bozarth & Handfield, 2008; O’Brien, 2004; Wennberg

et al, 2006]. These tenants, each of which is explained in detail below, include:

Goal seeking

Holistic

Boundary

Hierarchy

Inputs and Outputs

Actors

Transformation process

Equi-finality

Feedback

Goal seeking – An open process will always have focus or purpose that strives

towards achieving a predefined goal or objective. These goals will be driven by

organisational mission statements and strategies, and act as a reference point

from which to measure success. In the case of the partnership establishment

process or system, its goals and strategies would be directed inwardly at

optimising the system to addresses competitive pressures, and outwardly at

meeting the needs of its customers and suppliers i.e. European OEMs and

Chinese potential suppliers

Holistic – In an open process all the sub processes are related and must be

combined to produce the required output, which is termed holism. The

partnership establishment process for example is made up of many sub processes

that cover the range of issues needed to successfully establish a partnership.


68

Analysis of any of these sub processes must be conducted in the context of the

entire process.

Boundary – In an open process, the area, within which the decisions made by

the process about what actions can and cannot take place, is known as the

boundary. Beyond the boundary represents the systems environment with which

the process interacts. In the partnership establishment system the boundary

clearly defines what relates to partnership establishment only.

Hierarchy – In an open process some sub processes require input from lower

level sub processes in order to carry out their actions. Whole entities are made

up of smaller entities which themselves are whole and so on. This structure is

known as a hierarchy with the parts to make up the whole known as emergent

properties. In the case of the partnership establishment system a hierarchy is

required to obtain the overall goal.

Inputs and Outputs – In an open process actions cannot take place without

inputs, which subsequently lead to outputs being produced. In the case of a

partnership establishment system, various inputs are used to form a partnership

(information, strategies, competencies, regulations, laws etc.). The overall

output should be the establishment of a successful partnership.

Actors – In an open process, an individual that carries out one or more tasks is

an actor. An actor has a clearly defined role and set of responsibilities. Zulauf

[2007] identifies people as the most important element of a process. In the case

of partnership establishment system actors include experts, teams and senior

management.

Transformation process – In an open process inputs are converted into outputs

by a transformation process. A transformation process will contain a clear and

complete set of steps that when executed guide the process towards the

realisation of its overall goal. In the case of partnership establishment the inputs

listed above are transformed into the outputs listed above.

Equi-finality – In an open process the goals to be achieved can be arrived at in a

number of ways. The system can use different inputs and different means to

process these inputs. For example, in the case of the partnership establishment

process the initiation point of the sourcing stage can vary.


69

Feedback – In an open process performance measures allow assessment of the

process and facilitate continuous improvement. Based on the feedback changes

can be made to the process.

3.3.2 Modelling a Process

A model is a useful representation of a process that according to Sterman [2000] may

be used to (1) represent its complexity and holism; (2) define the relationships

between the parts; (3) describe the structures and sub processes; (4) gain an

understanding of a problem; (5) behave as a record of a proposed process; (6)

communicate and educate others about a process and finally (7) act as a control to

ensure the process implemented matches the planned process. Examples of

modelling techniques suitable for processes include flow charts, class diagrams, use

case diagrams, entity relationship diagrams and IDEF diagrams. Explanations for

these modelling techniques may be found in Scheer [1998]. In particular, IDEF-0 is

a structured analysis design technique which helps articulate the traits of a process as

described above. Figure 3-1 below illustrates how easily an IDEF-0 diagram can be

used to present a system. IDEF-0 is hierarchical allowing a process and its elements

to be described in detail.

Transformation

Process

Inputs Outputs

Mechanisms

Controls

Figure 3-1: IDEF0 methodology

To realise partnership establishment, a suitable process is required, which should

include a number of key elements as presented in the following section.


70

3.4 Key Partnership Establishment Process Elements

The choice of activities in a process determines its effectiveness. In the case of

partnership establishment the critical elements identified through a review of

literature include partnership requirements, sources of candidate partners, evaluation

methods and the role of negotiation theory. Each of these is discussed in detail

below.

3.4.1 Partnership Requirements

The success of an establishment process is greatly reduced without the requirements

criteria and their associated attributes being clearly known before the evaluation

approach is implemented [Choy & Lee, 2003]. The more ambiguous requirements

are, the more likely that almost any partner will do something, which will jeopardise

the success of a partnership [Piddock 2006]. Therefore, requirements engineering is

fundamental to partnership establishment. Requirements engineering is the term

used to describe the steps undertaken to gather the requirements of all relevant

parties. As a result, a set of criteria, related to identified business need or

opportunity that represent what one party hopes to attain from another, is defined,

forming a benchmark to assess possible candidates and assist with the selection

decision. The complex process of partnership establishment generally involves

assessing multiple criteria of varying importance, which may be quantitative or

qualitative, tangible or intangible and which may involve trade-offs [Chen et al.,

2006; Bayazit, 2006]. Requirements criteria specific to partnership have been

investigated by a number of researchers with Table 3-1 illustrating a summary of the

most common found in literature.

Assessing the financial status of a potential partner plays a key role in determining

suitability [Chen et al., 2008]. What is important is that the organisation is shown to

be in control financially, and displaying a healthy expected profitability for the

future. The specialist know-how of a potential partner is what attracts an OEM to

engage in partnership establishment. For example, European OEMs wishing to enter

the Chinese market will look for organisations with an in depth knowledge of the

market and who can provide the OEM with access to that market.

71

Table 3-1: Partnership Requirements Criteria

Chen

et al

2008

Hans

2008

Wang

& Kess

2006

Bayazit

2006

Maheswari

2006

Piddock

2006

Shakhar

2004

Choy

et al

2003

Jagersma

2003

Lemke

et al

2003

Kaplan

& Hurd

2002

Dyer

2000

Dacin

et al

1997

Financial stability x x x x x

current profits x

growth potential x

cash flow x

equity x debt amount x x

Unique competency x x x x x x x x

Capability compatibility x

manufacturing skills x x x x

manufacturing facilities x x x x x x

human resources x x x x x

technology / R&D x x x x x

management x x x x x x x

quality control x x x x x

collaboration x

future capabilities x

Market attractiveness

market knowledge x

marketing skills x x x

market share x x x x x

marketing objectives x

market gaps

Intangible assets

partnership potential

trust x x x x x x

personal rapport x x x x x

commitment x x x

reputation x x x

dependency x x flexibility x x x

Cultural alignment x x x x x x x x x

Willingness to share expertise x x

Previous alliance experience x x x x

Common partnership vision x x x x x x

partnership strategy x x shared goals x

Location x x


72

In terms of capabilities, Research and Development (R&D) will include assessing a

potential partner’s level of R&D investment, the number of personnel involved in

R&D, the communication network in place, the skill level of R&D personnel, and

whether or not the organisation engages in developing new products, and product and

process improvement. A strong R&D presence in a potential partner organisation is

a positive sign for partnership. Managerial capabilities include looking at the

compatibility between the OEM and potential partner managers, ability to build

consensus, management support and commitment levels, and the number of years of

managerial experience held. Without good management a partnership will have

difficulty succeeding since it must be driven and visibly supported from the top.

Criteria considered as part of quality capabilities include the defect rate, quality of

staff, delivery performance, and whether or not process and product improvement is

employed [Dyer, 2000]. Attention to high quality by a potential partner is very

positive and can compensate for a lack of technology or other operational

deficiencies that are more easily upgraded. A partnership is based on collaboration

between two or more organisations. Therefore, collaborative capabilities such as

collaborative leadership, listening skills, conflict resolution and decision making

must be assessed. The next criterion is market attractiveness, which involves

assessing the potential partner’s market presence and understanding of both their

competitors and customers in order to determine what market potential is open to the

OEM. Government regulations pertaining to marketing must be understood.

Intangible factors such as the brand name of a potential partner in their selling

market, partnership potential of an organisation, existing relationship between the

OEM and potential partner, reliability, adaptability and interaction all can influence

the partner selection decision [Kim & Lee, 2003; Mitsuhashi, 2002]. Alignment

between the cultures of the OEM and potential partner includes examining the

cultural understanding between both organisations and their individual practices and

behaviour. According to Todeva & Knoke [2005] international partnerships should

also address the cultural and legal systems in operation in the partnering country. A

willingness to share expertise should cover areas such as technical knowledge,

marketing know-how and resources [Kim & Lee, 2003]. According to Chen et al.

[2008] both parties must be willing to give to one another and depend on each other.


73

Business references and a history of performance in other partnerships should be

assessed to determine the value of previous partnership experience by potential

partners. Existing contacts according to Piddock [2006] and Mitsuhashi [2002] make

the formation of a partnership easier, more efficient and increase the chances of

success. A comparison of business philosophy, business and operational models

should be conducted to look for compatibility between both party's partnership

vision. Location is a factor that has become more relevant in recent times with the

increased numbers of partnerships forming between dispersed organisations such as

OEMs in European and Chinese organisations [Gao, 2004]. Influencing factors

linked to location within China include potential market share extension, transport

infrastructure and technical know-how [Chen et al., 2008]. Other less documented

but none the less important criteria include relationship maintenance [Trim & Lee,

2008; Lemke et al, 2003], political links [Piddock, 2006], and risk assessment [Wang

& Kess, 2006].

Techniques such as focus groups, interviews, and brain storming may be used to

elicit a set of requirements. It is important that sufficient time and effort is spent by

an organisation defining their requirements. Each organisation taking part in

partnership establishment will have a unique situation determined by its

circumstances, which will influence its requirements criteria, and the level of

importance assigned to each when involved in partnership establishment. These

factors include:

1. Perspective

2. Motivation

3. Diversity

4. Process stage

5. Level of integration

Firstly, an organisation engaged in partnership establishment will either play the role

of an OEM or a candidate partner. Therefore, it would be expected both an OEM

and candidate partner share some requirements, but others requirements will differ

based on their perspectives. Secondly, motivation behind an organisation, engaging

in partnership establishment will affect the choice of criteria and the importance

assigned to each during evaluation [Chen et al., 2008]. Top management of an


74

enterprise may have multiple motivations for forming a partnership, but with

different priorities in mind. These will be reflected in the weights assigned to criteria.

Therefore, when criteria weights are set they should be checked against the

motivations to ensure that the priorities are meet. If they do not match the

weightings, they should be adjusted to ensure motivation priorities are met and an

inappropriate partner is not selected. Global and cultural diversity between the OEM

and potential partners will also influence the choice of requirements. For example,

an OEM will place more emphasis on criteria such as political links and means of

communication when the partners are dislocated. The fourth factor relates to the

process stage and its impact on selection criteria and their importance. During the

initial sourcing stage only high level criteria are needed to develop a short list of

potential partners. Often what can be termed knock-out criteria may be defined

using requirements that are absolutely necessary thereby facilitating the rapid

elimination of unsuitable candidates. Later during the evaluation of the potential

partners more detailed criteria are used. Lastly, where an expectation that a high

level of integration will take place between the OEM and a potential partner more

intangible or soft criteria such as trust, commitment and ability to collaborate will be

defined with higher weightings [Petison & Johri, 2008]. These are generally

qualitative with face to face discussions needed to assess them during the detailed

evaluation stage.

During the partnership establishment process a number of the requirements criteria,

their values and importance levels can be expected to change. Piddock [2006] found

that existing models for partner selection assume rational decision making based on a

rigid set of criteria. This follows discussions and negotiations between an OEM and

a potential partner. Expected values may be adjusted up or down for compensatory

reasons, or as a result of a better understanding of what each partner has to offer the

other. Supply and demand of candidate partners also have an effect [Piddock, 2006].

Where a large number of partners, that closely match the OEMs requirements, are

available their requirements can expect to be exactly met. On the other hand, when a

shortage of partners exists compromises may have to be made and requirements

prioritised. Given that every situation for partnership establishment varies and

therefore, requires a different set of criteria, a universal set of criteria for every

organisation would be futile. This is an observation that Bayazit [2006] and Chen et


75

al. [2008] concur with. However, some guidance for partnership establishment as

part of the EE for example, between European OEMs and Chinese companies would

be beneficial in the context of this thesis. Table 3-2 below suggests a set of criteria

for global partnership establishment with particular emphasis on Europe and China

and based on a review of the literature in the area as presented in table 3-1. The table

is divided into criteria and an indication of their importance from the perspective of

the OEM and potential partners for the initial sourcing phase and the evaluation stage

of partnership establishment. Since the OEM from a developed region will lead the

partnership and the establishment process only OEM criteria are applied during the

sourcing stage with candidate partner information compared against these

requirements. Where some OEM criteria are relevant for both the sourcing and

evaluation stages, as illustrated in table 3-1, it suggests the criteria must be examined

in further detail during the evaluation stage. Note that some criteria are shared by

both the OEM and potential partner, such as trust, whilst others are particular to each

party. For example, the OEM is concerned about political links which the potential

partner is not, while the potential partner is concerned about the growth potential of

the OEM. Also, the level of importance varies between the two parties. For example

the manufacturing skills and technological capabilities of the OEM are very

important to the potential partners so they can upgrade their capabilities, whilst these

same criteria are not as important to the OEM as they generally are leaders in the

area.

The differences in terms of requirements for both party’s stems from their motivation

to form a partnership as detailed in section 2.1. Taking the case that China is a

developing country their motivation for forming partnerships with European OEMs

is to receive training and access to advanced technology and management skills. On

the other hand market knowledge and market share of the potential partner are very

important to the OEM from a developed country, but are of no importance to Chinese

potential partners. Motivation for European OEMs to form partnerships with

Chinese companies is to gain access to the lucrative Chinese market using local

know-how and companies with an existing presence in the market. Unchecked

requirements do not mean that they are irrelevant during partnership establishment;

rather that they are not the most important factors to be considered.

76

Table 3-2: European-Chinese Partnership Requirements Criteria

Sourcing criteria

European OEM European OEM Chinese potential partner

Financial stability current profits *

growth potential **

cash flow **

equity *

debt amount *

Unique competency ** ** **

Capability compatibility manufacturing skills * * **

manufacturing facilities *

human resources ** ** **

technology / R&D * **

management * *

quality control * *

collaboration ** **

future capabilities ** *

Market attractiveness market knowledge **

marketing skills *

market share * **

marketing objectives * *

market gaps **

Intangible assets partnership potential ** **

trust * ** **

personal rapport * * *

commitment * ** **

reputation * * *

dependency * *

flexibility * *

Cultural alignment ** **

Willingness to share expertise * *

Previous alliance experience * **

Common partnership vision

partnership strategy ** * shared goals * * *

Location * *

Political links * * * important

Risk assessment * * ** very important

Relationship maintenance * *

Evaluation criteria


77

It may also be observed that during the sourcing stage, harder criteria, which are

easier to quantify, are assessed. Softer more qualitative and difficult to assess criteria

are included in the evaluation stage. Therefore, it may be concluded that the

quantitative criteria (e.g. financial measures, manufacturing capabilities), which are

easier to assess, lend themselves to automated evaluation, whilst the qualitative

criteria (e.g. partnership potential, trust, reputation) require face to face intuitive

based evaluation methods. Despite the wealth of knowledge in relation to

requirements criteria for partnership establishment, it is generally dealt with in

isolation to the partnership establishment process. It represents a critical component

of the process and needs to be addressed in the context of the other elements of an

effective partnership establishment process. The use of these criteria to source

appropriate potential partners is dealt with in the following sub section.

3.4.2 Sourcing Potential Partners

Partner evaluation and selection is based on a preselected set of organisations that are

considered potential partners. Only through extensive evaluation will a decision be

made about whether or not each is suitable as a partner. Sourcing is the term used to

identify the process of compiling this group of potential partners. Access to a vast

number of candidate partners has made reducing it to a manageable number very

difficult. Yet given that a long term relationship involving significant resources

(time, financial and personnel) is at stake, it is critical that those organisations that

most closely match the OEM’s requirements are identified through sourcing. The

chances of a partnership being successful will be greatly reduced if the optimum

potential partners are not considered regardless of how comprehensive the selection

criteria are, and how advanced the selection process is. Therefore, it is surprising

how little attention this area has received in literature. A lot of researchers including

Sarkis et al., [2007]; Hans, [2008]; Maheshwari et al., [2006], Bhutta & Huq, [2002];

Ramanathan, [2007]; and Wang & Kess, [2006] have made the assumption that the

potential partners are known prior to applying sophisticated evaluation techniques

and guiding the partner selection decision. This assumption can lead to detailed

evaluations, which lead to significant resources being wasted on inappropriate

potential partners that should have been detected and eliminated during sourcing.


78

In the limited number of publications where the method of sourcing potential

partners is discussed, existing contacts are identified as the method of choice

[Barringer & Harrison, 2000; Piddock, 2006]. Existing contacts can take the form of

organisations that the OEM has worked satisfactorily with before, potential partners

that are recommended by someone the OEM trusts, or personal ties between key

decision makers. In the case of an existing history of working together, processes

and procedures may already be in place, the OEM will have first-hand knowledge of

their performance record and, more importantly, trust will already have been

established. According to Piddock [2006], this gives any future partnership a greater

chance of success and with predictable results. The recommendation of potential

partners is closely linked to the concept of reputation and a perception of proven

quality based on trust, which can also lead to successful partnerships. Personal ties

again are based on reputation and trust but, they can lead to problems where favours

are repaid with any unsuitability issues overlooked [Piddock, 2006]. Overall existing

contacts offer a faster, easier and more efficient partner selection process, but the

selection of the optimum partner and, therefore, the success of the partnership cannot

be guaranteed due to the possible omission of other candidates for consideration. De

le Sierra [1995] discusses the use of preferred suppliers and how it often leads to

complacency with OEMs afraid to make change and, therefore, losing out on the best

in class. This concern applies equally to sourcing collaborative partners. Apart from

existing contacts, potential partners may be sourced through trade fairs, trade specific

publications and the Internet. However, these methods are rarely used because of the

uncertainty associated with the trustworthiness of such sources, and the significant

time commitment needed to search and evaluate them properly.

For example, sources of potential Chinese partners can also come from the Chinese

government. It is generally politically motivated, and involves the building of a

partnership according to external constraints, usually financially linked [Piddock,

2006]. This may also be linked to political favours owed or received. The OEM

may not have any choice as to who or where a partnership is established, or whether

their requirements are met, just as long as any underlying political motivations are

achieved. Until recently the Chinese authorities decided which foreign companies

could form partnerships with which Chinese companies, where the products would

be manufactured and sold, and restricted shares so control stayed with the Chinese


79

partner. Formal approaches were made to European OEMs inviting them to

negotiate partnerships with named Chinese companies. This was based on the

authority’s perceived reputation of these companies and the benefits they would offer

the Chinese companies with which they were asked to form partnership. According

to Jagersma and van Gorp [2003] most foreign companies played along with this

policy in order to learn about the emerging Chinese market. Since the 1990s the

Chinese authorities have allowed foreign companies more freedom in forming

partnerships and independent companies [Jagersma & van Gorp, 2003]. This

represents one method of gaining access to the Chinese market but is dependent on

being sourced rather than sourcing potential partners, a possibility which is generally

only available to large multi-national OEMs with a global presence. Since the OEM

is given no choice as to which potential partner they can consider for a partnership

there is no sourcing involved. It represents a reactive, or what Piddock [2006] terms

a passive approach, rather than a proactive sourcing strategy.

Where an OEM has a number of organisations from which to choose potential

partners the common approach is to manually assess the information available.

However, this represents a slow, expensive, subjective and often complex process.

Hence, many OEMs concentrate on using contacts since it eliminates the need to

engage in a lengthy sourcing exercise. Its widespread availability and use, relative

cost effectiveness, and the capacity to offer a global source of potential partners

makes the Internet a very attractive sourcing tool. Attempts have been made to

harness the Internet, but the requirements profile defined by the OEM and the

potential partner profiles are defined independently, which means that compatibility

in terms of terminology and semantics cannot be guaranteed, easily leading to

misunderstandings. Also, information may be missing from the candidates’ profile

making evaluation difficult. An OEM and potential partner may unintentionally

believe they are compatible when in reality they may not be. Computers, search

engines and pattern matching are listed by Piddock [2006] as techniques that may be

used for potential partner identification. However, methods of effectively searching

the Internet are not yet readily available [Mansourian, 2008; Zhang et al, 2005].

Search engines are one such tool, but with a variety of search engines available and

limited search capabilities they cannot deal with all the information available in an

acceptable time period. As a result, appropriate potential partners for a particular


80

need can be overlooked. Portals offer dedicated collections of information that may

be used for sourcing purposes but challenges, which will be addressed in section 3.6,

still exist. Only a few researchers have addressed the use of advanced technology for

potential partners sourcing [Piddock, 2006; Vlachopoulou & Manthou, 2003; Kaplan

& Hurd, 2002; Tucker & Jones, 2000]. A software program that compares individual

patterns of web browsing is proposed by Piddock [2006]. The access patterns of

various users can be compared for similarities and differences and the results used to

identify possible matching interests between users. Kaplan and Hurd [2002] briefly

mention a scanning mechanism to identify a number of potential partners based on a

partner profile and information about potential partners, but do not expand on the

method utilised. A theoretical concept for partner sourcing is suggested by Tucker

and Jones [2000]. This involves the use of intelligent software agents to replace

human searching of the Internet. The agents are computer programs that use

artificial intelligence to extensively search the Internet based on the user’s

instructions. Such agents are not yet available for partner sourcing.

The importance of sourcing optimum potential partners has been shown. If this step

is omitted or not conducted properly, unsuitable potential partners may be chosen

while more suitable partners may be overlooked. Therefore, a partnership

establishment process should include a comprehensive sourcing step. Manual

sourcing is clearly ineffective. A suggestion would be to examine Internet sourcing

with a view to providing OEMs with single point access to sufficiently large

quantities, and diverse sources, of partners, and appropriate semi or fully automated

techniques for evaluation. A common method to deal with defining OEM and

candidate partner profiles is also required. Available evaluation methods are

discussed in the next sub section.

3.4.3 Evaluation Methods

Assessing the suitability of a potential partner is kernel to partnership establishment

[Lau et al., 2001; Chen et al., 2008; Thakkar et al, 2008]. Partnership suitability is

viewed by Maheshwari et al. [2006] as the analysis of the benefits and risks of the

proposed initiative on the competiveness of the supply chain both in the short term

and the long term. This includes the ability of a potential partner to influence


81

product quality, delivery, costs, customer service and technology. The evaluation

process is characterised by a large number of criteria that may be quantitative

(number of employees, market share) or qualitative (flexibility, culture). These are

often conflicting, leading to a need for trade off decisions to be made [Yang & Chen,

2006; Lau et al., 2001]. Given the long term consequences of a partnership, it is

viewed by some researchers as the most important step of partnership establishment

with other steps often overlooked or neglected [Piddock, 2006]. While it is clear that

the evaluation of potential partners it important, it is also intricate and complex. A

large portion of literature is devoted to evaluation techniques. A sample of the

researchers from literature who have discussed the various evaluation methods is

given in Table 3-3.

In particular, many methods which have been developed primarily for supplier

selection, but are also applicable to the establishment of long collaborative

relationships such as the EE. Based on a review of literature these methods may be

divided into six categories namely:

1. Categorical models

2. Linear weighting models

3. Mathematical programming models

4. Total cost of ownership models

5. Interpretive structural modelling

6. Artificial intelligence.

Each of the methods is written about in terms of how they work, giving examples of

real life applications and their advantages and disadvantages as follows:

1. Categorical models - These models are used to compare criteria by assigning

ratings of “positive”, “neutral” or “negative”. The main advantages of these

models are that they are inexpensive, easy to use, require minimum performance

data, lend some structure to the evaluation process, and allow a number of

personnel from related areas to contribute to the evaluation. However, criticisms

include that they are largely intuitive processes relying heavily on memory,

personal judgement and the experience and ability of the evaluator. As can be

seen in table 3-3 research dedicated to categorical models is limited and very

old, a fact which indicates its lack of relevance for real life applications.

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Table 3-3: Evaluation Methods

Categorical modelsLinear weights

models

Total cost of

ownership

models

Interpretive

structural

modelling

Artificial

Intelligence

AHP/ANP DEA CBR

Muralidharan, 2002 Bayazit, 2006 Yang et al., 2006 Percin, 2008 Zhou et al., 2008 Bayazit, 2006 Mohammed, 2008 Choy, 2004

Humphreys et al., 1998 Leenders et al., 2006 Dulmin, 2003 Chen et al., 2007 Ramanathan, 2007 Ferrin et al., 2006 Thakkar et al. 2008 Lau et al. 2001

Thompson, 1991 Talluri et al., 2006 Cakravastia, 2002 Ramanathan, 2007 Garfamy, 2006 Liu, 2003 Chen et al., 2007 Cook, 1997

Weber, 1991 Yang et al., 2006 De Boer, 2001 Sarkis et al., 2007 Leeners et al. 2006 Bhutta et al., 2002 Albino, 1998

Timmerman, 1986 Wang, 2004 Ghodsypour et al., 2001 Bayazit, 2006 Talluri et al., 2006 Smytka et al., 1993 Vokurka, 1996

Bhutta et al., 2002 Karpark et al., 2001 Leeners et al., 2006 Talluri, 2004 Monczka et al., 1991 Mandal, 1994

Handfield et al., 2002 Tam, 2001 Talluri et al., 2006 Liu, 2000

Tam & Tummula, 2001 Braglia et al., 2000 Yang et al, 2006 Weber, 2000

De Boer, 1998 Degraeve, 2000 Cobi et al., 2003

Barbarosoglu et al. 1997 Liu, 2000 Radcliffe et al., 2003

Min, 1994 Petroni, 2000 Yurdakul, 2003

Nydik et al., 1992 Weber, 2000 Bhutta et al., 2002

Thompson, 1991 Ganeshan, 1999 Handfield et al., 2002

Pan, 1989 Ghodsypour et al. 1998 Meade et al, 2002

Soukup, 1987 Humphreys et al. 1998 Tam et al., 2001

Timmerman, 1986 Verma, 1998 Lee et al., 2000

Rosenthal et al., 1995 Ghodsypour et al., 1998

Current, 1994 Barbarosoghu et al. 1997

Sadrian, 1994 Nydick et al., 1992

Akinc, 1993

Chaudhry et al., 1993

Benton, 1991

Pan, 1989

Bender, 1985

Bhuffa et al., 1983

Mathematical programming models


83

2. Linear Weighting models - These models are also called weighted point

models since weights are assigned to the criteria to rate their importance.

Advantages of this method include its simplicity, application flexibility, and

inexpensiveness. Limitations include that the performance measures used for

various criteria must apply standardised units.

3. Mathematical Programming models - These models are optimising models

with the decision-maker formulating the decision problem in terms of a

mathematical objective function. Generally, cost is the objective function with

the other criteria considered to be constraints against the objective function

(capacity, management skills etc.) [Yang & Chen, 2006]. Techniques that have

been developed include Data Envelope Analysis (DEA), Discrete Choice

Analysis (DCA), Analytical Hierarchy Process (AHP), dimensional analysis,

goal programming, Grey Relational Analysis (GRA), and sensitivity analysis.

This group of methods represent the main focus for evaluation techniques with

AHP/ANP, and DEA to a lesser extent, at the forefront today. The main

mathematical programming models are described below

o Analytic Hierarchy Process (AHP) – This method is used to deal with

the imprecision associated with assigning weights to multiple criteria. It

was developed by Saaty in 1980 [1980, 2008], and provides a structured

approach to supporting complex decision making based on paired

comparisons.

o Analytic Network Process (ANP) – A more general form of AHP, ANP

was developed by Saaty. It uses a network approach rather than a

hierarchical approach to breaking down a selection problem [Chen et al.,

2008]. Pairwise comparisons are made and a ranking of multi criteria used

to support the decision making process.

o Dimensional envelopment analysis (DEA) - This is a mathematical

programming technique that calculates the relative efficiencies of multiple

decision-making units (DMU) based on multiple inputs and outputs.

4. Total Cost of Ownership (TCO) models - TCO-based models attempt to

identify and include all quantifiable costs in a selection decision. They include

an estimation of the costs to be incurred throughout the life cycle of the

partnership. Some models measure performance factors that are difficult to


84

quantify, such as the partner’s ability to solve problems, and willingness to

provide the required technical data etc. As can be seen from table 3.3 this

method has received little attention due to inability to evaluate criteria that

cannot easily be expressed as a cost.

5. Interpretive structural modelling (ISM) – This methodology allows the user

gain a deeper understanding of a complex situation and prioritise alternatives. A

computer assisted tool supports the creation of a map to illustrate the complex

relationships between the elements. This method has been further developed in

recent years [Mohammed et al, 2008; Thakkar et al, 2008; and Chen & Huang,

2007].

6. Artificial intelligence (AI) – These models are based on computer-aided

systems with varying degrees of capability to “learn” from an expert or historic

data. Therefore, OEMs who have limited experience of partnership

establishment can consult the system. Development of this evaluation method is

slow since the technology to realise it is not yet fully developed. Example

techniques include case-based reasoning and neural networks.

o Case based reasoning (CBR) – This method is based on computer

programs that solve problems through the use of human problem-solving

experiences. A similar partnership establishment situation from the past

guides a current situation and any new knowledge is added to the system

[Choy & Lee, 2003]. CBR is a rich and knowledge intensive method for

capturing past experiences, enhancing existing problem solving methods

and improving the overall learning capability of a machine [Lau et al.,

2001].

According to Muralidharan et al. [2002] categorical models are the least precise of

the evaluation methods available since they assume all criteria are equally important

and selections are based on subjective analysis. The linear weights models are a

more objective method, but again, rely heavily on human judgement and are

confined to assessing quantitative criteria. In general, mathematical programming

models are more effective for partnership establishment but often are complex

requiring computer programmers, have lengthy execution periods, require significant

managerial involvement, and are designed for specific situations [Bhutta & Huq,

2002; De Boer, 2001]. As highlighted above, linear weights methods do not include


85

quantitative factors. However, mostly qualitative factors are used in MP models [de

Boer, 2001; Yang & Chen, 2006]. Few examples of AI based methods and in

particular, the use of Internet based technology, have been used for partner selection.

The suitability of each method depends on the situation to be modelled and the

information available. In terms of partnership establishment the traditional system

lack a ‘smart’ approach and usually focus on financial and costing perspectives [Lau

et al., 2001]. Linear weights and MP models are the most widely used according to

Bayazit [2006]. An optimum potential partner evaluation method between

companies from developed and developing regions will not be found in a single

method but requires a more imaginative approach with face to face negotiation an

important element. What is important is that a well defined set of procedures for

evaluation are defined and consistently applied to all partnership establishment

initiatives.

3.4.4 Negotiation Theory

A definition of negotiation suggested by Kennedy [2006] describes it as a process by

which a party searches for the terms to obtain what is wanted from a second party

who wants something from the first party. Lewicki et al. [2007] describe negotiation

as a reaction to a need where “the parties need each other in order to achieve their

preferred objectives or outcomes. That is, either they must coordinate with each

other to achieve their own objectives, or they choose to work together because the

possible outcome is better than [what] they can achieve by working on their own”.

Negotiation theory brings together four disciplinary areas including decision

analysis, behavioural decision making, game theory and negotiation analysis [Vasiliu

et al, 2004; Raiffa et al, 2002]. Negotiation plays an important role in partnership

establishment in determining the suitability of a potential partner and in agreeing the

terms of the EE partnership. Characteristics of negation include the involvement of

two or more parties by choice, a conflict of needs and desires between the parties,

clear negotiation issues which may be tangible or intangible, and an attitude of give

and take between the parties [Lewicki et al., 2007]. The negotiation process can be

divided into a number of stages that allow both parties understand the issues being

negotiated and their complexity, to make decisions, and to conduct the negotiations

so all effected are satisfied with the outcome. Process models are suggested by


86

Lewicki et al. [2007] and Greenhalge [2001]. Figure 3-2 below illustrates the seven

phases of Greenhalgh’s model, which guides the negotiator from preparing for the

negotiation through to implementing the agreement.

Phase 1 Phase 2 Phase 3 Phase 4 Phase 6

PreparationRelationship

building

Information

gathering

Information

usingBidding Closing

the deal

Implementing

the agreement

Phase 7Phase 5

Figure 3-2: Phases of Negotiation [Greenhalgh, 2001]

Numerous factors are identified in literature as being critical to the success of a

negotiation [Lin & Millar, 2003; Jagersma & van Gorp, 2003; Claney and Martin,

2004]. Lewicki et al. [2007] discuss the link between outcome and relationship.

This link is used to determine the negotiation strategy.

The two factors can have either a low or high level of importance to the negotiator.

For example, a European OEM looking to form an EE type relationship with a

Chinese organisation, which will operate on the basis of a strong relationship

between the partners, will rate relationship and outcome at the high level of

importance. These levels of importance will generally only occur if both parties

expect to have a future relationship together, are both committed to the relationship,

both parties are interdependent and both parties will positively influence the others

reputation [Lewicki et al., 2007].

The strategy adopted during negotiations will differ depending on the levels of each

factor expected. The negotiation strategies are divided as illustrated in figure 3-3

below. Care should be taken that the correct negotiation strategy is chosen. The

focus of this research is on the use of negotiation where both the relationship and the

outcomes are considered important. Therefore, the collaboration strategy should be

adopted during negotiation. This is where both parties work together to maximise

both the outcome and relationship and is known as a non-zero-sum, integrative

negotiation or a win-win situation [Lewicki et al., 2007]. In other words the

attainment of individual goals by one party will positively affect the other party’s

goal attainment. Features of integrative negotiation include focusing on

commonalities not differences, addressing needs and interests rather than positions,


87

committing to meet the needs of all involved, exchanging information and ideas,

creating options for mutual gain, and using the objective criteria as standards of

performance [Lewicki et al., 2007]. Collaboration negotiators for both parties should

display traits of honesty and integrity, maturity and be excellent listeners.

YES

Substantive outcome

important?

Relational

outcome

important?

NO

YES

NO

Collaboration

Competition

Accommodation

Avoidance

Figure 3-3: Dual Concerns Model [Lewicki et al., 2007]

The main difference between collaboration negotiation and the other types is that

there is no end to collaboration negotiation [Lewicki et al., 2007]. It is an ongoing

process during the lifetime of a relationship or partnership. Rather than being

viewed as a means of selecting a potential partner and then agreeing how the

partnership will operate before it begins, it is a way to learn about the other party,

increase interdependence, and becomes a means of communication. It is impossible

to foresee all issues during the establishment of a partnership. Therefore, the process

is ongoing. Therefore, in terms of partnership establishment for an EE, collaboration

negotiation allows the two parties get to know each other, to agree to form a

partnership and then to create a framework within which to operate the partnership

rather than having rigid terms. Kaplan and Hurd [2002] recommend that after

potential partners have been identified discussions should be held to determine

interest and to develop a deeper understanding between the two parties with multiple

levels of management involved. Lewicki et al. [2007] proposes three rules for

conducting collaboration type negotiations including taking time to negotiate in order

to enhance information gathering and build a trusting relationship, treating a long


88

term business deal as continuous negotiation or renegotiation of arising issues, and

employing third party intervention when issues cannot be resolved internally. Key to

a successful collaboration negotiation includes understanding each other’s needs and

objectives, providing a free flow of information, focusing on the other party’s

concern over your own, sitting side by side rather than negotiating at arm’s length,

seeking the best solution for both parties, and not exploiting the other side’s

weaknesses or going back on commitments [Lewicki et al., 2007].

According to Lewicki et al. [2007] the frequency of international negotiation has

increased rapidly in the last 20 years. Although the negotiation process is the same

regardless of culture, how it is executed will vary [Kennedy, 2006]. Definitions

specific to cross cultural negotiation which identify the fundamental definition of

negotiation, what is negotiable, and what occurs when negotiation takes place can

differ greatly across cultures, are offered by researchers such as Claney and Martin

[2004] and Lewicki et al. [2007]. A set of cultural influences on negotiation which

range from the protocol applied to the nature of agreements formed, are proposed by

Lewicki et al. [2007]. Given that this research is using European OEMs establishing

partnerships with Chinese companies as an example of partnership establishment

between an organisation from a developed and developing country, an indication of

the Chinese stance is added to the chart developed by Lewicki et al. [2007] is

illustrated in Table 3-4 below.

Table 3-4: Cultural Influences on Negotiation adopted from Lewicki et al. [2007]

Negotiation Factors Range of cultural responses Chinese response

Definition of negotiation contract relationship relationship

Negotiation opportunity distributive integrative integrative

Selection of negotiators experts trusted associates trusted associates

Protocol informal formal formal

Communication direct indirect indirect

Time sensitivity high low low

Risk propensity high low low

Groups versus individuals collectivism individualism collectivism

Nature of agreements specific general general

Emotionalism high low low

The definition of negotiation ranges from developing a contract to a relationship,

which Chinese culture takes to mean forming a relationship. The negotiation

opportunity can be anything from a one off transaction to an integrative situation


89

where a collaboration strategy is applied. For the purpose of this research an

integrative negotiation strategy is relevant. Chinese companies tend to use trusted

associates rather than experts when selecting negotiators since forming a relationship

is an underlying motive. Formal protocols are commonly used when negotiating in

China, particularly in the early stages until the parties get to know each other. Given

the huge gap between European and Chinese culture Chinese negotiators can often

appear to communicate indirectly. Time and effort is needed to understand their

communication signals. The speed at which Europeans often wish to apply to

conducting business is opposite to the Chinese style where time is important to create

a relationship. The level of risk a Chinese company will take will depend on the

situation but in terms of cross collaborative partnerships such as the EE they will

take low risks. Team work is common in all aspects of Chinese life. Therefore,

groups are used during negotiations. Europeans tend to need the terms of agreement

in detail often in the form of legally binding contracts. On the other hand, Chinese

organisations will sign a contract with a western organisation because that is what the

Chinese want but then look for re-negotiation the following week. General

agreements are the basis of Chinese agreements with trust and a strong relationship

the most important factor to ensure that the partners work together and not against

each other. Lastly, while Europeans are more likely to show emotion, Chinese

negotiators do not. The difference between western and Chinese negotiation is

discussed by Jagersma and van Gorp [2003]. Clearly, when negotiations take place

between two parties from different countries or cultures it will be more complex than

negotiations between two parties with the same culture. Factors such as politics,

economic policies, values, beliefs, shared meanings and attitudes will all have an

influence on the process, factors which the negotiator must learn to identify and

account for [Kennedy, 2006]. A lot of researchers have examined this area and

proposed ways of dealing with it in order to maximise the negotiation results [Lin &

Millar, 2003; Hurn, 2007; Claney & Martin, 2004]. In particular, China has been

identified as one of the most challenging countries in which western organisations

can conduct negotiations [Zhu et al., 2007]. A number of researchers such as

Jagersma and van Gorp [2003], Ma [2006], and Zhu et al [2007], have published

guidelines to guide negotiations with Chinese companies. Similar guidelines for are

applicable to other developing countries.


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Negotiation support is an area in which a limited number of applications have been

developed by researchers who include Neubert [2004], Dzeng [2004], Piddock

[2006], Ito [2000] and Vasiliu et al. [2004]. A partner negotiation model has been

developed by Piddock [2006]. A collaborative supply chain system based on the

concept of open tenders using blackboard based negotiations is proposed by Ito

[2000]. The negotiation support system developed by Dzeng [2004] is an agent

based system called C-Negotiators, which uses a genetic algorithm, and thereby

assisting a contractor and supplier to negotiate via the Internet. An extended value

chain management (EVCM) system presented by Neubert [2004] supports inquiries

for parts or services and the selection of suitable suppliers. However, it is the

author’s view that face to face negotiation cannot be replaced by computer based

systems. In particular, when negotiating with parties from diverse cultures such as

China, there is a need for direct communication and relationship development. This

need is also compounded by the qualitative nature of the majority of partnership

criteria, a fact which renders them difficult to evaluate using mathematical methods

[Chen et al., 2008].

3.5 Existing Process Models

Only a small number of process models to guide partnership establishment are

proposed in the literature. The core activities of these processes are found to be

essentially the same even though terminology and details differ. In other words,

there is a core set of critical activities that are fundamental requirements for success.

Researchers who have discussed the partnership establishment process tend to

include it as a single stage in the partnership lifecycle. As a result the level of detail

associated with executing the establishment stage tends to be reduced with sub steps

omitted in favour of a generic overview of the entire lifecycle. For example Piddock

[2006], Maheshwari et al. [2006], Sarkis et al. [2007], and Trim & Lee [2008]

present partnership processes whose core activities may be divided into four stages

as illustrated in figure 3-4 below.

Establish

Motivation

Form

Partnership

Implement

Partnership

Evaluate

Partnership

Figure 3-4: Partnership Lifecycle Model


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Execution of this process includes the OEM spending time to ensure that the forming

of a partnership is the right decision for the organisation, then forming the

partnership itself and getting it operational, and lastly, ensuring that it is meeting

expectations through evaluation measures. Piddock [2006] further details partner

selection as a four stage process including:

1. Alliance motivation

2. Partner characteristics

3. Selection criteria

4. Partner selection

It should be noted that the term alliance in this case has the same meaning as

partnership. Once motivation has been confirmed, the OEM decides what

partnership characteristics they are looking for and, using that information, defines a

set of criteria with which to select a suitable partner. Although more detailed

guidance for partnership establishment is provided, the sourcing of potential partners

is not addressed and the process stops short once a partner is selected. A further

partnership establishment process developed by Mitsuhashi [2002] is illustrated in

figure 3-5 below.

Define

Alliance

Opportunities

Identify

Prospective

Partners

Make

contact

Due Diligence

ProcessMake deal

Figure 3-5: Partnership Establishment Process [Mitsuhashi, 2002]

In this process potential partners are identified and contact made with them prior to

holding a series of meetings during which potential partners can be evaluated and the

terms of a partnership agreed. The sourcing of potential partners is an important step

in this process. However; the definition of partner characteristics and selection

criteria is missing. An analysis of these partnership selection processes may be

conducted using the process tenants identified and discussed in Section 3.3.1. Table

3-5 below illustrates the results.


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Table 3-5: Analysis of Partnership Selection Processes

Process tenants Model 1

(Pid

dock, 2

006)

Model 2

(Mah

eshw

ari e

t al, 2

006)

Model 3

(Sar

kis e

t al, 2

006)

Model 4

(Trim

& Le

e, 2006)

Model 5

(Mits

uhashi, 2

002)

Goal Seeking x x x x x

Holistic

Boundary x x x x x

Hierarchy x

Inputs & Outputs x x x x x

Actors

Transformation process x x x x x

Eqi-Finality

Feedback x

All the process models which were analysed displayed goal seeking, boundary,

inputs and outputs and transformation process tenants. However, none were found to

be holistic. In three of the models a sourcing activity was omitted. Evaluation

criteria were not identified in one, and another did not explain how formation should

be conducted. Only the model presented by Piddock [2006] displayed the hierarchy

tenant to explain how to establish a partnership. Maheshwari et al. [2006] briefly

mentioned the actors in one stage of the process model while none of the other

models discussed the role of actors in the process. Eqi-Finality was not found in any

of the analysed model. The linear nature of the available processes can also be

observed, something also highlighted by Piddock [2006]. In practice, feedback is

essential, both within the partnership establishment process itself since it is iterative,

and to facilitate the continuous improvement of the overall process. The absence of a

number of process model tenants makes the available models difficult to implement.

There is a need for a partnership establishment process that includes all process

model tenants, supports all relevant stages, is tailored to suit global partnership

establishment, facilitates iteration between stages, and outlines the role of personnel,

information and communication technology (ICT) in its execution. A good process

should be flexible, and proven in order to reduce redundancy and rework and place

importance on the early planning stages so as to reduce problems later in the process.


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In order to understand in more detail what is required for partnership establishment

management, the realisation of partnership establishment is discussed in the

following section.

3.6 Technologies to Support Partnership Establishment

The importance of information and communication technologies for operating

organisations is widely recognised [Thite, 2008; Roe, 2007; and Lee et al., 2005].

According to Roe [2007] it has resulted in many benefits both from a social and

economic perspective, and offers many possibilities for future applications. Mansell

et al, [2007] points out that the role of information and communication technologies

is as an enabler, and is not the determinant of any outcomes with which it is

connected in an organisation. Information and communication technologies

represent a fundamental element to link distributed OEMs and candidate potential

partners with a view to forming an EE partnership. Without it, effective distributed

partnership establishment would not be possible. Information and communication

technologies offer the potential to improve organisational profiling, to automate

potential partner matching, and to increase the chances of establishing a partnership

with the most suitable partner as well as reducing the time and effort associated with

the process. However, current technologies have been found to fall short in terms of

optimising partnership establishment. Therefore, there is a need to exploit emerging

information and communication technologies. With this in mind, this section will

explore some of the developments in the area of information and communication

technologies in order to assess their suitability to support partnership establishment.

Firstly, web technologies are explored with particular attention paid to what is

currently available. Then, an emerging technology called the semantic web is

discussed. This is followed by an overview of the ontologies and web services that

are required to realise the semantic web.

3.6.1 Web Technologies

Since its introduction, the Internet has been found to be a practical and cost effective

infrastructure to link distributed individuals and systems. Furthermore, growing

confidence in the Internet and it’s infiltration into every corner of the globe has made


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it a key driver of partnership management (and thus partnership establishment). The

shift towards web enablement has improved communication and collaboration

[Durgin & Sherif, 2008]. It enables organisations to publish their organisational

profiles, compare profiles and discuss the possibility of forming a collaborative

partnership regardless of location.

Although the Internet has enabled people and organisations to communicate and

exchange information electronically, thereby breaking down barriers, it has not yet

reached its full potential. For example, only structured documents can be stored and

processed. This means that valuable unstructured information may be overlooked.

Adding content to the Internet is very easy, something which has lead to its rapid

growth with over eight billion web pages published on it today [Breitman et al.,

2007]. However, it is the very fact that there is so much information on the web that

is proving to be a disadvantage. This has meant that web searching methods

currently available are inadequate in relation to the effort needed to search, assess,

present and maintain the information required by its many users. Most pages are still

designed so that the semantic context is understandable to human users only, and

therefore, cannot be processed by machines [Breitman et al., 2007]. This is due to

the fact that manipulation of information on the Internet is restricted to display

formats rather than based on an understanding of its meaning or attributes. As a

result the majority of the results returned by search engines are useless in comparison

to the user request, with valuable information often overlooked. Identifying the

relevance and suitability of information and retrieving the required info, whether

implicit or explicit, must be manually carried out. This is tedious and time

consuming and therefore, an expensive process. Furthermore, since many words

have multiple meanings, this can cause problems in manually selecting the required

information. Manipulating Internet content includes individual communities, or

organisations creating their own specific models to facilitate coordination and

communication models, which are often incompatible with models developed by

other communities. Due to the difficulty and time needed to maintain weakly

structured information, especially when dealing with large quantities of information,

search results may turn out to be inconsistent, incorrect and/or out of date. Exchange

of knowledge is hindered due to the vast quantities of information produced by

organisations using different applications with various formats. Therefore, the


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integration of distributed information over heterogeneous systems is not possible. As

pointed out by Berners-Lee [2001], knowledge-representation systems have

generally been centralised, thereby requiring all users to share exactly the same

definition of common concepts e.g. book or train. Developing common concepts

between experts from different fields and individuals from different cultures in order

to exchange information is an almost impossible task requiring significant time and

effort. This problem is magnified when the size of the web is considered therefore

rendering it impractical. Conducting business over the Internet has been viewed as

an attractive proposition for both OEMs and their value chain partners. Wider world

markets, elimination of geographical and time barriers and reduced transaction costs

are just some of the benefits mentioned. Efforts have been made to facilitate on-line

business such as Portals. However, it has not been as successful as anticipated with

users having to search many on-line locations to find what they want because of the

absence of a standard description method. Due to the intricacies and softer issues

associated with partnership establishment and the Internet’s inability to manipulate

this type of information, almost no progress has been made in this area.

3.6.2 Semantic Web

Based on the need to utilise information more effectively, Berners-Lee, the creator of

the world wide web (WWW), proposed the future of information processing on the

web. This is termed the semantic web. A definition of the semantic web by Fensel

et al [2003] describes it as “specifically machine-readable information whose

meaning is well defined by standards, which absolutely needs the interoperable

infrastructure that only global standard protocols can provide”. The concept involves

categorising structured and semi-structured information in a standard manner in

order to give it meaning so that both machines and humans can understand it, and

therefore make manipulation of it easier. It should be pointed out that it is not a

separate web, but an extension of the current one to give information a well defined

meaning [Durgin and Sherif, 2008]. The idea is not to have computers that

understand the language of people, but rather to have representations that are open to

automatic processing [Breitman et al., 2007]. It works by encoding metadata into

information that helps to describe not only that information, but also the relationship

between the information and other data [Durgin and Sherif, 2008]. In other words


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the hyperlinked connection of the current web is replaced be a semantic link that

creates an invisible matrix that connects information based on its meaning.

Therefore, data can be defined and linked for the purpose of display, automation,

integration and reuse across applications.

The semantic web aims to complement humans in areas in which they do not

perform well such as dealing quickly with large amounts of data, working

continuously or analysing large amounts of text for specific information. Berners-

Lee [2001], Warren [2003] and Durgin & Sherif [2008] envisage the semantic web

as enabling automated information access and use, thereby enabling computers and

people to work in closer co-operation. Better search engine results, intelligent agents

to carry out tasks with multiple objectives and constraints, and corporate intranets

becoming useful are just some of the benefits expected as a result of implementing

the semantic web. The search process will no longer be limited to finding matches

between the request keywords and the information on the web, but will include

deductive reasoning and decision making to answer the user’s query. The

consequence is that there will be fewer search results, but they will be more accurate.

According to Durgin and Sherif [2008] the semantic web will lead to a situation

where programs will be capable of collecting web content from diverse sources,

processing that information, and exchanging the results with other programs.

Therefore, knowledge from a large number of sources will be capable of being

manipulated to improve the competitive advantage of virtual business models. These

automated services will improve the capabilities of the web to assist humans in

achieving their needs by “understanding” the contents of the web and providing more

accurate filtering, categorisation and searches of information sources. The advantage

of intelligent agents is that they always remain active, negate large quantities of

information across multiple networks with accuracy and speed, and continuously

search for ways to meet the goals set by the user rather than waiting for instructions.

Enabling application integration, by way of the integration of information from

different sources and across virtual enterprises through the use of the semantic web,

will ensure that the difficulty and cost currently experienced by companies to

undertake integrating applications, both internally and externally, would cease. A

common syntax to exchange information regardless of the internal syntax utilised by


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the application makes this possible. eXtendable Markup Language (XML) is already

being used to facilitate integration between applications and is viewed by some as an

application of the semantic web which is already in use. It is expected that XML will

be further developed so as to realise seamless application integration. Warren (2003)

summarises that it will lead to an extremely knowledgeable system that features

specialised reasoning services to support all aspects of daily life.

The value of a technology lies in its ability to solve particular problems and bring

about improvements in an area. A number of researchers including Durgin & Sherif

[2007], Breitman et al. [2007], and Warren [2003] have discussed how the semantic

web may be applied. These areas may be summarised into knowledge management,

enterprise application integration, eCommerce, and web based collaboration. Durgin

and Sherif [2008] envisage business to business applications of the semantic web as

being the most important. This will require businesses to be analysed and updated to

accommodate the coding of data for the emerging semantic web. In terms of

distributed partnership establishment the semantic web is the key to its realisation.

OEMs and candidate potential partners could define their profiles and publish them

on their company websites. An intelligent agent could search the web for potential

partner profiles to match the OEM’s request profile. Given that the profiles are made

up of semantic data the agent could conduct detailed searches and find appropriate

matches quickly. During this process the intelligent agent may call on other agents

to assist. This would reduce the time needed to set up a collaborative partnership and

improve the chances of a suitable partner being sourced. An intelligent information

search agent would act on behalf of the OEM to find a suitable partner from various

sources using their requirements as guidance. It would only be necessary for the

candidate partners to be registered in one place on the web, as the search agent would

be able to locate them anywhere on the web, and there would be no terminology

misunderstandings because of a shared ontology. Therefore, a much larger pool of

candidate potential partners could be assessed and an organisation would only need

to define its profile once. However, Breitmen et al [2007] sees the ways of

describing all pieces of information as understood by people from different

viewpoints as the challenge to realising the semantic web. Applications for the


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semantic web are only in the early days of development, and technology has not been

developed enough to realise them fully.

3.6.3 Ontologies

Ontologies are an important element of the semantic web. An ontology is a

vocabulary of terms and their relations used to describe an area of interest which is

termed a domain. This commonly agreed set of terms can then be used to

communicate between people and heterogeneous application systems. Ontologies

facilitate knowledge sharing, and are designed so they may be reused and merged

with other ontologies. A model perspective of ontologies views it as a means to

capture and make explicit the vocabulary used in semantic applications, thereby

guaranteeing communication free of ambiguities. Fensel [2001] presents a formal

definition of ontologies as “An ontology is a formal, explicit specification of a

shared conceptualisation”. Where formal refers to the fact that the ontology should

be machine-readable, and the term shared reflects the notion that an ontology

captures consensual knowledge accepted by a group. Breitman et al. [2007] defines

an ontology in terms of a domain as “the study of the categories of things that exist

or may exist in some domain”. Ontologies should not be confused with taxonomies,

also known as classifications. This is because a taxonomy only allows a hierarchical

relationship (“is a”) between data items and does not permit attributes to be assigned

(Breitman et al., 2007). On the other hand a thesaurus is comparable to ontologies

since it represents a taxonomy with a set of semantic relationships such as

equivalence, hierarchy, and association. A thesaurus guarantees that concepts are

described consistently to enable users refine searches and locate information needed.

A number of categories of ontologies, which are divided according to their

application, are proposed by Gomez-Perez et al [2004]. They include (1) knowledge

representation ontologies, (2) generic and common use ontologies, (3) upper

ontologies, (4) domain ontologies, (5) task ontologies, (6) domain task ontologies,

(7) method ontologies, and (8) application ontologies.

Several languages known as web-based ontology languages (OWL), or markup

ontology languages have been developed to define ontologies. According to

Breitman et al. [2007] the web ontology language describes classes, properties and


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relations among conceptual objects in a way that facilitates machine interpretability

of web content. Resource Description Framework (RDF) is one example of a

general purpose language used to represent information about Web resources.

Ontology Inference Layer (Oil) and DARPA Agent Markup Language (DAML) are

two other examples of ontology description language where DARPA stands for the

Define Advanced Research Projects Agency [Breitman et al., 2007]. A collection of

related RDF statements make up an ontology. These statements specify a variety of

relationships among data elements such that logical inferences can be made.

Inference rules which are applied by a software agent to fulfil a user’s requirements

are also defined for ontologies. For example a rule may state that a city code is

associated with a state code and with an address uses that city code. Then that

address has the associated state code.

Ontologies can be used either to improve the accuracy of web searches by using a

search program to look for more precise information or by using ambiguous

keywords. The web does not simply pass information across networks but is

knowledgeable about it. It is expected that the web will be made up of a large

number of ontologies which will be developed to represent various domains with

pointers to each other. A number of tools to create and edit ontologies are already

available including Protege and OilEd [Breitman et al., 2007]. According to

Breitman et al. [2007] ontology development is not particularly challenging when

compared to building other software engineering models. The standard of the

resulting ontology is linked to the ability of the person and the quality of information

they have defined rather than the uploading exercise.

3.6.4 Web Services

Initially, the Internet was just a data provider, but has since evolved into a service

provider also [Breitman et al., 2007]. It is now commonplace to conduct activities

such as purchasing or bank transactions over the Internet. Efforts have been made to

establish standards for developing and using web resources through what has come

to be known as web services. A web service is a software system designed to

support interoperable machine to machine interaction over a network. Hewlett

Packard terms it “apps on tap”. A web service is defined by Adams et al. [2002] as


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software components that are developed using specific technologies from three

primary technology categories:

An XML-based description formation (for example, WSDL)

An application messaging protocol (for example, SOAP)

A collector or transport protocol (for example, HTTP)

The WSDL is used to describe the web service which can then be accessed using

standard network protocols such as SOAP and HTTP. Web services are platform

independent, physical location independent (place where message sent from

irrelevant), application language independent and clients do not need to know what

kind of processor the server uses [Breitman et al., 2007]. Therefore web service

technology enables the use of the web at a global level. Through semantic web

services any software application on the web has potential to reach any other

applications. If applications exchange messages in a way that is compliant with the

web service standards they will communicate independent of operating system,

programming language, processor and internal protocols [Breitman et al., 2007].

Web services bring a dynamic aspect to the use of the web. These automated

services or intelligent agents, as they are called, will be able to access, integrate and

use this information to successfully carry out tasks with minimum human

intervention. Semantic descriptions facilitate the ease of applying web services.

Ontology Web Language – Service (OWL – S) is an OWL service ontology that

documents the terms that can be used with OWL to describe services in a machine

readable format. Web services applicable to partnership establishment include

profile matching and evaluation.

Emerging technology presents significant possibilities to enable distributed

partnership establishment that optimises the chances of the best possible partners

forming an EE partnership. Based on the tenants of a successful process and the key

elements of partnership establishment a process perspective for partnership

establishment is proposed in the following section.


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3.7 Partnership Establishment – A Process Perspective

Undertaking to establish a successful partnership involves bringing together the key

partnership establishment process elements identified in section 3.4, whilst adhering

to the tenants of process theory identified in section 3.3.1. The effort required in a

process initiative is described as complex by Mulligan [2007] with much analysis

and resources needed. Theoretical models are one approach to addressing this

complexity by offering the user guidance during the execution of a process. With

this in mind the author will use one such model to propose how a partnership

establishment process may be implemented. The Work Centred Analysis (WCA)

model developed by Alter [1999] represents a means for an organisation to

understand an existing work process and supporting information systems, or to

design a new one. A work process has human participants to perform a business

process using information, technology and other resources to produce the desired

results for the customer. In this case the WCA model will be used to design a

partnership establishment process that meets the elements and tenants previously

discussed. As per figure 3.6 the framework is made up of six areas that are

interlinked:

1. Customers of the process

2. Services produced by the process

3. Transformation process steps

4. Actors in the process

5. Inputs used or outputs created by the process

6. Technology used by the process

Together the transformation process, actors, inputs, intermediate outputs and

technology are used to create the required services. Where the work involves data

processing an information system is required. Analysis of each of these elements and

their interactions provides a full understanding of how to develop the process. It is

important to note that the transformation process element is core to the overall

process though not considered on its own [Alter, 1999].


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CUSTOMERS

SERVICES

TRANSFORMATION PROCESS

ACTORSINPUTS/

OUTPUTSTECHNOLOGY

Figure 3-6: Work Centred Analysis Model [Alter, 1999]

The arrows indicate the interrelationship between the elements. Each of the elements

in terms of a partnership establishment process is detailed in the following

subsections.

3.7.1 Customers

The people that receive and use outputs from the work process are the customers.

They may be categorised as internal or external customers. Internal customers

participate in adding value to the final product or service that goes to the external

customer. External customers receive and use the final outputs from the system. In

the case of partnership establishment the OEM and potential partners are the

customers. Although the OEM is ultimately the external customer they behave as an

internal customer during some stages of the transformation process.


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3.7.2 Services

The output from a work process may be a mix of information and physical and

service components. In the case of partnership establishment it provides a linking

service for the OEM with EE partners in distributed locations. A number of

supporting sub services are also provided including defining company details,

requirements and offer profiling, potential partner request, matching, and attribute

definition.

3.7.3 Transformation Processes

A group of related steps or activities constitute a transformation process. The steps

have a logical sequence and structure that facilitate the conversion of inputs into

outputs until the final output is produced. People, information and other resources

are used to carry out the process steps and create value for the customers of the

system. In the case of partnership establishment a number of process steps make up

guidelines which when executed facilitate the formation of a successful partnership

including the identification of requirements, definition of profiles, sourcing potential

partners, evaluating potential partners using quantitative and negotiation methods,

selecting a partner, and agreeing the terms of the partnership.

3.7.4 Actors

The humans that carry out work in a work system are the participants. Where

systems are highly automated participants typically have roles that include entering,

processing or using information in the process. The importance of the link between

an information process and its participants should not be underestimated. The

success of an information system relies on the participant entering the required

information accurately and in a timely manner, whilst the participant relies on the

computer system to process the information currently and produce accurate results in

a timely manner. In the case of partnership establishment the OEM, via their

implementation team and senior managers, and the potential partner personnel and

their senior managers will behave as the main participants to enter and use the

required input and output information. Other actors will include the candidate

partner personnel who will submit offer profiles for the initial sourcing stage.


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External experts, previous contacts and representatives of the Chinese government

may be actors during the process depending on circumstances.

3.7.5 Inputs and Outputs

Everything from numbers, text, pictures and multi-media make up information that

can be used in a work process. Information may be created or manipulated within

the process or provided by other processes. An information system will process data,

information and knowledge where data is raw facts, images or sounds that are not

linked to anything to give them purpose. When an information system formats,

filters and/or summarises data it becomes information since it has a distinct purpose.

Finally, knowledge is the effective use of information which is derived based on

instinct, ideas, rules and procedures to guide actions and decisions. Knowledge is

more difficult to automate in information systems. In the case of partnership

establishment data is taken from the ontology to create information in the form of

OEM and candidate partner profiles, which are then subjected to rules in order to

create knowledge about potential partners and their suitability as EE partners.

3.7.6 Technology

The tools that perform work directly or enable people to do work, represent

technology. Examples include printers, computers, and the Internet. The value of

technology is only realised when linked to a business process. In the case of

partnership establishment, online web enabled technology is necessary to facilitate

distributed partnership establishment. In particular, the Internet provides access to a

large number of candidate partners, which, through the use of semantic web

technology, can be evaluated to identify suitable potential partners for an OEM in a

reasonable time period based on multiple objectives and constraints.

3.8 Conclusion

The research findings presented in this chapter suggest that partnership establishment

management is key to the success of a partnership. Therefore, it seems that elements

such as requirements definition, sourcing, evaluation and negotiation are critical.


105

This chapter introduced the complexities of partnership establishment management.

It defined partnership establishment and introduced process theory. Important

elements of partnership establishment were explored in some detail, and a review of

available processes conducted. Emerging information communication technologies

(ICT) and their suitability to enable partnership establishment management for an EE

were discussed. Finally, a concept for the implementation of partnership

establishment from a process perspective was presented.

In order to design and implement an effective partnership establishment structure or

framework for the EE a number of imperatives can be drawn from the research

documented in this chapter. Therefore the following must be considered:

Partnership establishment is made up of a structured set of activities. Therefore,

the framework should support consistency of execution by providing a

systematic approach to partnership establishment

According to process theory, tenants of a process are (a) goal seeking, (b) are

holistic, (c) have boundary, (d) have hierarchical, (e) have inputs and outputs, (f)

have actors, (g) carry out a transformation process, (h) have equi-finality, and (i)

have feedback. Therefore, the framework should strive to facilitate each of these

traits.

Establishing a successful partnership depends on clearly defining both

qualitative and quantitative requirements. Hence the framework should facilitate

the definition of both types of requirements.

Research indicates that the sourcing of optimal potential partners would benefit

from a common profiling method for both OEMs and candidate partners, and

sourcing from a large pool of candidate partners. Consequently, the framework

needs to facilitate comprehensive sourcing in order to optimise the chance of

selecting the best partner.

Evaluating potential partners from diverse locations such as China should be a

combination of proven evaluation techniques and face to face negotiations. The

framework should incorporate both these aspects of evaluation to support the

determination of the suitability of a match.


106

New developments in ICT can act as an enabler to effective partnership

establishment management especially when the OEM and candidate partners are

geographically distributed. Therefore, the framework must endeavour to exploit

emerging ICT developments where possible so as to support the establishment

process.

Realisation of partnership establishment from a process perspective should

consider aspects which include the customers, service provided, transformation

process, actors, inputs and outputs and technology used in the process. Hence the

framework should address these areas.

Chapter 4: The PEM Framework

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4.1 Introduction

4.2 Rationale for a New Framework

4.3 The PEM Framework

4.4 Critical Success Factors Model

4.5 Support System Architecture

4.6 Implementation Methodology

4.7 PEM: An Integrated Systems Approach

4.8 Conclusion

4.1 Introduction

This chapter takes the findings of the previous chapters, and proposes a framework to

support the establishment of partnerships. The application of this framework expects

to improve how companies present themselves, and the chances of the formation of a

successful partnership. A process model for partnership establishment, a

requirements analysis checklist, and a support system architecture for partnership

establishment management are combined to provide the necessary support. This is

termed the Partnership Establishment Management (PEM) framework.

The chapter starts with a discussion on the rationale behind the proposed PEM

framework. This is followed by a presentation of the PEM framework, and detailed

descriptions of each of its elements. The links between the elements are also

addressed so as to demonstrate how the PEM framework supports effective

partnership establishment. The final section of the chapter draws together the main

conclusions of the work presented.

4.2 Rationale for a New Framework

It is clear from literature that forming partnerships to ensure competitiveness is

critical [Chen et al., 2008; Choy et al, 2004; Hans, 2008]. However, sourcing and


108

selecting the right partnership is difficult, with many partnerships failing early in the

partnership, or unsuitable partnerships dragging on for long periods of time as a

result [Dunlop, 2006; Chen et al., 2008; Li-Hua & Khalil, 2006]. Both these

scenarios are counterproductive for both parties. The increasing necessity for

partnerships to be formed between organisations in distributed geographical locations

where development levels, management techniques and cultural differences exist

means that the difficulty in establishing successful partnerships is compounded. A

significant body of work may be found in literature in the area of partnership

establishment, but gaps can be identified. As a result of the author’s interaction with

industry and a detailed review of literature the problems associated with current

partnership establishment practice have been identified. They include:

• Poor presentation of company: Companies often select partners using

information about either themselves or potential partners, which information does

not reflect them accurately. The information used to present the company may

be inaccurate, incomplete, and/or out of date. This may be due to the choice of

words, mis-interpretation of meaning of terms, cultural misunderstandings, or

loss of meaning due to translations. There is a need for a common terminology

and presentation method to be applied by companies for the partnership

establishment process.

• Lack of awareness of requirements for partnerships: Partnership

establishment practices often focuses on the evaluation of potential partners

rather than on the definition of requirements for a partnership. Therefore, only

limited requirements definition practices are in use during partnership

establishment.

• Limited sourcing of partners: Sourcing of potential partners is often very

limited, with no sourcing carried out in some cases. Country specific restrictions

may mean that a potential partner is assigned to a company. Directives from

parent companies may limit the pool from which potential partners may be

sourced. Furthermore, time constraints and a lack of awareness of the range of

sources available to companies are experienced in relation to the extent of

sourcing of partners conducted.

• Lack of structured approach to partnership establishment: Partnership

establishment practices have been found to be conducted in an ad-hoc manner. A

process which allows the systematic definition of requirements, company profile


109

definition, and the sourcing and evaluation of potential partners during

partnership establishment is lacking.

• Ineffective mechanisms for partnership establishment: Online mechanisms

for partnership establishment are limited. Support to address the cultural

differences between potential partners during partnership establishment is not

available. Automatic matching and evaluation mechanisms of potential partners

are missing.

Current partnership establishment practices focus on the later stages of the process.

This is due to the complexity of the evaluation process, and to a lack of research in

the area. As a result, a large body of research has being conducted and published

solely in this area. Often companies were introduced to potential partners through

contacts and overlooked the critical requirements definition, profiling, and sourcing

steps. However, the increased number of partnerships and particularly those between

companies in distributed geographical locations has highlighted the importance of a

complete partnership establishment process which accurately represents companies.

In other words, the later stages of the process cannot be expected to succeed unless

the early stages have been completed successfully. To successfully establish

partnerships a structured approach to partnership establishment which encompasses

both the early and later stages is needed. Therefore, consideration should be given

by the company to develop and understand their partnership requirements as part of

partnership establishment. The importance of requirements understanding is

confirmed by many researchers [Choy & Lee, 2003]. This increases the chances of

sourcing and selecting a suitable partner, and shortens the partner establishment

process. Furthermore, these requirements and other company information must be

presented in a common manner so as to eliminate misunderstandings and facilitate

global partnership establishment. A common profiling approach must be applied

such that a bank of company descriptions is available for sourcing purposes.

Mechanisms which provide machine readable company descriptions for matching

and evaluation purposes are needed. To address the above a framework called the

Partnership Establishment Management (PEM) framework has been developed.


110

4.3 The PEM Framework

In simple terms a framework involves taking a complex concept or process and

representing it in an easy to understand and organised manner [Alter, 1999]. It may

include principles, definitions, methodologies, values, and assumptions, and illustrate

how they are related. Further discussions on frameworks may be found in Alter

[1999]. The Partnership Establishment Management (PEM) framework has been

developed to support the successful establishment of partnerships between

distributed companies. Findings based on best practice and the requirements

identified in section 4.2 are combined to create the framework. In particular it aims

to:

1. Improve how companies present themselves

2. Promote the importance of requirements understanding

3. Improve partner sourcing

4. Enable a structured approach to partnership establishment and lastly

5. Enable partnership establishment support.

The PEM framework is designed to aid manufacturers to initiate the right partnership

during the partnership establishment process. A common company description

method will improve the accuracy of information on which a selection is based.

This, coupled with the ability to create company information in a machine readable

format, will facilitate the establishment of partnerships with companies in

geographically dislocated countries in a timely and accurate manner. Based on the

conclusions of chapters two and three the following is incorporated into the

framework:

• Incorporates a support system that is web enabled to facilitate dislocated

organisations communicate effectively,

• Accommodates long term collaborative partnership establishment,

• Focuses on developing a structure for managing partnership establishment

between companies in developed and developing countries, such as Europe and

China,

• Focuses on developing a structure to manage the establishment of EE

partnerships to allow OEMs retain their global competitive advantage,


111

• Focuses on developing a systematic approach to partnership establishment in

order to structure the necessary activities.

• Facilitates each of the process theory tenants namely: (a) goal seeking, (b)

holistic, (c) boundary, (d) hierarchy, (e) inputs and outputs, (f) actors, (g)

transformation process, (h) eqi-finality, and (i) feedback,

• Accommodates the definition of both qualitative and quantitative requirements

to ensure that complete request and offer profiles can be created,

• Facilitates comprehensive sourcing of (i.e. common profiling method and large

pool of candidate partners) potential partners in order to optimise the chance of

selecting the best partner,

• Incorporates a combination of evaluation techniques and face to face

negotiation to support the determination of the suitability of a match,

• Exploits emerging ICT developments in order to enable effective distributed

partnership establishment management,

• Adopts a process perspective to all aspects of partnership establishment

management (i.e. it includes customers, service provided, transformation

process, actors, input and outputs, and technology).

The PEM framework is made up three key elements namely: a critical success factors

model, a support system architecture and an implementation methodology. The

relationship between these elements is illustrated in figure 4-1 on the following page.

The critical success factors model includes best practices to enable the effective

execution of the overall partnership establishment process via the implementation

methodology, and the web enabled architecture. A best practice checklist is used to

implement the critical success factor guidelines. The architecture itself is developed

in such a way that it prompts the user to adopt a systematic approach to partnership

establishment management. A web enabled software prototype called ePartner

Manager is developed and used to validate the architecture. Lastly, the

implementation methodology offers an overall set of steps, to enable the

establishment of a suitable EE partnership, that guide the use and development of the

architecture and software prototype, whilst also taking into consideration the critical

success factors.


112

Critical Success Factors

Best practices checklist

Architecture

ePartner Manager

Implementation Methodology

PEM Framework

• Strategy & leadership

• Culture & climate

• Sourcing & selection

• Technology & communication

• Structure & organisation

Figure 4-1: The PEM Framework

4.4 Critical Success Factors Model

There are many factors that affect the successful execution of an EE partnership

establishment process by an OEM. Understanding the behaviour of all parties

involved assists in identifying those critical success factors. Strategies and structures

to enable effective requirements definition, profiling, sourcing and selecting of EE

partners must be realised. What is important is that the human, process and technical

elements are all considered in relation to a successful partnership establishment

process. A set of five key indicators are proposed by the author as facilitating

successful partnership establishment. These groups were identified based on an in-

depth review of literature in a number of key research area. Refer to section 2.5

which discusses key enablers for partnership establishment. The development and

refinement of the groupings was supported by a number of case studies.


113

The resulting indicators are as follows:

1. Strategy and leadership

2. Structure and organisation

3. Culture and climate

4. Sourcing and selection

5. Technology and communication

Using these best practice criteria a series of PEM best practices models combining

current management practices from a number of fields of research is suggested.

Each model contains a checklist that may be used by organisations to assess their

PEM position for the given best practice criteria. Together the checklists allow

OEMs to evaluate and assess their establishment process and procedures. Through

their application these traits are expected to contribute to the development of an

optimum environment for efficient and effective partnership establishment. Each

best practice criteria is accessed via 10 statements. Each statement is scored from

one to five according to how well the organisation is meeting that statement. Each

indicator is detailed along with a presentation of the list of best practice statements in

the sub sections below.

4.4.1 Strategy and Leadership

Strategy and leadership represent important enablers for collaboration establishment

between dislocated organisations. A partnership strategy will provide direction and

guidance during the process between the OEM and all potential partners being

considered. The strategy, whose development is lead by the OEM for the entire EE,

addresses both the short and long term expectations and plans for the partnership.

Focus is provided by the strategy in the form of a clear set of goals and objectives.

The expectation is that the main objective is to create a partnership that will develop

over time as trust is increased, and be in operation for a long period of time. Typical

drivers (refer to section 2.3) documented as part of the strategy for initiating the

process include entry into new markets, or the development of new products. A

partnership strategy will include the competitive priorities of the overall EE, how

these priorities expect to be achieved, and timelines in which it expects to reach

them. Research into external and internal factors along with emerging trends must


114

be considered when developing the partnership strategy. It is important that the

strategy is linked with the overall strategy of the organisation, and that compatibility

exists between the OEM’s partnership strategy and the partnership strategies of its

EE partners. It is common for the organisational strategies of members of the EE,

used as the basis on which the partnership strategy is developed, to differ. However,

it is important that there is compatibility and alignment between them. Mismatched

strategies may lead to frustration and misunderstandings with the wrong partner

selected, or the right one overlooked, thereby leading to the ultimate failure of the

partnership. Therefore, what is required is that all parties share a common view on

the overall direction and aim of the partnership in a way that supports the

achievement of their individual strategies, and the shared EE strategy. As a result

when the OEM collaborates directly with a new partner the input from the new

partner will be more detailed. Key requirements are also included in the strategy. In

order to reduce misunderstandings it is important to communicate the partnership

strategy and its implication to all relevant parties in the partnering organisations.

This helps maximise the success of the partnership establishment process.

In terms of leadership, clear motivation and commitment to the partnership must be

demonstrated. These must stem from top management during all stages of the

partnership establishment process. In order to maximise the chances of success,

individuals must be assigned specific responsibilities within the process. Champions

who are assigned as leaders to implement the initiative should visibly drive and

encourage others within the organisation. Support should also be provided to leaders

in the form of training in the area of implementation and management of the

partnership establishment strategy. Decision making should involve a consensus

approach between all relevant partners in the EE. The application of the strategy

together with strong leadership qualities will enable a successful partnership

establishment initiative. A checklist of best practice statements for the strategy and

leadership critical success factor is illustrated in table 4-1 below:

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Table 4-1: Strategy and Leadership Best Practices Checklist

Strategy and Leadership

1. An effective partnership strategy, which reflects both long and short term goals guides the process 1 2 3 4 5

2. The partnership strategy is clearly communicated to all key stakeholders (incl EE partners) 1 2 3 4 5

3. The partnership strategy considers external influences as well as internal resources (incl recent-emerging trends) 1 2 3 4 5

4. Alignment exists between the partnership strategy and the overall strategy of the company 1 2 3 4 5

5. The partnership strategy of each member of the EE is compatible 1 2 3 4 5

6. The partnership planned has a long term thrust and focus 1 2 3 4 5

7. Key partnership requirements are clearly identified 1 2 3 4 5

8. Leaders visibly drive partnership establishment 1 2 3 4 5

9. Senior management must be seen to support the partnership establishment process 1 2 3 4 5

10. Clear responsibility for the achievement and management of the goals is defined 1 2 3 4 5

SCORESTATEMENT

Please circle the extent to which you agree or disagree with each statement below where 1 represents strongly agree and 5 represents strongly

disagree


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4.4.2 Structure and Organisation

The partnership establishment process is characterised by a large number of

individuals representing the relevant functional areas across the EE, who

communicate with dislocated potential partners. The number and location of these

individuals makes information sharing and the co-ordination of activities between the

parties very complex. Therefore, the creation of a partnership establishment team is

recommended to deal with these complexities, and enable the establishment of a

partnership. Each team member brings his/her own competencies that are needed

from within the supply chain to ensure a successful outcome. Every team member

has a clearly defined role that supports shared responsibilities and decision making

between them. This ensures that everyone involved is aware of their personal

responsibilities, and the responsibilities of everyone else. As a result, issues such as

duplication of work, or incomplete work, are avoided and collaboration between

geographically dislocated individuals becomes more manageable. Clear lines of

responsibility contained in the partnership establishment team structure make the

collaboration establishment process more efficient, and ensures that objectives are

achieved in the shortest time possible. A team leader is given overall responsibility

to ensure that the process is properly executed and goals achieved, with team

members being given decision making powers. It is important that the assigned

responsibilities are structured such that decision making is shared between the team

members. All tasks undertaken by this team should be guided by the partnership

strategy and monitored regularly for alignment purposes. Given the dynamics of the

potential partner organisations and partnership establishment, flexibility is an

important feature of these teams. Additional personnel may need to be brought in

and changes made to the team during the partnership establishment initiative. The

use of cross functional and cross organisational teams brings together key elements

needed for successful partnership establishment.

Apart from employing a partnership team, activities undertaken during partnership

establishment must be carefully organised and co-ordinated. Appropriate

organisational structures must be put in place to facilitate this. The structuring of

processes and procedures must support the seamless exchange of information and

knowledge between dislocated parties, such as the EE representatives and the


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potential partners. Issues to be considered here include the provision of process

steps, procedures and timelines to be followed during partnership establishment,

along with information and other relevant support requirements (e.g. drawings,

prototypes). The availability of ICT tools for each team member enables the

efficient and effective sourcing and selection of an appropriate partner. In the

absence of structure and organisation the partnership establishment process will take

much longer to execute, and the chances of errors being made increased.

Competitive pressures mean that the right partners need to be selected in as short a

time as is possible. Given that high levels of interaction with the potential partner’s

organisation can be expected, it is advised that the lines of authority within such

companies are identified. This ensures that correct protocol is adhered to when

dealing with the potential partners. This is particularly relevant in companies from

diverse cultures where decision making structures may differ from European models.

Structures are an important facilitator for partnership success, and must be set in

place to prevent misunderstandings. Without structure, work may need to be redone

due to unclear/undefined roles or procedures. All parties involved must be

represented to give a balanced view to the partnership. A checklist of best practice

statements for the structure and organisation critical success factor is illustrated in

table 4-2 below:

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Table 4-2: Structure and Organisation Best Practices Checklist

Structure and Organisation

1. Partnerships are formed using cross functional teams (may include members of EE) 1 2 3 4 5

2. Partnership establishment teams are flexible 1 2 3 4 5

3. All team activities are driven by the partnership strategy and its associated goals 1 2 3 4 5

4. The team leader has overall responsibility for the effective execution of partnership establishment 1 2 3 4 5

5. Team members are given the authority to make decisions 1 2 3 4 5

6. Team members are equiped with effective ICT tools 1 2 3 4 5

7. The organisational structure promotes effectiveness and efficiency 1 2 3 4 5

8. The organisational structure supports knowledge transfer within the team, and with the potential partners 1 2 3 4 5

9. There are effective mechanisms for the coordination of the partnership establishment activities 1 2 3 4 5

10. Clear lines of authority are identified in the potential partner organisations 1 2 3 4 5


disagree

STATEMENT SCORE


119

4.4.3 Culture and Climate

Seeking a collaborative partner for an EE requires commitment from all members of

the existing EE and their employees. An environment of trust and a culture that is

open to sharing is a prerequisite along with the support to sustain it. This presents a

particular challenge for organisation in relation to culture, and building trust, both of

which are interlinked. Culture can be divided into the individual characteristics of

the organisation, and factors beyond the organisation itself, which are rooted in

national and historical contexts. Regardless of whether two organisations are from

the same continent or country each will have their own individual culture.

Organisational culture is evident in the ‘way’ they work both internally as an

organisation, and how they relate to external entities. Beyond organisational culture,

country based social factors such as politics, language, and customs influence the

culture, and practices of organisations from a region. Therefore, because of their

diverse cultures, partnership establishment between for example, European

organisations and Chinese partners represents a greater challenge than most. To

ensure that the process is effectively and efficiently executed cultural differences and

practices must be acknowledged and understood. The role of adequate resources and

moral support in providing such a climate cannot be underestimated. In particular,

the availability of adequate budgets, appropriately skilled personnel, and autonomy is

needed. When sufficient support is provided, and the partnership strategy and its

associated goals drive activities, the chances of forming a partnership with the

optimum partner are greatly increased. Misunderstandings can also be expected to

be significantly reduced. The provision of support to develop cultural awareness

should be lead by senior management via information sessions as part of partnership

establishment. Parallel to cultural understanding, an environment that enables the

formation of a trust based relationship between organisations is required to facilitate

partnership establishment. Without trust, communication will be guarded and vital

information often withheld. Therefore, two organisations will never feel comfortable

enough to work together with a view to forming a partnership. This will have a

detrimental effect on the partnership establishment process. Trust begins with the

first contact between the partnership establishment team and a potential partner.


120

A classification of levels of trust is presented by Childe [1998] as follows:

Contractual trust; This is confined to upholding the terms of a contract, which

generally are limited to criteria such as delivery or payment deadlines.

Competence trust; Technical and managerial capabilities culminating in the

ability to perform a function are addressed by this trust type.

Good will trust: This represents the most advanced from of trust, where

decisions are taken by an organisation without exploiting their partner. In this

case trust exists without boundaries.

In general, contractual trust would be expected to be achieved through the

partnership establishment process with an evolution towards good will trust taking

place during the lifetime of the partnership. Approach differences and similarities

should be examined to anticipate behaviour or to develop a consensus in relation to

collaborative exchanges between culturally diverse groups. Acknowledgement and

tolerance of other cultures also helps develop trust between the potential partners.

Encouraging and rewarding the exchange of cultural knowledge and practices

between possible partners is required. Cultural practices cannot be changed quickly

and harmonisation between the two cultures must be achieved as a result of team

work and successful exchanges. A checklist of best practice statements for the

culture and climate critical success factor is illustrated in table 4-3 below:

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Table 4-3: Culture and Climate Best Practices Checklist

Culture and Climate

1. The organisation encourages the formation of EE partnerships 1 2 3 4 5

2. An environment exists where trusting partnerships can be established 1 2 3 4 5

3. Adequate resources and support are committed by the organisation to partnership establishment 1 2 3 4 5

4. All activites are driven by the partnership strategy and its associated goals 1 2 3 4 5

5. Senior management is committed to risk taking in partnership establishment 1 2 3 4 5

6. Cultural differences between diverse partners are understood and accepted 1 2 3 4 5

7. Senior management actively supports and leads the creation of cross cultual awareness and trust building 1 2 3 4 5

8. Cultural briefings are provided on organisations from diverse cultures 1 2 3 4 5

9. Resources are made available to create cultural awareness about diverse organisations 1 2 3 4 5

10. Cultural knowledge sharing & trust building is encouraged and rewarded 1 2 3 4 5


disagree

STATEMENT SCORE


122

4.4.4 Sourcing and Selection

Imperative to partnership establishment is the sourcing and selection of a suitable

partner. This is particularly important when organisations are located across the

globe. Robson & Katsikeas [2005] emphasises the importance of applying as wide a

search as economically possible in order to consider many potential partners and

increase the chances of identifying the most appropriate partner. This is confirmed

by Hans [2008], Trafford & Proctor [2006] and Wang & Kess [2006], but yet it is not

common practice. The consequence is that many partnerships are formed, but fail

after a short period of time [Dunlop, 2006; Mansourian, 2008]. The lack of extensive

sourcing is identified as one reason for the high failure rate of partnerships. Many

techniques are available to support the selection of a collaboration partner. However,

the majority exist in isolation from the remainder of the partnership establishment

process, and assume that potential partners have been identified. Also, many are

complex and are manually applied, something which increases the chances of error

and makes information exchange between dislocated parties difficult. In order to

address this, a formal process is needed to manage and support best practices for

partnership establishment. A clear set of predefined requirements are used to

initially screen a pool of potential partners with a view to identifying a small number

of potential partners whose capabilities and partnership competencies closely match

the requirements criteria. An automated method of sourcing is applied to speed up

the process, ensure accuracy and facilitate a rigorous process. The process itself

involves a machine to machine matching of the OEM and supplier organisations

profiles, where the OEM profiles their requirements criteria and supplier

organisations profile their offer attributes from a common ontology to significantly

reduce semantic misunderstandings. The chances of matching compatible partners is

therefore, greatly increased. During selection the potential partners that exhibit

compatibility are assessed in greater detail. Therefore selection and evaluation

techniques and methods should be incorporated into the selection process. As far as

possible technological support to facilitate distributed organisations should be

applied. However, according to Zhu et al. [2007], Fang [2006], and Ma [2006] there

are some aspects of partnership establishment that require face to face discussions.

For example the establishment team should visit the potential partner’s facilities for

inspection purposes and to conduct negotiations. Particularly when dealing with


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different cultures there is no substitute for spending time with a potential partner to

build up trust, agree terms and to learn to appreciate and understand their culturally

influenced ways of working. Balancing the use of technology with direct interaction

is difficult but very necessary. Technology is critical and highly beneficial in the

initial sourcing and pre-selection activities, whereas direct interaction replaces

technology towards the latter stages of partnership establishment. It should be noted

however, that technology still has a role during negotiation for the purpose of co-

ordination, and communication purposes. The potential partners are to be tested for

alignment against the partnership strategy to assess their suitability. All final

selection decisions are made by senior managers in both the OEM and potential

partner organisations. Sourcing and selection is the fourth critical success factor for

partnership establishment. In this view, a formal process must be consistently

followed. Rigorous sourcing is important to ensure suitable partners are considered.

Requirements criteria are matched against offer attributes to test for compatibility

using advanced technologies. The final selection decision is made following face to

face negotiations by key personnel. A checklist of best practice statements for the

sourcing and selection critical success factor is illustrated in table 4-4 below:

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Table 4-4: Sourcing and Selection Best Practices Checklist

Sourcing and Selection

1. An effective partnership establishment process is consistently applied 1 2 3 4 5

2. A formal process effectively manages and supports the key value activities of partnership establishment 1 2 3 4 5

3. Partners are selected using predefined sets of competency and partner capability requirements 1 2 3 4 5

4. Sourcing potential partners is rigorously undertaken 1 2 3 4 5

5. There is a large pool of offer companies, which increases the chances of sourcing the right partner 1 2 3 4 5

6. Potential partners are evaluated for alignment against the organisation's partnership strategy and goals 1 2 3 4 5

7. Potential partner offer attributes are matched to the organisations requirements criteria 1 2 3 4 5

8. Appropriate tools and techniques are used to evaluate suitable EE partners 1 2 3 4 5

9. Face to face negotiations are conducted with the potential partners 1 2 3 4 5

10. Management make the final selection decision of the most suitable EE partner 1 2 3 4 5


disagree

STATEMENT SCORE


125

4.4.5 Technology and Communication

Establishing partnerships with distributed companies has no chance of working

unless efficient and effective communication and information exchanges are

exercised by all the major stakeholders. Therefore, procedures and supporting

mechanisms, including information transfer structures, need to be put in place.

Information to be shared may includes everything from competency information,

requirements criteria, offer attributes, product specifications, process information, to

generic company data. ICT should be in place to facilitate the capture and sharing of

knowledge in an appropriate form. Effective communication, which must be

maintained during the entire process relates to the accuracy and timeliness of the

information. Immediate communication of updated information ensures all parties

are synchronised. Timely communication and information transfer facilitates a rapid

decision making process. Without a fast response time, a partnership cannot hope to

be set up in a reasonable time thereby allowing competitive advantages to be

exploited. This factor is particularly important when two organisations are separated

by geography and time zones. Given that the majority of the information will be

exchanged virtually, this is very complex. Existing technologies such as the Internet,

and emerging concepts such as the semantic web can enable communication between

the EE and dislocated potential partners. As part of partnership establishment,

provision must be made for the availability of structures to promote communication

between all relevant parties. A free flow of information between the parties ensures

that the chances of misunderstandings are minimised. Everyone is kept up to date,

and this helps build trust across the initiating partnership. However, unless there is

compatibility of data formats and technology applied by both parties, clear and

comprehensive information exchange is limited. Linked with technological

compatibility is semantic compatibility. Where all parties involved do not share a

common understanding of the terminology involved in a partnership at the

operational level all communication and partnership establishment initiatives are

wasted. Therefore, a mechanism to assist both the establishment team and the

potential partners document their requirements and capabilities in a semantically

compatible format is critical to ensure that information and instructions are

interpreted, and that appropriate matches can be made. During the partnership

establishment process, sourcing and selection mechanisms help save time, facilitate a


126

wider range of potential partners to be considered, and support the analysis step. The

circulation of regular progress report to all key stakeholders is also beneficial to the

process. In summary, communication and the use of the most up to date technology

are a must for partnership establishment between dislocated organisations so as to

minimise misunderstandings and overcome the geographical and culturally diverse

challenges inherent. Overall it helps build trust, saves time, improves efficiencies,

and helps to maximise the chances of matching the most appropriate partners. A

checklist of best practice statements for the technology and communication critical

success factor is illustrated in table 4-5 below:

127

Table 4-5: Technology and Communication Best Practices Checklist

Technology and Communication

1. Structures exist to promote communication between all the actors along the partnership establishment process 1 2 3 4 5

2. Mechanisms to support efficient and effective communication with the potential partners are employed 1 2 3 4 5

3. Appropriate mechanisms are in place to provide access to information, and to enable seamless information transfer 1 2 3 4 5

4. ICT tools are in place to facilitate the capture and sharing of knowledge across diverse geographical locations 1 2 3 4 5

5. Adequate support mechanisms are provided for the sourcing and selection of appropriate EE partners 1 2 3 4 5

6. The organisations partnership requirements are clearly communicated to all potential partners 1 2 3 4 5

7. Information on attributes, profiles etc. are clearly communicated between the organisation and potential partners 1 2 3 4 5

8. A formal profiling mechanism is used by the OEM and the potential partners to describe themselves 1 2 3 4 5

9. A formal matching and evaluation mechanism is used as part of the partnership establishment process 1 2 3 4 5

10. Progress during the partnership establishment process is communicated to all key stakeholders 1 2 3 4 5


disagree

STATEMENT SCORE


128

4.5 Support System Architecture

The need for a systematic approach to distributed partnership establishment is

enabled by the support system architecture. The group architecture must be

specifically designed to support an OEM during the sourcing and selecting of an EE

partner from a large source of distributed partners. The main objective of the

architecture is to enable both the OEM and potential partners to conduct the

establishment process as effectively as possible, whilst maximising effort and

resources used. The support system architecture provides a dynamic framework for

developing semantically compatible request and offer profiles, automating the

matching process between the OEM and potential partners, and supporting the final

selection and establishment of a partnership. It also facilitates the evaluation of

matching request and offer profiles. Relevant and necessary information is gathered

into one location and then can be manipulated in order to identify suitable partners.

The support system architecture enables potential partners to be filtered and

evaluated based on a set of goal and constraint driven needs. Based on the ARIS

House the support system architecture for partnership establishment management is

developed by the author. This concept was developed by IDS Prof. Scheer GmbH

[Scheer, 1998]. The ARIS House is divided into five views namely; function,

organisation, data, output and control.

Function view consists of processes transforming inputs into outputs. Functions are

goal driven. They may be initiated by organisational entities or by other functions.

They include such functions as define a partnership strategy, and define requirements

in order to verify that the partnership establishment process should be undertaken.

Computer aided software applications may be used to execute and support functions.

In this case these functions address creating offers, and creating request profiles that

allow potential partner matching to be based on semantically compatible profiles.

Others include searching for and evaluating potential partners. This information can

be used to select appropriate partners, and negotiate and sign a partnership contract.

Organisation view creates the hierarchical organisation structure needed to engage

in partnership establishment. Responsible individuals are identified and grouped to

work towards a common goal. In this instance, external experts, an implementation


129

team, personnel from potential partner organisations, and senior management from

both parties are included in the organisation view.

Data view represents the information used and created by the functions to meet the

overall goal. Messages triggering functions or messages triggered by functions are

also handled by the data view. Industry trends and needs analysis provide

background information to support the definition of requirements. The offer profiles,

and request profiles are generated using the attribute ontology, and are then stored in

the data view until needed for search and evaluation purposes. The processes are

constrained so that they align with the organisation’s strategies, competencies,

standards, laws and regulations, and selection criteria.

Output view consists of the result of the partnership establishment efforts, which in

this case is a signed contract between two organisations. Feedback is also an output

of the PEM process. This helps to improve the current process for future iterations.

It includes evaluations of the process steps and support tools. Intermediate outputs

include the partnership strategy, partnership requirements, list of potential partners,

and evaluation results.

Control view manages the integration of the other views. Responsibility assigned in

the organisational view controls the execution of the processes within the function

view. At the organisational level access privilege rights are utilised to control access

to information within the data view. Initiation of functions, or writing to or from the

data and/or output views are also managed by the control view. This ensures that

sequencing is correctly implemented with stage gates functionality.

IT support enables all views to be integrated. In this case a web server, DB server,

web client and web services, and an application level provide this support. From this

the architecture for partnership establishment management is developed. This is

illustrated in figure 4-2.


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Strategy

Competencies

Regulations, laws, standards

Selection criteria

•External experts

•Potential partner personnel

•Senior management

•Implementation team

Responsible

Data output

Data input

Triggers

Is created

•Contract

•Lessons learnt

•Partnership strategy

•Requirements•Evaluation results•List of potential partners

OUTPUT

•Partner request tool

•Offer description tool

•Sourcing & evaluation tool

APPLICATION SOFTWARE

•Add attribute

•Create request profile

•Profile manager

•Evaluate potential partners

•Modify offer profile

•Modify request profile

•Potential partner search

•Strategy & requirements definition

•Create offer profile

FUNCTION

DATA

•Company information

•Needs analysis

•Industry trends

•Attribute ontology

•Request profiles

•Offer profiles

INFORMATION OBJECT

ORGANISATION

CONTROL FUNCTION

Executes

Access rights

Web server

DB server

Web client & web services

Application

Figure 4-2: The Support System Architecture


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The architecture represents all elements of the partnership establishment process and

how they are interrelated. Each of the five views, the constraint information, and the

IT elements are included. Requirements (i.e. brain storming, market analysis,

selection criteria) are used as the basis for request and offer profile generation, which

in turn automates the search for matching partners. An ontology based attribute

library is part of the architecture, and this is used to create both request and offer

profiles. The library is scalable with provision made for new attributes to be added

by the individual or team concerned, through requirements modelling. The potential

partners map the expertise they have to offer onto the offer profile. Using a

matching algorithm initiated by the OEM implementation team all offer profiles held

in the database of the architecture are compared against a selected request profile for

compatibility. The algorithm searches for each attribute title in an offer profile,

returns its value, and compares it against the request attributes value. Attribute

values are divided into binary values (i.e. location Beijing), or range values (i.e. sales

between €20,000 - €100,000 p.a.). This screening or filtering eliminates unsuitable

organisations registered, through the use of compulsory request attributes. All

remaining attributes are used to rank the remaining organisations in terms of their

suitability. Therefore, offer profiles can be dropped immediately, or can progress to

the next stage for filtering or further development. The architecture facilitates the

evaluation of some of or the entire list of potential partners identified to be evaluated

using a weighting factors algorithm. These weighting factors are assigned to each

non compulsory attribute by the OEM when generating the request profile. Each

weighting factor represents the importance placed by the organisation on a given

attribute. Potential partners who rank highest at this point may be selected by the

OEM for further more detailed analysis. At this stage, the potential partners follow

the traditional methods of evaluation where effective techniques such as face to face

negotiation, company visits and team building exercises are used to support these

activities. As a result of these evaluation activities, it is expected that the request and

offer profiles of both organisations would evolve as both parties move towards a

collaboration agreement. In other words, in order to establish collaboration, both

parties work to equalise their original profiles over a number of negotiation sessions

and loops of the profile modification functionality. This, then, forms a common

requirement profile for the resultant collaborative partnership. The architecture


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facilitates the updating of the profiles and rerunning the evaluation functionality. A

functional view diagram of the architecture can seen below in figure 4.3.

Attributes

Requirements

Attribute Ontology

Request

Profile

Offer

profiles

Search for Match

Potential

partners

Evaluate

offers

Company

InformationCompany

Information

Modify

Request &

Offer

profiles

Match

Request

Profile

Offer

Profile

Figure 4-3: Function View of the Support System Architecture

All profile and evaluation information is available to the OEM when making a final

selection decision, and then negotiating the terms of the partnership and ending with

a contract being signed by senior managers in both organisations. The architecture is

supported by a web enabled software prototype called ePartner Manager, which

implements the greyed out sections of the architecture as shown in figure 4-2. This

prototype is used to validate the architecture and is presented in Chapter 5. The PEM


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framework also includes the implementation process for partnership establishment

management. This following section presents this methodology in detail.

4.6 Implementation Methodology

The implementation methodology facilitates a structured approach to partnership

establishment, and this allows companies manage this activity more effectively.

Since partnership establishment involves both an OEM seeking a partner, and

companies offering themselves as potential partners working towards a common goal

the process outlines the steps to be taken by both these parties. A clear and well

defined set of process steps ensure that all parties involved know what they are doing

and why. Without such a structure, time is wasted, and, at worst, may result in

inappropriate partners being selected. Therefore, a generic process which may be

used for partnership establishment initiatives must be developed. The process can be

executed repeatedly in an efficient and predictable manner. This implementation

methodology identifies the main steps required at each stage of the establishment

process thereby providing support to manufacturers globally. The use of such a

structured approach to partnership establishment increases the chances of an

appropriate partner being selected, and the partnership being successful.

An IDEF0 model is used to illustrate the partnership establishment process model.

IDEF0 is used to produce a "function model", where a function model is a structured

representation of the functions, activities or processes within the modelled system or

subject area [NIST, 1993]. Each activity is described in terms of a box with inputs,

outputs, controls and mechanisms. The inputs are converted into outputs by the

activity, with the assistance of mechanisms, while the controls enable the activity to

be executed within defined constraints. An IDEF0 diagram illustrates what activities

the user must undertake, and what is needed to perform those activities. A process

may be described in various degrees of detail, which are represented as hierarchical

levels in an IDEF0 model. The first level, termed A-0, of the partnership

establishment process model using IDEF0 notation is illustrated in figure 4.4 below:


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Partnership establishment

process

needs analysis

industry trends

lessons learnt

contract

ePartner Manager

A-0

senior management

external expertise

internal expertise

competencies

regulations, laws, standards

company strategy

Figure 4-4: Overall Partnership Establishment Process

The main drivers of this methodology include selection criteria, the overall company

strategy, competencies, and regulations, laws and standards. Together with these

drivers the needs analysis of a company, and the trends within its industry are utilised

to create the process outputs. The control and input information form the basis on

which a suitable partner may be sourced and selected. The expected output of the

process is (a) a contract with a company, and (b) the lessons learnt from undertaking

the process. These lessons add to the knowledge of the company in relation to

forming partnerships, knowledge which can be applied in later executions of the

process. This high level view is further detailed in a level A0 IDEF0 diagram in

terms of the activities needed to realise the outputs identified. A review of literature,

along with interactions with industry, shows a need for a common company

description method for the purpose of sourcing and evaluating partners. Therefore,

the partnership establishment process, as illustrated in figure 4.5 and described in

detail in the sub sections below, is divided into six key steps:

1. Define strategy and terms for partnership

2. Generate offer profile

3. Generate request profile

4. Source & select potential partners

5. Evaluate potential partners

6. Select partner and establish partnership


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Each step is designed to consider experience so as to make each step a success.

Organisations can therefore be guided through the partnership establishment process

in a structured way to allow them manage and co-ordinate it effectively. These steps

are illustrated in figure 4.5 and described in detail in the sub sections below. A more

detailed explanation of the implementation methodology can be found in the

Appendix.

4.6.1 Define Strategy and Terms for Partnership

Chen et al. [2008] describes how critical it is for a company, whether seeking a

partner or offering themselves as a potential partner, to spend time internally defining

their needs, develop a strategy to address these needs and define criteria in relation to

partnership formation. Companies often start the process without considering their

own rationale behind either seeking a partner or offering themselves as a partner, and

what their expectations from a partnership are. As a result steps such as sourcing and

evaluation are generally based on very poor information. Therefore, the first step of

any partnership establishment process should take place with both parties defining a

strategy (include the type of partnership sought, duration, long and short term goals)

and identifying their terms (requirements and offer attributes) for a partnership. The

benefit of engaging with external organisations linked to the supply chain is widely

documented [Choy et al., 2004; Chen et al., 2008; Dunlop, 2006]. It is to be

recommended that organisations examine their mission, value potential, strategic

excellence positions/core competencies, and infrastructure to determine the role of a

partner in the EE from a strategic viewpoint. Chen et al. [2008] outlines the need for

a demonstration of why a partnership is required (gaining skills, joint development,

cost reduction, access to new markets), for assigning value to an external partnership,

and for obtaining the full support of top management as being vital to ensure a

successful partnership establishment process. Such activities will enable

organisations to analyse their current situation in order to develop a set of partnership

requirements to enhance their strengths and capabilities. Both partners will also

define what it is they have to offer a partner. This information will then be utilised to

form partnerships that match their needs.

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contract

lessons learnt

Define strategy & terms for

partnership

Generate offer

profile

Source & select potential partners

Evaluate potential partners

Select partner & establish

partnership

senior management

needs analysis

industry trendspartnership strategy

partnership terms

request profile

offer profile

formal invitation details

potential partner profiles

MOU/LOI

updated profiles

evaluation findings

A6

A5

A4

A2

A1

company information

ePartner Manager

external expertise

internal expertise

company strategy

competencies


Generate request profile

A3 list of potential partners

search request profile

Figure 4-5: Implementation Methodology


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This step involves defining requirements as discussed in section 3.4.1 in chapter 3.

These requirements and offers focus on the competencies (resources, IT, product,

management) of a potential partner, and those specific to the partnership itself

(communication & IT, strategy, structure, culture & trust). This step provides

direction to both parties by establishing strategies and a limiting set of criteria to

guide them during the remainder of partnership establishment.

To summarise, defining strategy and terms for partnership is the first activity of a six

step process. Findings based on a needs analysis of the company’s products and the

market trends within the industry along with drivers for partnership establishment

(see section 2.3), may be used to prompt the company to initiate this step, and be

used as input to it. It is clear that companies must make themselves aware of the

trends and needs relevant to their situation as part of partnership establishment. The

interpretation and manipulation of this input information are guided and controlled

through the higher level strategies of the company, selection criteria, competencies,

country specific regulations and governmental laws, and standards. There are two

main outputs from this step namely; a strategy for partnership and the terms on

which a partnership will be established. These outputs act as constraints to other

activities in the process. Resources to support this step include internal or external

experts or a combination of both. The internal experts may include representatives

from marketing, production, procurement, quality assurance and/or development

departments of the company. Where a company does not have the skills internally to

execute this step, external experts may be employed. Together this step provides an

infrastructure that facilitates strategy and requirements definition.

4.6.2 Generate Offer Profile

The success of partnerships establishment is significantly influenced by the manner

in which offer proposals are created. A profile is simply a set of generic facts about

a company, which may be used by other companies to determine their suitability as

potential partners. The offer profile records the capabilities and capacity of the

potential partner. The offer proposal is a mechanism utilised to communicate to the

OEM what the potential partner can do to meet their needs. Organisations are

advised to choose to document their profiles in a systematic manner, and to use a


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common ontology to describe request criterion and offer attributes. Therefore, a

common database of features and descriptors must be provided from which every

company may generate a request or offer profile. Such a facility minimises the

possibility of misunderstanding problems occurring. Since the profiles alone will be

the basis on which a potential partnership will be sourced and initially evaluated, it is

important that they clearly and accurately represent both parties. Only necessary and

pertinent information should be included in the profiles so as to reduce search times

and to improve the chances of matching an offer with a request. The terms

information (in particular the offer terms) from the previous step is evaluated and a

succinct set of facts used to create the offer profile ready to be presented to potential

OEM partners. Information to be included typically addresses strategy,

technological capabilities, management skills, customer details, product types,

country of location, region of location among other factors. Since these factors will

be used for the initial sourcing and evaluation purposes sensitive or detailed

information is not included. For example, information related to intellectual property

rights is omitted. The partnership strategy helps focus a company as to what

information to include in their offer profile. In the view presented above, this

information is the basis for all the remaining steps in the selection process. The

implementation team must lead this activity with the full support of senior

management.

To summarise, generating offer profiles is the second activity in the six step process.

Input for this step takes into consideration both partnership terms (i.e. the output

from the previous step), and generic company information held in the records of the

company. Other sources of guidance that constrain this step include the partnership

strategy (i.e. the output from the previous step), overall company strategy, selection

criteria, internal competencies, and appropriate regulations, laws and standards.

There is one main output from this step namely an offer profile. An offer description

module in the support architecture facilitates this activity. Support for this step also

comes from the implementation team and its multi-disciplinary team members.


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4.6.3 Generate Request Profile

The success of partnerships establishment is significantly influenced by the manner

in which request proposals are created. A profile is simply a set of generic facts

about a company, which may be used by other companies to determine their

suitability as potential partners. The request proposal is a mechanism utilised to

communicate to the potential partners what is required. It represents a set of

requirements and appropriate values expected from a potential partner.

Organisations are advised to choose to document their offer profiles in a systematic

manner, and to use a common ontology to describe request criterions. Therefore, a

common database of features and descriptors must be provided from which every

company may generate a request profile. Such a facility minimises the possibility of

misunderstanding problems occurring. Since the profiles alone will be the basis on

which a potential partnership will be sourced and initially evaluated, it is important

that they clearly and accurately represent both parties. Only necessary and pertinent

information should be included in the profiles so as to reduce search times and to

improve the chances of matching an offer with a request. The terms (in particular the

request terms) information from the previous step is evaluated and a succinct set of

facts used to create the profiles ready to be presented to potential partners.

Information to be included typically addresses strategy, technological capabilities,

management skills, customer details, product types, country of location, region of

location among other factors. Since these factors will be used for the initial sourcing

and evaluation purposes sensitive or detailed information is not included. For

example, information related to intellectual property rights is omitted. The

partnership strategy helps focus a company as to what information to include in their

request profile profile. In the view presented above, this information is the basis for

all the remaining steps in the selection process. The implementation team must lead

this activity with the full support of senior management.

To summarise, generating request profiles is the third activity of the six step process.

Input for this step takes into consideration both partnership terms (i.e. the output

from the previous step), and generic company information held in the records of the

company. Other sources of guidance that constrain this step include the partnership

strategy (i.e. the output from the previous step), overall company strategy, selection


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criteria, internal competencies, and appropriate regulations, laws and standards.

There is one main output from this step namely a request profile. A partner request

module in the support architecture facilitates this activity. Support for this step also

comes from the implementation team and its multi-disciplinary team members.

4.6.4 Source and Select Potential Partners

Sourcing and selecting suitable potential partners is an important step in the

partnership establishment methodology. However, the majority of selection

processes do not include a sortation step. Instead, an assumption is made that

potential partners are known to the company prior to detailed evaluation, or at best,

limited sources are used from which to source potential partners [Sarkis et al., 2007;

Hans, 2008; Maheshwari et al., 2006; Ramanathan, 2007; Wang & Kess, 2006]. Yet,

considering the correlation between the importance of the partnership and the effort

put into searching for a suitable partner expressed by Chen et al. [2008] and Choy et

al. [2004], it is reasonable to conclude that this process warrants the investigation of

as many organisations as is viable. This investigation increases the chances of the

most appropriate partner being identified, something which in turn is strongly linked

with long term success [Robson & Katsikeas, 2005; Dunlop, 2006; Chen et al., 2008;

Li-Hua & Khalil, 2006]. It is from this point on that the process costs start to rise

dramatically as resources for detailed evaluation are needed, particularly in the case

of dislocated potential partners from diverse cultures, which necessitate numerous

face to face meetings. A more cost effective approach involves detecting and

eliminating unsuitable partners at this stage, thereby rendering it imperative to source

extensively. Initialisation of the step is by a company seeking a partner. No active

role is played by those companies offering themselves as partners. Instead their

profiles generated in the previous steps are compared against the requirements of the

companies seeking a partner. The request profile forms the basis on which all those

companies, offering themselves as potential partners, are checked and selected.

Sourcing from a variety of reliable sources is also essential for successful partnership

establishment. In some countries, such as China, formal invitations which propose a

specific potential partner to the company are issued by the government or

representatives of the government. In this situation the sourcing step involves simply

accepting or refusing the invitation. Advantages of this situation include the speed of


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execution of the sourcing step, and the fact that the government will generally

propose one of their top companies as a potential partner. However, a company is

putting itself in a situation where alternatives, which may be better, are not

considered. It should be noted however, that these countries are often difficult to

gain entry into, so a formal invitation may be the only option available to a company.

Previous contacts may also be considered as potential partners. The company may

have worked with the company previously or have recommendations from a trusted

source. This gives such contacts an advantage over other potential companies of

which the company has no previous knowledge. To maximise the sourcing and

selection of potential partners’ activity the rapid and efficient searching of large

databases of offer companies is needed.

Source and select potential partners is the third activity in the six step process. The

request profiles and offer profiles (i.e. the output from the previous activity), formal

invitations and personal contacts make up the inputs to this activity. Controlling the

process involves searching within the boundaries of the partnership strategy, overall

strategy, selection criteria, competencies, and regulations, laws and standards. The

names of those companies that most closely match the requirements along with their

profile information are returned as the output to this step. A sourcing and evaluation

module in the support system architecture facilitates this activity. It supports the

automation of the sourcing and selection step through machine readable request and

offer profiles.

4.6.5 Evaluate Potential Partners

The integration of an external organisation into a supply chain carries high levels of

risk and uncertainty. Therefore, it is vitally important that the partner selected, both

benefits the supply chain, and fits its partnership ethos. Evaluation is the means by

which the potential partners identified in the previous step and the OEM can

exchange detailed information, gain an understanding of each other, and begin to

develop a trusting relationship. This evaluation acts as a basis on which to ascertain

how closely a particular potential partner meets the OEMs organisational goals

relative to other potential partners under consideration, and facilitates the ranking of

them. The importance and complexity of this area of evaluation has been extensively


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documented in literature as testified by authors including Bayazit [2006], Chin et al.

[2008] and Garfamy [2006]. This approach recommends a combined approach of the

application of a mathematical based tool and visits to the potential companies where

face to face negotiations are critical. Although web based tools are very useful in

assessing potential partners, at this stage of the process it is the face to face

negotiations that allow the detailed and sensitive information to be exchanged and

trust to be built up. This is particularly important when negotiating with companies

from other countries and cultures. A number of iterations are completed, and this

allows each party to update their profile. The evaluation activities continue until both

parties are satisfied that all aspects in relation to establishing a partnership have been

considered. The length of time required to conduct this step should not be

underestimated, and varies greatly from partnership to partnership.

Evaluating the potential partners is the fourth activity in the partnership

establishment process. The input to the evaluation step is the short list of potential

partners identified in the previous step, and information about each for evaluation

purposes. Two further optional inputs are a Memo of Understanding (MOU), and a

Letter of Intention (LOI), both of which must be approved by the Chinese

government. A MOU is drawn up and signed by both parties to confirm their interest

in negotiating a partnership. Then the relevant authorised person within both

companies signs a letter of intent (LOI), which indicates their agreement to the

concept of investigating establishing a partnership. Both these documents are often

used when forming partnerships in China, but are not confined to China. Again the

partnership strategy, overall strategy, selection criteria, competencies, and

regulations, laws and standards constrain the activity. Reports constitute the main

outputs of this step. Two main reports are produced namely: (a) evaluation reports,

and (b) updated profiles. This acts as the input to the sixth and final activity in the

process model. The relevant company personnel in the potential partner organisation

and the implementation team make up the support mechanism for this activity along

with the request and offer modules of the support system architecture.


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4.6.6 Select Partner and Establish Partnership

The select partner and establish partnership activity allows senior management of the

request organisation decide who, if any, of the potential partners should be invited to

join their EE. The final phase of this process is the selection of the most suitable

partner and the management of the final partnership establishment tasks. A balance

between the specification and the potential partner’s capabilities and capacities

represents a suitable match for the formation of a relationship [Maheshwari et al.,

2006]. As with negotiation, the selection decision must be one that is driven by a

human rather than one driven by technology. However, it should not be forgotten

that this point in the process would not have been reached without the support of

technology for communication and information exchange purposes. The terms of a

partnership are finalised based on matching request and offer profiles, and on initial

trust between the two parties. This includes deciding how the partnership will

operate and developing a common process model. When both parties are satisfied, a

contract is signed. In the case of Chinese companies re-negotiations are not

uncommon even after a partnership contract is signed. This situation has been found

to be accepted by European companies. During the lifetime of a partnership the

terms of the partnerships constantly evolve, something which leads to many re-

negotiated contracts. As part of this activity it is important that the success of the

process itself is assessed with feedback used to update the know-how of the

company, and to drive the continuous improvement of future applications of the

partnership establishment process.

Selecting a partner and establishing a partnership is the sixth and final activity in the

process model. The evaluation reports (including negotiation and visit information)

and the updated profiles are the main inputs to this activity. The partnership strategy,

overall strategy, selection criteria, know-how, and regulations, laws and standards

help shape the final decision of the company looking to form a partnership. A signed

contract and lessons learnt are the outputs of this final stage in the process. Senior

management from both parties and the implementation team make up the support

mechanisms for this activity.


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The implementation methodology is made up of a number of tasks that allow the

documentation, selection, evaluation, and management of information pertaining to

the effective use of resources in order to establish partnerships. The process model is

based on the critical success factors model and helps scope the research undertaken

in this thesis. Each of these activities is supported in part or totally by elements

within the support system architecture. The next section will demonstrate how each

element of the PEM framework interacts with and supports each other.

4.7 PEM: An Integrated Systems Approach

The objective of this research is to provide the user with an integrated approach to

better manage and control partnership establishment initiatives for the EE. The PEM

framework covers the human, process and technology aspects of partnership

establishment, representing a holistic approach. As discussed earlier, the main

components of the PEM framework are; (a) a critical success factors model, (b) a

support system architecture and (c) an implementation methodology to support the

establishment process. Integration of these elements greatly helps reduce or

eliminate the associated problems of current partnership establishment practices.

The PEM framework uses a systems perspective to support the bringing together and

assessment of information, in a suitable generic form, from a large number of key

players in the partnership establishment process, regardless of their location. That is,

it aims to provide a structure to help OEMs and potential partners effectively manage

the necessary information and activities to form a successful partnership whilst they

are dislocated. The purpose of the systems approach is to capture the unique set of

needs and/or offerings of each organisation applying the PEM framework. Every

organisation has its own way to describe its attributes and to source potential

partners. Therefore, the establishment practices of OEMs vary greatly. This

research proposes a generic method of describing partnership establishment

information, and a generic set of steps, to which to apply this information. In order

to demonstrate how the PEM framework elements work together to enable effective

partnership establishment the remainder of this section addresses each element

separately. The relevant critical success factors are linked with the implementation

methodology stages as illustrated in table 4-6 below. The critical success factors

model represents the first element of the PEM framework. This model gathers


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together best practice, which if implemented enables effective management of the

partnership establishment process. The characteristics of an organisation can greatly

influence its execution of the partnership establishment process. With some

carefully chosen changes to how an organisation operates, it can improve its

partnership establishment activities, and, consequently, increase the chances of

forming successful partnerships. For example, from table 4-6 it can be seen that the

existence of a clear partnership strategy and leadership is one of the critical success

factors that guides the definition of requirements for a partnership.

Table 4-6: An Integrated Partnership Establishment Approach

Implementation Methodology CSF Model

Define requirements for partnership Strategy and leadership

Structure and organisation

Culture and climate

Generate offer profile Structure and organisation

Culture and climate

Technology and communication

Generate request profile Structure and organisation

Culture and climate


Source & select potential partners Sourcing and selection


Culture and climate


Evaluate potential partners Sourcing and selection


Culture and climate


Select partner & establish partnership Sourcing and selection


Culture and climate



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The partnership strategy must include a wide enough scope to cover both long and

short term goals, and be compatible with the overall strategies of each member of the

EE. In terms of leadership the strategy must be visible to all parties involved and

demonstrated through actions when defining the partnership requirements. A second

critical success factor that enables the definition of requirements for a partnership is

structure and organisation. A well managed team representing all relevant functions

enables a complete set of requirements to be defined, which in turn reduces the

chances of overlooking important factors when forming a partnership. Clear

structures promote effective communication, knowledge sharing and allows

dislocated parties to work together. Lastly, culture and climate also represent

important factors in supporting requirements definition. With the correct attitude and

environment, an organisation will identify the most relevant requirements that reflect

their needs from a partner. This includes encouragement, adequate resources and

support from senior management. With these three critical success factors in place

an organisation can expect to optimise the definition of requirements for a

partnership step of the implementation methodology. The remaining four steps in the

implementation methodology are supported by the critical success factors identified

in table 4-6. As can be seen, culture and climate, sourcing and selection, structure

and organisation, and technology and communication are all important enabling

factors for these steps.

The second component of the PEM framework includes the support system

architecture. The architecture provides a dynamic framework for capturing

requirements information in the form of requests, and also for the capturing of offer

information, utilising the same ontology to reduce misunderstandings and ultimately

leading to appropriate partners being matched. Through the use of the architecture,

potential partners can be identified and preliminary evaluations conducted via the

web thereby saving time and effort. Matching and filtering activities can objectively

take into consideration the goals, requirements and constraints of both parties. The

five main modules of the support system architecture promote partnership

establishment. They include:

The Attribute Manager module deals with the attributes. It provides a central

location for all partnership and product features, and their description. These

features can be included in a request profile or in an offer profile. This module


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includes functionality to capture attributes, to update attributes and/or to use

attributes. A common set of attributes is available to all parties involved in

partnership establishment.

The Request Portfolio module addresses the preparation stage of the

partnership establishment process. The OEM identifies what they are looking

for from perspective partners. This is presented in a common form called a

profile. The profile can then be used for companies to compare with offer

profiles, created by potential partners, in order to identify suitable partners.

Also, a request profile can be modified so as to reflect agreements made during

negotiations between an OEM and a potential partner. This module allows the

OEM to express and manage their needs in a generic manner.

The Offer Portfolio profile module is the second part of the preparation stage of

the partnership establishment process. Organisations willing to offer themselves

as potential partners document what they have to offer. As with the OEM’s

requirements a profile is used here. This module captures what an organisation

can bring to a partnership in the same generic format as request profiles. An

offer profile can be modified to reflect agreements made during negotiation

between and OEM and a potential partner. This module allows potential

partners express and manage their offerings in a generic manner.

The Search Request module behaves as the next step in the partnership

establishment process after requirements and offer profiles are created. It

includes functionality to match a request against all offers registered on the

system. Those offers that contain attributes closest to the request attributes are

returned to the OEM. This short listing of potential partners helps the OEM

chose which organisations it wishes to investigate further.

The Evaluate module facilitates a more detailed comparison of the request

profile and the offer profile of the short list of potential partners. Other

evaluation tools can be included in this module such as face to face negotiations,

and company visits. The evaluation of the matching profiles provides a starting

point for the other tools and an up to date record of the closeness of an OEM and

a particular potential partner. This facility allows integration to take place

between all parties involved via the web. At the end of the evaluation process

the evaluation module provides terms on which a contract may be signed

between an OEM and partner.


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The third and final component of the PEM framework is the implementation

methodology. A set of steps are provided that facilitate organisations to pose as both

OEMs and potential partners with a view to forming partnerships in an efficient and

effective manner. Table 4-6 illustrates the steps in the implementation methodology

that provide a structure which organisations can use to manage and to co-ordinate

their partnership establishment activities. These are:

1. Define requirements for partnership

2. Generate offer profile

3. Generate request profile

4. Source and select potential partners

5. Evaluate potential partners

6. Select partner and establish partnership

By taking the time to carefully define what is required from a partnership, with both

the OEM and potential partners applying a generic description method the chances of

forming a successful partnership are greatly increased. This methodology provides a

structure to capture and manipulate the right information at the right time with a view

to partnership establishment.

4.8 Conclusion

A structure for managing partnership requests and offers in a networked environment

has been presented in this chapter and it is termed the partnership establishment

(PEM) framework. The framework is made up of three elements, the first being a

critical success factors model to facilitate an effective partnership establishment

process. These factors must be assessed and managed by organisations wishing to

engage in partnership establishment. A self-assessment form called the Best

practices scorecard was developed based on these factors. This scorecard allows

organisations to measure their performance against best practice with a view to

improving. Secondly, the architecture for virtual partnership establishment is

included in the PEM framework. This architecture aims to facilitate a systematic

approach to distributed partnership establishment management. Lastly, an

implementation methodology is provided to realise the architecture. The

methodology ensures that a systematic approach is applied to manage partnership


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establishment effectively. It is broken into a number of steps that need to be

completed in a predefined manner due to their interrelatedness. The design of the

methodology steps is based on experience thereby ensuring their success.

In order to improve current partnership establishment results, the problems and the

reasons behind them must be fully understood and only then can preventative

measures be put in place. The PEM framework aims to put best practices in place

from the start and thereby prevent, rather than address, partnership establishment

problems. There is a need for organisations to map the PEM framework interfaces to

their existing processes. Adoption of the framework should meet the specific needs

of the organisations that will use it, in order to meet the objectives for which it is

being implemented. Lastly, the partnership establishment framework must be

monitored and developed to suit the user organisations as they evolve.

Chapter 5: Validation of the PEM Framework

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5.1 Introduction

5.2 Case Study Analysis

5.3 Validation of the Critical Success Factors Model

5.4 Validation of the Architecture: ePartner Manager

5.5 Validation of the Implementation Methodology

5.7 Conclusion

5.1 Introduction

The purpose of this chapter is to take the proposed PEM Framework and test its

validity in an industrial setting. Case study analysis was chosen as the method to

carry out this analysis. Case studies provide a qualitative means of understanding the

dynamics within real life scenarios, such as managerial processes and international

relations, which would be difficult to analyse using other methods [Huberman and

Miles, 2002; Yin, 2003; Creswell, 2003]. Case studies are used extensively to

develop and evaluate process theories, such as for thesis and dissertation research, in

the management science areas [Yin, 2003]. Scenario characteristics that can be

identified with case studies include; where “why” and “how” questions (e.g. how and

why a framework/software program does or does not work) have to be asked, and

where the researcher has little control over events [Yin, 2003]. Since the research

documented in this thesis fits these characteristics, the PEM framework was

validated using the case study method. Its application involved implementing the

PEM scorecard (i.e. a self assessment audit which reflects the critical evaluation

factors model) in industry to test the theoretical concepts. Secondly, the ePartner

Manager (i.e. a web enabled software prototype which automates key elements of the

partnership establishment process) was applied in an industrial setting. Finally, the

partnership establishment implementation methodology was mapped against the

organisations’ practices in order to validate its scope and content. The key findings

and results from the case study analysis are summarised and presented in this

chapter.


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5.2 Case Study Analysis

According to a number of experts in the area of research methodologies [Yin, 2003;

Creswell, 2003; and Huberman & Miles 2002] case studies provide researchers with

a tool to conduct detailed analysis of particular situations where no two are similar

enough to allow comparisons, or where controlled experiments are unsuitable. The

case study method compensates for this lack of control in its ability to draw from a

large variety of evidence such as documents, interviews with personnel involved in

the events, and direct observations of the events being studied. This analysis

considers a situation from the point of view of the processes involved, and the

situations context. In other words their interaction is acknowledged. Case studies

have been used in the partnership establishment research fields as evidenced by Zhou

et al, [2008], and Yang & Chen [2006]. Through the execution of systematic and

theory-based research, followed by its evaluation through carefully selected cases, a

theory may be proved or disproved. Of course between the extremes of total

acceptance or rejection suggested improvements for the theory are the more usual

outcome. Prior to applying the case study method the remainder of this section

details:

The validation methodology used in this study

A profile of the participating organisations

The data collection methods employed

The criteria used to validate each element of the PEM framework

5.2.1 Validation Methodology

The validation methodology applied was divided into two stages. These stages are

illustrated in figure 5-1. The first stage was conducted prior to developing the

framework. This involved carrying out interviews and case studies with five

organisations based in Europe and China, all of whom had a history of domestic and

international collaboration partnerships. Senior managers were interviewed, as they

had a holistic view of all the relevant areas to be covered, and discussions were held

with other relevant personnel. The sample was carefully chosen to represent

collaboration on a global scale between dislocated organisations. The sample

allowed different partnership establishment practices and experiences in specific


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industrial contexts to be captured. Case information was collected by visiting these

organisations and by interviewing key personnel involved in the partnership

establishment process. The industrial sector of the studied organisations ranged from

automotive, to mechanical engineering, to domestic appliances, and to electronics.

In terms of size, the organisations varied from 700 to 420,000 employees. The

results of these case studies contributed to the design of the framework. The goal of

these interviews was; (a) to identify the strengths and weaknesses of each

organisation’s partnership establishment practices, (b) to identify factors that

facilitate partnership establishment between dislocated organisations, and (c) to

discuss how improvements are needed to facilitate successful partnership

establishment. Theoretical concepts for the critical success factors model were also

evaluated by the representatives of the organisations. Based on their feedback,

changes were made to this set of concepts. This interaction helped focus the

research, from the start, in terms of its scope and content.

Develop PEM

Framework

2 Case Studies

Implement PEM Framework& Validate

iteration

feedback

5 Case Studies

Identify Requirements Refine & Validate Theory

Figure 5-1: Validation Methodology


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The second stage in the validation process took place when the PEM framework was

developed. Two organisations implemented the PEM framework with a view to

evaluating its effectiveness. Questionnaires were used to gather background

information. The PEM scorecard was used to test and validate the critical evaluation

factors model, and the ePartner Manager was also used, to validate the support

system architecture. Lastly, the implementation methodology was mapped against

each organisation’s partnership establishment process to validate its usefulness in

terms of scope and content. These tools guided the interviews and ensured that

similar and consistent questions were posed in each case organisation. Appropriate

levels of management and personnel within the organisations were involved in the

process. The results of the analysis are detailed in sections 5.3 through to 5.5. Table

5-1 below provides a brief profile of the three organisations involved in the second

stage of the case study analysis. The three organisations are described in more detail

in section 5.2.2.

Table 5-1: Profile of Organisations used to Validate the PEM framework

Case A Case B

(EU partner)

Case B

(Chinese partner)

Contact Engineering

manager

Director of

outsourcing

Production manager

R&D manager

Managing director

Purchasing manager

Industry type Automotive Domestic appliances Mechanical

Base location Europe Europe China

Size Large Large Medium

Collaboration types JV partnerships

Supplier contract

JV partnerships Domestic supplier

agreements

5.2.2 Profile of Organisations Analysed

Case A is a European based multinational manufacturer that supplies automotive

products such as cars, trucks and buses to countries worldwide. A total of 130

production plants engaged in mass production are operated by case A all over the

world. With an annual turnover in the region of €150 billion, an export share of 64%

outside of Europe, and in excess of 420,000 employees it is considered a market

leader in the industry. The company formed its first partnership in China in 1984.

Currently, it is engaged in two JV partnerships, and is negotiating a further three.


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The motivation behind the partnerships formed in China is to gain entry into the

largely unsaturated automotive market in China. In return the organisation provides

money, technology and training in the areas of technology, quality management, and

other management methods to its Chinese partners, which are poorly developed in

comparison to western standards. The requirements are defined by an expert within

the company, and documented on paper. Requirements take the form of drawings

and specification lists. The sourcing of potential partners is driven by the need to

find the right partner in the right location with the right contacts rather than by

technological, qualitative or managerial levels. Potential partners are sourced in the

provinces where the government offices are located, since it buys approximately

60% of all the cars produced in China. This relates to the government policy that

only allows products to be sold in the province in which they are produced.

Assessment of potential partners includes visiting the potential partner’s organisation

to review, among other things, their production and financial situation. References

are also sought from other partnering organisations. Face to face negotiation is

critical to the successful formation of a partnership, with renegotiations regularly

taking place after the contract has been signed by both parties. Although this would

be an unacceptable practice in western partnership establishment, it is tolerated as a

good will gesture in the case of China due to cultural differences. No tools are used

to evaluate and select a JV partner. Also, the company has very limited means of

communication between the company and potential partner (e.g. phone, email,

spreadsheets). Other problems related to the partnership establishment practices of

the company include the following:

Company A utilises an informal partnership establishment process, which often

can result in partnerships being formed that, later, are found to be unsuitable

matches. The company highlighted a number of previous partnerships that were

unsatisfactory. These led to losses of significant amounts of money and moral.

Therefore, it seems a structured approach to partnership establishment is

required.

The partnership establishment process takes company A on average 4-5 years to

complete. Difficulties sourcing suitable potential partner organisations mean

that time is often wasted visiting organisations that prove unsuitable, or that a

limited number of potential partners are considered and evaluated. This problem

is also compounded by the lack of a pre-evaluation method to assess the


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suitability of potential partners. Therefore, access to a large pool of potential

partners is required with support to pre-evaluate potential partners.

The company uses a very ad hoc manual method to source potential partners.

This method is very time consuming. Often it is cut short because of time and

monetary constraints. Therefore, suitable potential partners may be overlooked.

The lack of structure during the sourcing process also means that the evaluation

method is inconsistent and subject to the subjective opinion of the person

responsible. It would seem, therefore, that a formal sourcing mechanism which

applies an automated method of sourcing to speed up the process, increase the

number of companies considered, and improve consistency, is needed.

Case B (European partner) is made up of two companies that share a JV

partnership. The partnership includes a European based multinational domestic

appliances manufacturer (refrigerator division), and a Chinese parts manufacturer,

which formed a JV in 1993 in order to produce compressors for fridges. This case

represents a typical joint venture between a European company and a Chinese

partner company with the European company holding a share of just under 50%. A

total of 10 production plants engaged in mass production are operated by the

European partner worldwide. It has an annual turnover of around €1,248 million,

and employs approximately 9,000 employees. Since 1988 they have worked with the

Chinese State Government to form partnerships with Chinese manufacturing

companies such as the parts manufacturer in this case. Case B is currently involved

in two partnerships with Chinese manufacturing companies. The partnership

establishment process is initiated by the Chinese government. An offer is made by

the Chinese government to the company to form a partnership with a pre-selected

Chinese manufacturing company. The company is approached by the government

following an assessment of western manufacturers to assess their technological

and/or managerial know-how. Only those companies considered useful for the future

Chinese economy receive such invitations. In return the Chinese partner provides

capital, market penetration possibilities, location, and a low cost base. The Chinese

partner having limited management capabilities, is provided with training. A

difference in culture also results in the retraining of personnel to meet European

standards. The partnership establishment process is made up of the evaluation of the

potential partner and the negotiation of the terms of the partnership agreement. In


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other words no formal method to define requirements or source a number of potential

partners is applied since the process is initiated by the Chinese Government. During

the partnership establishment process, little or no information technology support is

used (only Microsoft word is used to a limited extent) with everything written on

paper. Communication is based on frequent visits by the European company to the

potential Chinese partner’s facilities. Evaluation of the potential partner, and the

terms of the partnership are determined through face to face negotiations. A

feasibility study is carried out to assess the viability of a potential partnership.

Personnel from the Chinese company also travel to Europe to send time in the

European company’s plant. Although meeting face to face has its benefits, the

partnership establishment process takes 1-2 years to complete, a time span which the

company concedes is too long. Problems relating to the management of the

partnership establishment process include the following:

Case B uses little to no information technology when executing the process.

Without IT the number of inaccuracies, version control problems, and

inefficiencies (writing information many times) are greatly increased. The

management of requirements and offer attribute information is ad hoc as

opposed to planned. Communication between the parties is difficult and slow.

Therefore, it seems a partnership establishment management support system is

needed to enable the effective management of partnerships, whilst they are being

established.

Although the company has found its partnerships a success, they do identify a

problem in obtaining the required quality standard from their Chinese partners.

The partnering company does not have the expected skills that Case B company

thought they had during evaluation. Both companies define their requirements

and offer attributes using their own methods. Therefore, when comparing what

is required against what is offered to meet these requirements,

misunderstandings take place. A formal requirements and offer attributes

definition method is missing. A systematic requirements and offer attributes

definition method would seem to be needed to reduce the number of

misunderstandings and increase the chances of selecting the correct partner.

The set of evaluation criteria applied by Case B to evaluate its potential partner

is incomprehensive. Market penetration is viewed as the most important criteria,

with other criteria overlooked. Criteria definition is missing from their


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partnership establishment process. Therefore, a set of critical partnership

evaluation criteria would seem to be needed along with a requirements definition

stage in the partnership establishment process.

Case B (Chinese partner) are a manufacturing company based in China who

represent the main suppliers of refrigerator compressors for the Chinese market with

a 6% market share in the domestic market for freezers and refrigerators. Their

annual turnover is approximately €30 million. The company has just under 800

employees and one company site where all the product life cycle tasks are performed

except for the design, which is conducted in the European plant by the appliance

manufacturer. Mass production techniques are used. Apart from this partnership, the

case company has a number of supplier agreements with companies, located in China

independently of the Chinese government. Motivation for this Chinese partner to

engage in the partnership is to improve product design, improve their administrative

and operation quality and efficiency, reduce costs, and learn new operational and

management techniques. In terms of offer attribute definition, an informal method is

used with general principles followed rather than having fixed criteria. In the

company’s opinion legal and traditional factors determine how the evaluation and

selection stage of the process is executed. As mentioned in the description of the

European partners of this case, all information related to the partnership

establishment process is documented on paper. The company does, however, have

intermediate levels of IT in the form of email, AutoCAD, Catia, Word, and Excel but

these are only used for communication purposes during the partnership. These tools

represent a wasted opportunity as they could be used to implement the perceived

improvements for the management of partnership establishment. The company

identify a need for more IT support during this activity.

5.2.3 Data Collection Methods

The case study method is very versatile covering both quantitative and qualitative

data collection methods such as a) observation, b) interviews, c) audio visual, and d)

questionnaires [Yin, 2003; Creswell, 2003]. However, as with all research

methodologies there are inherent weaknesses. The strengths and weaknesses of each

according to Creswell’s [2003] findings are illustrated in table 5-2.


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Table 5-2: Analysis of Data Collection Methods [Creswell, 2003]

Method Strengths Weaknesses

Observation Researcher has first hand experience

with participant

Researcher can record information as it

is revealed

Unusual aspects can be noticed during

observation

Useful in exploring topics that may be

uncomfortable for participants to discuss

Researchers may be seen as intrusive

Private information may be observed

that the researcher cannot report

Researcher may not have good attention

and observing skills

Certain participants may present special

problems in gaining rapport

Interviews Useful when participant cannot be

observed directly

Participants can provide historical

information

Allows researcher ‘control’ over the line

of questioning

Provides indirect information filtered

through the views of interviewees

Provides information in designated place

rather than the natural field setting

Researcher’s presence may bias

responses

People are not equally articulate and

perceptive

Documents Enables a researcher to obtain the

language and words of participants

Can be accessed at a time convenient to

the researcher – an unobtrusive source

of information

Represents data that are thoughtful in

that participants have given attention to

compiling

As written evidence, it saves a

researcher the time and expense of

transcribing

May be protected information

unavailable to public or private access

Requires the researcher to search out

the information in hard-to-find places

Requires transcribing or optically

scanning for computer entry

Materials may be incomplete

The document may not be authentic or

accurate

Audiovisual

materials

May be an unobtrusive method of

collecting data

Provide an opportunity for participants to

directly share their ‘reality’

Creative in that it captures attention

visually

May be difficult to interpret

May not be accessible publicly or

privately

The presence of an observer (e.g.

photographer) may be disruptive and

affect responses

To overcome the weaknesses of individual methods, a combination of these data

collection methods were used, including focused questionnaires, in-depth study

interviews, and company specific documentation for each of the cases. This is

known as triangulation [Creswell, 2003]. The purpose of the questionnaire was to

structure discussion rather than inhibit it.


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5.2.4 Validation Criteria

A set of criteria as illustrated in table 5-3 below was chosen to validate the

framework developed in this thesis.

Table 5-3: Set of Validation Criteria and Assessment Guidelines [Cormican, 2005]

Criteria Description

Effective Does the methodology work?

Does it solve the problems, or produce the products, for which it is intended?

Do projects that follow the methodology turn out successfully?

Efficient Are all the tasks and activities prescribed by the methodology strictly necessary?

Are all legitimate short cuts exploited?

Is there any redundant effort?

Universally

applicable

Comprehensive

Does the methodology work across the whole of a domain?

If there are any restrictions on the range of situations that the methodology can handle, are these

restrictions well understood?

Does the methodology work in any organisation size or culture?

Does the methodology have limits of the size or complexity of projects it can handle?

Reliable

Accurate

What risks are involved in using the methodology?

How are the risks minimised?

At what stage of a project can we be reasonably certain of success?

What quality control procedures are there, and how do they work?

Stable

Robust

Flexible

Evolving

Is the methodology tolerant of minor errors and alterations?

Does the methodology allow for human imperfection?

Does the methodology contain a self-preservation mechanism, to maintain its relevance within the

organisation?

Is the methodology capable of incremental change, to cope with new ideas or technological

opportunities?

Is the methodology capable of incorporating improvements learned from experience?

Simple & easy

to learn and use

Acceptable to

participants

Is the methodology targeted at a well-defined population?

Is the methodology based on a coherent set of concepts and techniques?

Are all the concepts and techniques strictly necessary?

Does the methodology conform to the prevailing conceptual paradigms and values?

Is it easy to motivate people to adhere to the methodology?

Is the methodology scalable

Manageable Does the methodology provide guidelines for the management environment of the project?

Does the methodology clearly state what it regards as success or failure of a project, and provide

suitable measures

Is the methodology self-monitoring? Does it provide the project manager with information about the

effectiveness of the process?

Visible

Comprehensible

Does the methodology make its reasoning clear and visible to the participants, so that they can

intelligently judge the relevance and completeness of each piece of work?

Do participants attribute their successes (if any) to the methodology?

Well supported To what extent are relevant tools, skills and services currently available to support this

methodology?

What are the future prospects for the development and commercial dissemination of such tools,

skills and services?


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Literature that deals with validation criteria for frameworks and methodologies is

very limited. Authors such as Olsen and Elram [1997] propose internal logic, truth,

acceptance, applicability and novelty value as possible validation criteria. However,

this set of criteria is not comprehensive enough to deal with the diverse nature of

frameworks, and is difficult to apply according to Mulligan [2007]. Cormican

[2005] puts forward a comprehensive set of validation criteria along with

accompanying assessment questions. The set of criteria illustrated in table 5-3 was

chosen from this list. Each of the three elements of the PEM framework, namely the

critical success factors model, the support system architecture and the

implementation methodology was evaluated using this set of criteria.

5.3 Validation of the Critical Success Factors Model

A critical success factors model for partnership establishment management was

presented in Chapter 4. This model is made up of five key categories identified as

being essential for successful partnership establishment namely:

1. Strategy and Leadership

2. Structure and Organisation

3. Culture and Climate

4. Sourcing and Selection

5. Technology and Communication

The determination of these categories was determined based on a comprehensive

review of literature. The refinement and improvement of these theoretical concepts

was carried out using iterative case study analysis. Then, with a view to validating

the categories in an industrial setting a number of concrete statements which were

combined into the partnership establishment management (PEM) scorecard (refer to

tables 4-1 to 4-5) was developed. The implementation of the PEM scorecard in a

number of organisations enabled those organisations to understand their strengths

and weaknesses in terms of partnership establishment management. Interviewing the

managers facilitated the validation of the scorecard through a series of questions in

relation to its effectiveness (i.e. how useful, applicable and appropriate the

statements are) and to its practicality (i.e. how pragmatic, functional and deployable


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the statements are). The remainder of this section discusses how the scorecard can

be implemented and highlights the key findings from the validation process.

5.3.1 Implementing the Best Practice Checklist

The PEM scorecard was implemented in all companies that participated in the case

study. However, for the purposes of illustration two companies were chosen to

describe how the process works. The first (Company A) is a European based

multinational manufacturer. The findings of the scorecard reveal that many of the

best practices highlighted are adopted and used in this company. This organisation

scores well across all five of the categories in the critical success factors model as

illustrated in figure 5.2. In particular, the company demonstrates strength in the area

of sourcing and selecting. Considerable effort is made to define the partnership

requirements and to select the right partner. For example, evaluation of potential

partners involves visiting their companies, conducting face to face negotiations, and

obtaining references for them. This activity is supported by the provision of

appropriate infrastructures. For example, this organisation has an effective

partnership establishment team with experts in relevant areas. There is also a

partnership establishment process in place, and this is utilised. The second

organisation, chosen to illustrate the PEM scorecard in action, does not perform as

well as the first. This organisation (Company B) is a European based multinational

manufacturer. In this instance the company scores below average in all of the five

areas critical to partnership establishment management as illustrated in figure 5.2.

More specifically, this organisation scores particularly low in terms of strategy and

sourcing. In this case, the organisation’s partnership establishment activities are not

guided by a partnership strategy. Instead it operates in an ad hoc manner in response

to invitations, from the Chinese government, to form partnerships with pre-selected

Chinese manufacturers. Consequently, other more suitable partners may be

overlooked. Furthermore, the communication infrastructures and technology support

are very poor. Therefore, frequent visits are necessary to maintain communication

between both parties. Consequently, the process is longer, and more difficult, with

high levels of misunderstandings.


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1

2

3

4

5

Strategy and Leadership

Structure and Organisation

Culture and Climate

Sourcing and Selection

Technology and Communication

Case B

Case A

1 = Strongly agree; 2 = Agree; 3 = Neutral; 4 = Disagree; 5 = Strongly disagree

Figure 5-2: Implementing the PEM Scorecard

5.3.2 Strategy and Leadership

The importance of an effective strategic plan for successful partnership establishment

management is agreed by most of the managers. This is particularly relevant when

the OEM and potential partners are geographically dispersed. Managers highlighted

that “an effective partnership strategy, which reflects both long and short term goals

guides the process”, and “key partnership requirements are clearly identified” are the

most important and effective characteristics for partnership establishment in terms of

strategy. However, following an analysis of the case study it was found that

organisations do not exercise sufficient effort to identify their key requirements.

Most requirements are developed in an informal manner without a requirements

definition process. It also emerged that while some defined sets of requirements are

comprehensive, others are vague and unclear. Therefore, a new trait for the PEM

scorecard could read “a formal partnership requirements process is applied”. Also,

there is evidence that partnership requirements are defined after potential partners are

identified. In other words requirements are not used to guide the identification of

potential partners. Therefore, “partnership requirements guide all partnership

establishment activities” could also be included in the Strategy and Leadership

category.


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Success of a partnership establishment initiative was taken to be based on effective

leadership. The majority of organisations, who are serious about establishing EE

partnerships, will ensure that strong leaders are in place to motivate and guide the

partnership establishment process, and take responsibility for its outcome. The trait

identified as contributing the most was “clear responsibility for the achievement and

management of the goals is defined”. On the other hand the weakest trait of this

category was identified as “leaders visibly drive partnership establishment”. The

reason given was that it is too subjective, and difficult to measure.

5.3.3 Structure and Organisation

Team-based structures are applied to partnership establishment activities by most of

the organisations analysed in this study. “Partnerships are formed using a cross

functional team” was considered to be a strong trait in this category. The findings of

this analysis reveal that cross-functional teams provide a more balanced view across

the entire organisation. However, most managers concede that the teams often do

not include representatives from all relevant functions. With this in mind, another

trait for this category could read “partnership establishment teams include

representatives from all relevant functions”. Furthermore, the trait “team members

are given the authority to make decisions” is identified as being weak, the reason

being that it was ambiguous in terms of the kind of decision a team member could

make. Seniority of decision makers is linked with the importance and risk associated

with a decision. Therefore, the trait could be amended to read “team members are

given the authority to make decisions relevant to their role”. It was also suggested

that the trait “actors along the partnership establishment process are equipped with

effective information and communication tools” would be more appropriate in the

technology and communication category, and could be removed from this category.

This analysis found that when an OEM and their potential partners are distributed

geographically, coordinating partnership establishment activities becomes difficult.

Therefore, a formal and systematic organisational structure is important. However,

the more formal the organisational structure is, the greater the chance is that

responsiveness and flexibility will be lost. Therefore, another trait for this category

could read “organisational structure has a positive effect on partnership


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establishment; it does not hinder its responsiveness and flexibility”. This trait

assesses whether organisations have a good balance between organisational structure

and flexibility.

5.3.4 Culture and Climate

An organisation’s culture (i.e. values, norms and beliefs) and climate (i.e. policies,

practices and procedures) were found to have a positive effect on successful

partnership establishment management. In other words, members of an organisation

are actively encouraged to engage in partnership establishment, take risks, and be

open to diverse cultures. Such organisations enable trusting relationships to be

developed. According to the case study analysis the strongest traits in this category

are “senior management actively supports and leads the creation of cross cultural

awareness and trust building” and “resources are made available to create cultural

awareness about diverse organisation”. These traits are clear and actively support the

development of a culture and climate where partnership establishment can take place.

This analysis found evidence to suggest that the trait called “cultural knowledge

sharing & trust building is encouraged and rewarded” is very important in this

category. Individuals involved in partnership establishment have different roles and

competencies and therefore, different contributions to add to the process.

Consequently, it can be difficult to reward such individuals fairly and equitably.

This is a weakness of this trait, making it a challenge to implement.

5.3.5 Sourcing and Selection

During analysis, sourcing and selection was found to be the most important area in

successful partnership establishment management. However, it was also found to be

the most in need of attention. “An effective partnership establishment process is

consistently applied” was considered to be a strong trait in this category. However,

most managers concede that they suffer from poor sourcing of potential partners.

Sourcing in general is informal, lacks a systematic approach, with mainly only

organisations known to the OEM considered. Managers also note that they lacked a

structured approach to defining the OEM requirements and candidate potential

partner offer profiles. Therefore, another trait for this category could read “OEM and


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candidate potential partner profiles are systematically defined”. This analysis also

found that there are insufficient tools available to support profile definition. With

this in mind a new trait labelled “a formal profiling mechanism is used by the OEM

and the potential partners to describe themselves”. Furthermore, there are either

insufficient or inadequate tools available for potential partner sourcing. With this in

mind, another trait reading “sufficient and appropriate tools are used to support

potential partner sourcing” could be added to the scorecard.

The analysis also revealed that, while most potential partners are evaluated using

mathematical techniques, managers found that “face to face negotiations are

conducted with potential partners” is a very effective trait. This is found to be

particularly significant as the OEM and potential partners are geographically

distributed. Also, the trait that reads “management make the final selection decision

of the most suitable EE partner” is considered a significant trait for successful

partnership establishment. Regardless of the techniques or tools applied to

partnership establishment, a manager takes all the information into consideration

before making a final decision.

5.3.6 Technology and Communication

Technology and communication is kernel to successful partnership establishment

management. This is particularly evident when the OEM and potential partners are

not co-located. Face to face interaction is hailed as the most powerful, effective and

productive form of communication between the OEM and potential partners.

However, due to the extensive distance between Europe and China the frequency of

such meetings is restricted. Therefore, organisations rely heavily on emerging web

technologies in order to support sourcing potential partners and establishing an EE

partnership with a suitable company. With this in mind the trait “actors along the

partnership establishment process are equipped with effective information and

communication tools” could be included in this category. In general, this study

found that the trait reading “information and communication technology tools are in

place to facilitate the capture and sharing of knowledge across diverse geographical

locations” is a strong indicator of success in this category. It seems that technology

enabled communication is particularly important when distance is an issue.


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Problems involving misunderstandings can and do occur. It is often difficult to

express what an OEMs requirements are and what a potential partner has to offer.

Therefore, the trait “information on attributes, profiles etc. are clearly communicated

between the organisation and potential partners” is a strong indicator of success in

this category.

It was also suggested that the trait “a formal profiling mechanism is used by the

OEM and the potential partners to describe themselves” would be more appropriate

in the sourcing and selection category, and could be removed from this category.

Finally, organisations have and use many different information technology systems

and tools. However, these are not linked to each other and there is no co-ordination

effort in place. With this in mind, an additional trait could read “information systems

complement each other and are linked to each other”.

The following analysis details how the PEM scorecard and therefore, the critical

success factors model performs against Cormican’s validation criteria.

Effective: The validation process demonstrated that industry has appraised the

PEM scorecard and thus the critical success factors model, and found it to be

both useful and effective.

Efficient: The validation process insured that the traits in the scorecard

addressed the scope of partnership establishment. Traits that were found to be

irrelevant were eliminated from the scorecard, while additional traits were added

to the scorecard where considered necessary. The critical success factors model

was updated accordingly. Therefore, it can be said that the critical success

factors model incorporates all necessary traits.

Universally applicable: The case studies used to conduct the validation were

relevant to the research domain (i.e. European OEMs engaging in EE partnership

establishment with Chinese organisations) and demonstrated that the critical

success factors model applies to the domain for which it was intended. Also the

use of case study analysis in determining and refining the theoretical concepts at

the start as well as for the final validation process insured that the critical

success factors model was applicable to organisations involved in partnership

establishment.


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Reliable: The traits in the PEM scorecard are based on known and accepted

theories. Therefore, it can be said that the critical success factors model forms a

logical foundation to the research and thereby is reliable and minimises risk to

an acceptable level.

Stable: The PEM scorecard is made up of fifty statements divided into five

categories. Following the validation process, amendments were made to the

critical success factors model, via the removal and addition of traits in the PEM

scorecard, without compromising its integrity. Therefore, it can be said that the

critical success factors model is stable while at the same time open to

incremental changes.

Simple and easy to learn: The application of the PEM scorecard is based on

known and accepted theories. Therefore, managers found the PEM scorecard

easy to use and thereby acceptable.

Manageable: The validation process demonstrated that industry could clearly

determine the success and failure of each trait of the PEM scorecard via suitable

measures. Therefore, it can be said that the critical success factors model is

manageable.

Visible: The validation process demonstrated that managers have appraised the

reasoning of the PEM scorecard and found it to be visible and comprehensive.

Well supported: The managers found that the PEM scorecard was an innovative

and relevant mechanism to support the assessment of the concepts contained

within the critical success factors model.

5.4 Validation of the Architecture: ePartner Manager

In order to validate the support system architecture presented in chapter 4 (refer to

figure 4-2) a web enabled software tool named ePartner Manager was developed.

The ePartner Manager is made up of a number of modules that facilitate the storage

and manipulation of information that is needed in order to effectively manage the

partnership establishment process. The key objective of this software was to capture

critical partnership establishment that is relevant to the execution of an effective and

systematic partnership establishment process. The first step in applying the support

system software involves the candidate partner generating an offer profile that

represents what the company has to offer as a basis on which to form a partnership.


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This is carried out in the offer portfolio module. In parallel, an OEM generates a

request profile in the request portfolio module to represent what they are looking for

in order to consider forming a partnership with a company. Both the offer portfolio

and request portfolio modules support the capture of critical information for sourcing

matching requests and offers that are semantically comparable. Once this is done,

the OEM activates the start partner search function in the request portfolio module to

match their request with suitable offers. The system uses the request to

automatically identify those offers that most closely match the request and returns

the results of the search. From the search results a list of potential partners is

selected by the OEM and stored by the system. The search results can be viewed

from the initiatives module. To support the evaluation and negotiation steps of the

process the support system has an initiatives module. This module contains views of

the request profile and potential partner offer profiles, and enables contents of the

profiles and the matching comparisons to be updated to reflect the decisions made

following evaluation and negotiation activities. The homepage of the ePartner

Manager as illustrated in figure 5-3 is the entry point for the user.

Figure 5-3: Homepage and Login Page of the ePartner Manager


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The ePartner Manager support system was successfully modelled using data from

two of the case companies in order to explain its functionality and validate this

thesis. A number of screen shots are used to support the validation discussion. Once

logged in, the user’s personal profile manager screen opens as illustrated in figure 5-

4. From this page the user can access and manipulate information they have stored

during previous sessions, or create / obtain new information via the available

functions within the support system modules. The key modules to support the

partnership establishment process include an offer portfolio module, a request

portfolio module, and an initiatives module. A fourth module entitled company

details is used to capture generic details (i.e. company name, address details, contact

details, website address) about each company that registers with ePartner Manager,

but is not key to the partnership establishment process. The relevant functionality

within the key modules is presented and discussed in more detail below.

Figure 5-4: Personal Profile Manager


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The generate offer profile window presents a view of the offer attributes that make

up an offer profile. These attributes describe the capabilities on which a company

has to base a partnership with an OEM. The case companies revealed that offer

profiles are generated in an ad-hoc manner, a fact which results in incomplete or

inconsistent information being used during partnership establishment. Therefore,

this module has been developed in order to capture a complete set of offer attributes.

The two fields used to capture the offer details include attribute name and attribute

value. As many attributes as are needed can be added or removed from the offer

profile by selecting the attribute manager menu option at the bottom of the screen.

An appropriate name that describes the offer profile should be entered manually in

the name field at the top of the offer profile view. Figure 5-5 portrays an offer

profile in ePartner Manager based on the case companies.

Figure 5-5: Generate Offer Profile View


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5.4.2 Offer Portfolio

Here all previous offers that have been created by the candidate partner are listed. It

is important that a candidate partner effectively manages the offer profiles they have

generated. Therefore, the system supports the tracking of offer profiles by name and

status. The name field provides a brief description of the offer. The status field is

divided into three options. An ‘available’ status indicates that the offer is open for

matching against an OEM request profile, an ‘active’ status indicates that the

candidate partner is in discussions with an OEM to establish a partnership based on

the offer, and, lastly, an ‘archived’ status indicates that the offer is not available for

matching purposes. Each of the offers listed is hyperlinked to the offer profile where

the attributes and their assigned values may be viewed. The offer portfolio module

can be seen in figure 5-6.

Figure 5-6: Offer Portfolio View


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The generate request profile window presents a view of the requirements attributes

that make up an offer profile. These attributes describe the capabilities which an

OEM seeks when establishing a partnership. Requirements driven partnership

establishment is linked to the success of the partnership establishment process. This

module enables a comprehensive request profile to be generated in a systematic way

and partnership establishment to be driven by these requirements. The key

information captured includes: attribute name, attribute value, attribute weighting,

knock out attribute selection, and sourcing attribute selection. As many attributes as

are needed can be added or removed from the request profile by selecting the

attribute manager menu option at the bottom of the screen. An appropriate name that

describes the request profile must be entered manually in the name field at the top of

the request profile view. The completed machine readable profile enables automated

partner sourcing when the user selects the start partner search menu option. Figure

5-7 portrays a request profile in ePartner Manager based on the case study

companies.

Figure 5-7: Generate Request Profile View


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5.4.4 Request Portfolio

The request portfolio module represents all the previous requests that have been

created by the OEM. It is important that an OEM effectively manages the request

profiles they have generated. Therefore, the system supports the tracking of request

profiles by name and status. The name field provides a brief description of the

request. The status field is divided into three options. An ‘available’ status indicates

that the request is ready for matching against offer profiles stored in the system

database, an ‘active’ status indicates that the OEM has issued the request profile and

is either awaiting search results or is in discussions with one or more potential

partners to establish a partnership based on the request, and, lastly, an ‘archived’

status indicates that the request is no longer available for matching purposes. Each

of the requests listed is hyperlinked to its request profile details. The request

portfolio module can be seen in figure 5-8.

Figure 5-8: Request Portfolio View


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5.4.5 Attribute Manager

This module enables both a candidate partner and an OEM to define request and

offer attributes from a common set of attributes. The case companies discussed the

misunderstandings that took place when both parties have created their request and

offer information using independent sets of attributes. Therefore, the ePartner

Manager attribute manager helps the OEM and candidate partners to use

semantically compatible information during partnership establishment. The module

is divided into two areas. The first on the left of the screen is the library area. The

library itself has a tree like structure categorising the attributes, something which

assists navigation. Attributes may be added or removed using the function buttons

displayed. Selected attributes are displayed in the form in the second area of the

screen on the right hand side of the screen. A value must be manually added by the

user to the value data field to the right of the attribute name. Figure 5-9 presents a

view of the ePartner Manager attribute manager function.

Figure 5-9: Attribute Manager View


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5.4.6 Define Attribute

The set of attributes used to define request and offer profiles will never be completed

since scenarios will change and companies will evolve. In order to facilitate this, the

ePartner System has developed a define attribute function that makes the attribute

library scalable. This module enables a name, definition and category assignment of

new attributes to be captured. Once uploaded the attribute tree is updated to include

the new attribute, which is now available to all users of the attribute library. The

define attribute functionality can be seen in figure 5-10.

Figure 5-10: Define Attribute View


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5.4.7 Search Results

The search results module has been developed to present the offer profiles, which

match the request profile to an acceptable level, to the OEM. Using a web browser,

this module enables the OEM to review the suggested offer profiles regardless of

their geographical location. Therefore, the partnership establishment process can be

carried out in an effective manner. Key information presented in this view includes

the offer company’s name, the percentage relevance of the offer profile in relation to

the request profile, and the comparison score of the offer profile against the request

profile. Hyperlinks provide access to each of the offer profile details. A check box

is provided to enable the user select potential partners from among the search results.

Figure 5-11 presents a view of the search results module.

Figure 5-11: Search Results View


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5.4.8 Initiatives

The term initiatives applies when the ePartner Management system searches for

matching offers to a request profile, and then the selected potential partners and

OEM engage in detailed evaluation. Given that the OEM and the candidate or

potential partners will be dislocated in terms of geographical location and time zone

both rely heavily on effective communication and data management support. In

order to realise this, the ePartner Manager system has developed an initiatives

module that provides a single access point to view all information relating to a

particular initiative in order to effectively manage it. Information available through

the initiative module includes the active request profile, its search results, list of the

potential partner offers, the offer profiles, and the evaluation results. The evaluation

module for the updated profiles can be accessed by clicking on the evaluate menu

option. Figure 5.12 portrays an example of the initiatives view in the system.

Figure 5-12: Initiatives View


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5.4.9 Evaluation Results

During the evaluate potential partners step of the partnership establishment process

both the OEM and potential partners are facilitated by the support system to make

changes to their profiles. The evaluation results module represents the results of the

assessment of the request profile against the potential partner offers, which may or

may not be adjusted. Key information presented in this view includes the offer

company’s name, the percentage relevance of the offer profile in relation to the

request profile, and the comparison score of the offer profile against the request

profile. Each of the offers listed and the request are hyperlinked to their respective

profiles where the attributes and their assigned values may be viewed. The

evaluation results module can be seen in figure 5-13.

Figure 5-13: Evaluation Results View


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5.4.10 Summary of Case Study Findings

ePartner Manager was implemented and tested based on our two case companies.

This highlighted a number of benefits from applying such a system to support the

partnership establishment process. The main benefits identified may be grouped as

follows:

Globalisation and competiveness: ePartner Manager was found to enable OEMs

to expand their EE globally. The system provides an access point for the OEM

to source EE partners in globally disperse developed and developing countries.

Therefore, they will be in a position to enter emerging markets such as China,

reduce their manufacturing costs, and pool resources and expertise. This enables

the OEM to increase their competitive advantage.

Availability of information: Generating, storing, manipulating and distributing

information is central to a success partnership establishment process. The

challenge of making relevant information available in distributed partnership

establishment is addressed by ePartner Manager. A variety of modules within

the ePartner Manager communicate relevant information to the actors involved

in the partnership establishment process. This facilitates easy access to a range

of information, which is critical during decision making. A centralised web

facility for storing the attributes, offer profiles and request profiles provide full

traceability and transparency to all relevant actors along the process. This in

turn assists in the development of a trusting relationship between prospective EE

partners.

Distributed partnership establishment: The software also enables distributed

partnership establishment. This is achieved through the use of internet

technology, which promotes ease of communication, breaks down traditional

geographical and time barriers between the OEM and a potential partner, and

enables information to be stored in a machine readable format. As a result,

distributed partnership establishment is simplified, higher success rates are

possible and a more efficient process can be achieved through the use of

automated tasks.

Process focus: Partnership establishment is a process made up of many

elements. ePartner Manager was found to support the partnership establishment

process by storing and manipulating information needed for various decision


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making points along the process. Specific functionality, to support the definition

of common profiles and to automatically identify suitable partners, is also

provided. It also reinforces the systematic and structured nature of the process

and guides the user.

Generic profiling and automated searching: ePartner Manager enables machine

readable profiles to be generated by the OEM and candidate partners.

Automated searching is then possible, using these profiles. As a result, the

chances of a suitable partner being selected increases, misunderstandings are

minimised, and more extensive searches can be conducted in a short period of

time.

In summary, it can be said that ePartner Manager facilitates the partnership

establishment process. The technology is easy to work with, widely accessible and

the process is easy to follow. A number of areas of improvement to the architecture

and support system emerged as a result of the case study analysis. These include:

Currently ePartner Manager enables the users to generate and manipulate request

and offer profiles. However, additional information and documentation (e.g.

drawings, discussions, videos) will need to be exchanged during the partnership

establishment process that this is something the system does not currently

support. Therefore, a collaboration type application such as Sharepoint linked

up to the initiatives module could benefit the system.

ePartner Manager could link up to a negotiations management application to

enable the OEM manage this stage and the associated documentation in a more

systematic manner.

eProduct Manager follows the concepts of the support system architecture. It was

used as a mechanism to validate the architecture. With this in mind, the following

details how the support system architecture performs against Cormican’s validation

criteria.

Effective: Many aspects of the architecture were presented and have been

received with great interest. Feedback from researchers and industry indicates

that it is easy to understand, useful and practical.


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Efficient: The support system architecture was designed and developed with the

requirements of industry in mind. It was also successfully validated when used

by two organisations. This demonstrates that it can support industrial scenarios.


relevant to the research domain (i.e. European OEMs engaging in EE partnership

establishment with Chinese organisations) and demonstrated that the architecture

applies to the domain for which it was intended. Also, the use of case study

analysis in determining and refining the theoretical concepts at the start as well

as for the final validation process insured that the support system architecture

was applicable to organisations involved in partnership establishment.

Reliable: The architecture is grounded in theory and takes best practice into

consideration. It was developed based on known, or accepted theories and

processes (i.e. critical success factors model). The support system architecture

was found to provide a meaningful insight into partnership establishment

processes. Therefore, it can be said to be reliable, and to minimise risk to an

acceptable level.

Stable: The validation process demonstrated that the OEMs and candidate

partners could implement and use the support system architecture to support

their partnership establishment process. However, in order to maximise

effectiveness it should be fine-tuned to the specific needs of each organisation.

Therefore, it can be said to be stable while at the same time being open to

incremental changes.

Simple and easy to learn: OEMs and candidate partners found the support

system architecture was simple and easy to use in an industrial setting.

Manageable: The validation process demonstrated that industry could use the

support system architecture to enable their individual partnership establishment

process. Therefore, it can be said that the architecture is manageable.

Visible: The validation process demonstrated that OEMs have appraised the

reasoning of the architecture and found it to be visible and comprehensive.

Well supported: The use of web enabled technology to support system

architecture was considered to be a useful aid.


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5.5 Validation of the Implementation Methodology

The implementation methodology developed as part of the partnership establishment

management framework, and was presented in Chapter 4 and further detailed in the

appendix. The goal of this methodology is to identify and bring together the key

elements needed to manage partnership establishment for the EE. It aims to guide

and focus the user during the process so as to maximise the chances of forming a

successful partnership. The methodology applies a socio-technical approach by

considering tools and technology, as well as the softer people orientated issues.

Validation of this methodology involved mapping it against the tenants of a generic

process as presented in section 3.3.1. These tenants were shown to have not all been

met when applied to partnership establishment processes available in literature (refer

to figure 3-5). Table 5-4 presents these same tenants and maps them against the

methodology developed as part of this research. This facilitated assessing whether

the tenants of a successful process were supported by the methodology. Analysis of

the mapping demonstrates that the nine tenants of a generic process are supported by

the implementation methodology.

Table 5-4: Mapping Methodology onto Process Tenants

Process tenants Methodology

Goal Seeking Aims to establish successful partnership

Holistic Caters for requirements definition through to partnership establishment

Boundary Restricted to partnership establishment between European OEMs and Chinese

organisations

Hierarchy Lower level process outputs enable higher level processes to be executed

Inputs & Outputs Includes needs analysis & industry trends through to contract & lessons learnt

Actors Includes implemenation team, potential partner personnel, senior management, candidate

partner personnel, previous contacts, Chinese government representatives

Transformation process Includes define strategy and requirements for partnership through to select partner and

establish partnership

Eqi-Finality E.g. Potential partners may be sourced from formal invitations, previous contacts or

candidate partners

Feedback Includes process review step

The implementation methodology was also mapped against the partnership

establishment process of each of the case study organisations. The managers of the

case study organisations were asked to comment on whether or not the


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implementation methodology supports their partnership establishment processes.

Particular attention was given to whether it was useful in terms of scope (i.e. whether

it includes all the relevant stages in the partnership establishment process) and

content (i.e. whether the content of each stage of the methodology is relevant,

accurate and complete). The remainder of this section analyses each stage of the

implementation methodology and discusses the findings.

5.5.1 Define Strategy and Terms for Partnership

Strategy and terms definition was found to be critical to the success of partnership

establishment. However, the organisations that took part in this case study admit that

this stage of the process is often overlooked. Often, requirements are not defined

until the evaluation stage begins and potential partners are already identified. In

other words gap analysis, partnership strategy and requirements definition are not

seamlessly integrated into the partnership establishment process. The organisations

do recognise that this area needs to be urgently addressed in order to improve their

chances of forming successful partnerships.


This stage of the implementation methodology takes place in a very informal manner

within the organisations examined. OEMs were found to use their own methods to

describe the requirements and capabilities. In other words there is no systematic

process in place to enable a common profiling method. The benefits of a common

profiling method are welcomed by the organisations, particularly to alleviate

misunderstandings and provide a common platform for negotiations.


As with offer profiles generating request profiles was also found to takes place in a

very informal manner within the organisations examined. The potential partners

were found to use their own methods to describe the requirements and capabilities.

That is no systematic process was found to be in place to enable a common profiling

method. The need for a common profiling method was identified by the


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organisations, with a view to alleviate misunderstandings and provide a common

platform for negotiations.

5.5.4 Source and Select Potential Partners

It seems that the OEM organisations examined do not have a systematic approach to

sourcing and selecting potential partners from as large a pool of candidate partners as

possible. Instead, previous contacts are heavily relied upon, along with a small

number of formal invitations from the Chinese government. As a result, suitable

partners may be overlooked in these limited sources. At present, OEMs focus on the

evaluation stage of the partnership establishment process and often assume potential

partners have been identified. However, managers did recognise the importance of

extensive and effective sourcing and conceded that it should be added to their

processes. This points towards the importance of the source and select potential

partners step in the partnership establishment process.

5.5.5 Evaluate Potential Partners

The organisations investigated all employ at least one type of evaluation method.

This stage of the process is considered the most important and has received the most

attention both in literature and in industry. Most evaluation methods used include a

combination of mathematical techniques, site visits and face-to-face negotiation. All

organisations invest significantly in the evaluation of potential partners. However,

they recognise the need for attention to be paid to initial planning to maximise the

outcome of this stage of the process.

5.5.6 Select Partners and Establish Partnership

This stage of the methodology deals with the selection of a partner and continues

until the partnership is operational. The organisations reviewed excel at the

establishment of partnerships but do not consider the dissolution of a partnership

during its initiation. Also, the majority were found not to review their partnership

establishment process once complete.


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This study found that the implementation methodology is a generic model that

provides a framework which organisations can use to develop and define their own

best practice partnership establishment process. The following analysis details how

the implementation methodology performs against Cormican’s validation criteria.

Effective: Managers found that the implementation methodology was both easy

to understand, useful and practical

Efficient: The methodology was found to support establishment processes in the

organisations studied. Also, it acted as a stimulus for these organisations to

include pre evaluation activities into their partnership establishment processes.


relevant to the research domain (i.e. European OEM’s engaging in EE

partnership establishment with Chinese organisations) and demonstrated that the

implementation methodology applies to the domain for which it was intended.

Also the use of case study analysis in determining and refining the theoretical

concepts at the start as well for the final validation process insured that the

implementation methodology was applicable to organisations involved in

partnership establishment.

Reliable: The implementation methodology was developed based on the best

practice concepts identified in the critical success factors model. It also supports

the partnership establishment process from requirements definition to getting a

partnership operational. Therefore it can be said to be reliable and to minimise

risk to an acceptable level.

Stable: The validation process demonstrated that the implementation

methodology supports the partnership establishment process in an industrial

setting. Therefore it can be said to be stable while at the same time being open

to incremental changes.

Simple and easy to learn: Managers found that the implementation

methodology was simple, and easy to use in an industrial setting.

Manageable: The validation process demonstrated that industry could clearly

use the implementation methodology to tailor their individual partnership

establishment process. Therefore, it can be said that the implementation

methodology is manageable.


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Visible: The validation process demonstrated that managers have appraised the

reasoning of the implementation methodology and found it to be visible and

comprehensive.

Well supported: The use of IDEF0 models to support the implementation

methodology was considered to be a useful aid.

5.6 Conclusion

This chapter aimed to validate the partnership establishment management framework

developed and presented in chapter 4. In order to validate the PEM framework each

of its elements (i.e. the critical success factors model, the support system architecture

and the implementation methodology) were evaluated against a predefined set of

criteria. The self assessment scorecard, which represents the critical success factors

model was used to test the effectiveness and practicality of the theoretical concepts

guiding this area of research. ePartner Manager, a software prototype to represent

the support system architecture was used to validate the architecture. Lastly, the

implementation methodology was mapped against the participating companies’

partnership establishment practices in order to validate its scope and content. Based

on case study analysis, it was concluded that the critical success factors models is a

best practice model that was found to be both useful and practical for organisations

in determining how effective their partnership establishment management practices

are. It also enabled areas of improvement to be identified and implemented. The

support system architecture supports the mechanisation of key elements within the

partnership establishment process. It also enables the achievement of a systematic

approach to effective partnership establishment. Lastly, the implementation

methodology was shown to provide a structure, that includes all relevant stages, and

facilitates organisations to manage and co-ordinate their partnership establishment

process in an effective and efficient manner. The framework was identified as

providing a useful and easy-to-use set of guidelines for partnership establishment.

Chapter 6: Conclusions & Recommendations

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6.1 Introduction

6.2 Thesis Summary

6.3 Overall Conclusions

6.4 Recommendations for Future Research

6.1 Introduction

This chapter summarises the research work undertaken in this thesis, and presents the

main resultant findings. This is followed by the presentation of a number of

conclusions that may be taken from the research, and the identification of future

research areas.

6.2 Thesis Summary

The aim of this thesis is to design, develop and validate a structured approach to

managing partnership establishment for the EE. In response to this need a

partnership establishment management (PEM) framework was designed, developed

and tested. The framework was developed utilising a combination of the

requirements of industry and best practices. In particular, the establishment stage of

the partnership lifecycle is dealt with; from defining requirements to selecting a

suitable partner. A systems perspective is taken to ensure that the OEM and potential

partner profiles are created using a generic method, that extensive sourcing is

possible from a central database, and that effective matching and evaluation are

supported. The PEM framework provides a solution that supports both OEMs and

potential partnerships regardless of their geographical location. It helps managers of

EEs clearly define what they require from a partner, and increases their changes of

selecting the most suitable partner by aligning machine readable profiles and it also

facilitates them in managing the entire partnership establishment process.

The PEM framework is made up of three key elements including; a critical success

factors model, a support system architecture for distributed partnership establishment


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and lastly, a partnership establishment methodology. These are summarised as

follows:

The critical success factors model: Effective partnership establishment

management must take a number of factors into consideration. These factors

cover both social and technical aspects of an organisation, and are known as a

socio-technical systems approach. Therefore, the author identified a set of

criteria important for distributed partnership establishment management and

grouped them under five key headings. They are; (a) Strategy and leadership,

(b) Structure and organisation, (c) Culture and climate, (d) Sourcing and

selection and (e) Technology and communication.

The support system architecture: This architecture aims to enable a systematic

approach to distributed partnership establishment management. The overall

objective of the architecture is to provide a single contact point for distributed

OEMs and potential partners, and to maximise the effort and resources applied

during partnership establishment. The architecture provides a framework with

which machine readable offer and request profiles can be created and stored

using a generic method, and initial matching and evaluation processes can be

automated. It allows profiles to be filtered, analysed and ranked taking into

consideration the organisation’s goals, requirements and constraints.

The implementation methodology: The purpose of the implementation

methodology is to provide a structure to guide the management and co-

ordination of the establishment process. The methodology is made up of a

number of steps each of which includes guidelines to be followed. The

guidelines based on best practice are designed to allow the user execute each

successfully. The six stages in the methodology are; (a) Define strategy and

terms for partnership, (b) Generate request profile, (c) Generate offer profile, (d)

Source and select potential partners, (e) Evaluate potential partners and (f) Select

partner & establish partnership.

In order to check the validity and relevance of these theoretical concepts for

industrial scenarios a number of tools were developed namely; the PEM checklist

and the ePartner Manager.


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These are summarised as follows:

The PEM checklist: All of the critical success factor criteria were written as

statements to form the partnership establishment management (PEM) checklist.

The checklist, which allows a company conduct a self-assessment or audit, is

made up of fifty statements based on the five critical success factors identified as

facilitating effective partnership establishment management. Managers and

decision makers can use the checklist to consider their strength (to be exploited)

and weaknesses (to be improved) in relation to partnership establishment

management. The PEM checklist was validated in industry by assessing its

effectiveness and its practicality.

ePartner manager: The PEM architecture was tested using a software

prototype called the ePartner manager. The key elements of the architecture

were converted into software code that rendered them web enabled. This

prototype clearly distinguishes between the key elements of the process and

integrates them effectively. It is a web enabled application that provides a

holistic and integrated approach to the partnership establishment process. The

ePartner manager was validated in industry by assessing its effectiveness,

efficiency, usability and accuracy.

6.3 Overall Conclusions

The purpose of this section is to identify and briefly discuss the main findings of the

research conducted in this thesis.

The partnership establishment management (PEM) framework is based on

theory and best practices. Research areas covered include partnership,

partnership establishment, systems theory, information communication

technology and ontologies.

The PEM framework provides organisations with a structured approach to

managing the generation, and machine to machine manipulation, of request and

offer profiles as part of partnership establishment in a distributed environment.

The PEM framework was found to provide a meaningful insight into the

complexities of a distributed partnership establishment process. This has led to

new work methods and solutions being developed for industry. The PEM


190

framework was also found to meet the requirements established at the start of the

research.

The validation process proved that the PEM framework is suitable for use in

industry. However, in order to maximise its effectiveness minor adjustments are

suggested.

As organisations develop and respond to environmental pressures it is important

that they monitor their partnership establishment management approach, and

evolve it in line with their strategies, requirements and constraints.

Analysis of the implications of the PEM framework on industry points towards the

following key features and resultant benefits:

Generic company profiling: The PEM framework enables request and offer

profiles to be defined using a common description method. This ensures that

information related to both the OEM and potential partners is in a format that

can be quickly and accurately compared, and that matches are identified. The

chance of the right selection decision being made is increased as the selection is

based on a generic set of reliable and accurate attribute definitions. Users are

encouraged to add attributes to the profiling ontology where these are

unavailable. This improves the scope and usability of the ontology.

Requirements centred partnership establishment: The PEM framework

encourages the OEM to place importance on the requirements aspect of

partnership establishment. It provides a structure to enable management to

systematically identify and understand their EE partner requirements, and to

utilise these requirements to drive all stages of partnership establishment. This

enables the OEM’s requirements to be clearly captured and communicated in an

appropriate manner to potential partners. This ensures that there is a shared

understanding by both the OEM and potential partners of the focus for

partnership establishment. A requirements centred partnership establishment

process means that unsuitable potential partners are eliminated early in the

process, allowing resources and effort to be expended in establishing a

partnership that will be long lasting and bring significant benefit to both parties.

Extensive partner sourcing: The PEM framework encourages effective

sourcing of partners from as large a pool as possible. It provides an

infrastructure to centrally store extensive quantities of machine readable offer


191

profiles. The framework also includes an automated search algorithm to speed

up the assessment stage of the process. This makes it viable for an OEM to

consider many different potential partners in as short a time as possible. It also

gives OEMs an excellent chance of selecting the right partner.

Structured partnership establishment: The PEM framework adopts a holistic

view of partnership establishment, and provides complete guidance for all stages

of the process. The framework also encourages the OEM to engage in each step

of partnership establishment in a systematic manner from defining their

requirements, creating a request profile, conducting extensive sourcing and

evaluation to selecting a partner and establishing a partnership with them. This

ensures that no stage is overlooked, and decreases the possibility of making the

wrong selection decision. The framework is also flexible in terms of its

application suiting the needs of individual organisations. This increases it

adaptability across many different organisations.

Effective mechanism for partnership establishment: The PEM framework

provides a set of information communication technology (ICT) based on

mechanisms which enable partnership establishment parties (i.e. OEM and

potential partners) to access, sort and manipulate accurate, reliable, timely and

relevant information at the right time, in the right place, in the right format,

regardless of location. The framework also standardises a number of activities

(i.e. profile definition, matching, evaluation) and automates their implementation

in order to minimise their execution time and reduce the potential for error and

resource costs associated with manual tasks. As a result, the partnership start

date is brought forward thus enabling partnership establishment activities to be

conducted in an efficient and effective manner.

6.4 Recommendations for Future Research

During the course of this thesis a number of areas that required further research were

identified, but it was not possible to address these areas within the scope of the

research. They are briefly described below:

One of the main findings of the research was that partnerships can be divided

into three main types namely; peer to peer, network and ownership. For the

purpose of this research, the framework to support distributed network type


192

partnership establishment, was developed and in particular for the EE. VE

network and ownership type partnerships can also be expected to be formed

between dislocated organisations in the future. Therefore, future research should

focus on the area of distributed VE and ownership type partnership

establishment.

It has been shown that the exchange of information between distributed

organisations can be difficult. This difficultly is compounded when

organisations from diverse cultures are involved. The possibility of

misunderstandings and offending individuals or groups during the delicate

partnership establishment process can have detrimental consequences, but it is

easily and often unintentionally done. The effort required to understand another

culture in detail is often unviable. Future research should look at this area with a

view to developing support and advice that is quickly and easily accessible.

This research applied the concept of ontologies to describe the attributes

associated with partnership establishment for the EE, and their relationships.

Utilising the ontology, request and offer profiles are developed, and then

manipulated using a based search algorithm. This does not allow for intuitive

matching between the OEM request and the potential partners offer profiles.

Future research should look at applying the concept of the semantic web to make

the matching process more intelligent.

Research indicates that there is a need for intellectual property rights (IPR) to be

protected during the partnership establishment process. Although sophisticated

techniques for information and knowledge exchange via the Internet are being

developed and made available, end users are reluctant to put their core

competency related information on-line. Future research needs to focus on this

area in order develop the trust of OEMs and to control access to information

during partnership establishment.

One of the findings of the research was that very little research has been

conducted in the area of dissolving a partnership. While it is acknowledged that

the dissolution of a partnership should be considered and agreed during

partnership establishment it was not within the scope of the author’s research.

Given the complexities in establishing a partnership future research is needed to

address its dissolution so that it does not negatively affect the parties involved or

leave them in a position where they feel they cannot end a relationship.

193

Appendix

Appendix

194

Introduction

This appendix comprises supplementary material on the implementation

methodology. More specifically, it provides a complete set of IDEF0 diagrams

demonstrating the partnership establishment implementation methodology. The

implementation methodology identifies the main steps required at each stage of the

establishment process thereby providing support to manufacturers globally. The use

of such a structured approach to partnership establishment increases the chances of

an appropriate partner being selected, and the partnership being successful. Each

level is presented and its operation described.

A-0: Partnership Establishment Process

The first level of the partnership establishment process model using IDEF0 notation,

termed A-0, is illustrated in figure 1 below:

Partnership establishment

process

needs analysis

industry trends

lessons learnt

contract

ePartner Manager

A-0

senior management

external expertise

internal expertise

competencies


company strategy

Figure 1: A-0 Partnership Establishment Process

The main drivers of this methodology include the overall company strategy,

competencies, and regulations, laws and standards. See section 2.3 for further

discussions on the drivers for partnership formation. Together with these drivers the

needs analysis of a company, the trends within its industry, and internal and external

Appendix

195

expertise are utilised to create the process outputs. In most cases it is expected that

an implementation team that is made up of cross function internal personnel will be

created. However, in some situations an organisation may not feel that they have the

expertise internally, and employ an external expert to assist in executing the process.

The control and input information form the basis on which a suitable partner may be

sourced and selected. The expected output of the process is (a) a contract with a

company, and (b) the lessons learnt from undertaking the process. These lessons add

to the knowledge of the company in relation to forming partnerships, knowledge

which can be applied in later executions of the process. These outputs are enabled

by the ePartner Manager mechanism, and by senior management. This high level

view is further detailed in a level A0 IDEF0 diagram in terms of the activities needed

to realise the outputs which are identified.

A0: Partnership Establishment Steps

A review of literature, along with interactions with industry, shows a need for a

common company description method for the purpose of sourcing and evaluating

partners. Therefore, the partnership establishment process is divided into six key

steps: (a) Define strategy and terms for partnership; (b) Generate request profile; (c)

Generate offer profile; (d) Source & select potential partners; (e) Evaluate potential

partners; and (f) Select partner and establish partnership. Each step is designed to

consider experience so as to make each step a success. Organisations can therefore

be guided through the partnership establishment process in a structured way to allow

them manage and co-ordinate it effectively. These steps are illustrated in figure 2

below.

196

contract

lessons learnt

Define strategy & terms for

partnership

Generate offer

profile

Source & select potential partners

Evaluate potential partners

Select partner & establish

partnership

senior management

needs analysis

industry trendspartnership strategy

partnership terms

request profile

offer profile



MOU/LOI

updated profiles

evaluation findings

A6

A5

A4

A2

A1

company information

ePartner Manager

external expertise

internal expertise

company strategy

competencies


Generate request profile

A3 list of potential partners


Figure 2: A0 Partnership Establishment Steps

Appendix

197

A1: Define Strategy and Terms for Partnership

This stage of the implementation methodology represents putting a foundation in

place for partnership establishment by both an OEM and any candidate partner

organisations. It is divided into three steps namely; (a) analyse external influences

and internal resources, (b) develop partnership strategy, and (c) define partnership

terms. The first task is to review and compare all internal resources and external

influences with a view to identifying gaps in the organisation. A needs analysis and

industry trends support this activity. Company strategy, competencies regulations,

laws and standards effect any decisions made. The identified gaps are then used to

develop a partnership strategy. This strategy guides all other stages of the

partnership establishment process. Therefore, it must be comprehensive and include

factors such as type of partnership sought, long and short term goals, and expected

duration of partnership. It is also important that the partnership strategy is compared

against the company’s strategy so as to ensure that they are compatible. The final

step of this stage involves defining the terms of the partnership. In the case of the

OEM, it will mainly be made up of the requirements they expect from a partner,

while in the case of a candidate partner it will include what they are going to offer an

OEM. Along with the requirements, an OEM will also formalise what it is that they

have to offer a candidate partner and the candidate partners will have certain

expectations of what it expects from an OEM. These terms will form the basis on

which to identify potential partners and then to engage in negotiations. As with the

previous step, the partnership terms need to be compared against the partnership and

company strategy to check for compatibility. Revisions should be made if necessary.

As illustrated in figure 3 below external experts may be used to support the execution

of this stage, in situations where the organisation does not have the experience or

lacks the confidence to do so on their own. The full IDEF0 diagram to accompany

this stage of the implementation methodology is illustrated in figure 3.

198

partnership terms

Analyse external

influences &

internal resources

Define partnership

terms

internal expertise

identified gaps

A13

A12

A11

needs analysis

partnership strategy

industry trends

Develop partnership

strategy

external expertise

company strategy

competencies


Figure 3: A1 Define Strategy and Terms for Partnership

Appendix

199

A2: Generate Offer Profiles

In order to be considered as a potential partner an offer company needs to describe

their capabilities. A mechanised profiling method is suggested by using the ePartner

Manager. The process used to generate an offer profile is divided into three steps

namely; (a) add offer attributes, (b) assign values to offer attributes, (c) save offer

profile. It is expected that many companies will submit offer profiles, that are

unknown, to a given OEM. These offer sources are termed candidate partners.

Other sources of offers may come in the form of formal invitations by the Chinese

government or previous contacts known to the OEM. It is important that all sources

register their offers in the same manner by using the ePartner Manager profiling

mechanism. The term candidate partner will be used to represent all offer sources.

To begin this process a member of the candidate partner company uses their login

details to log onto the ePartner Manager system and initiates the menu option to

create an offer profile (refer to figure 5-5). The first step involves the attributes,

which fit the candidate partner capabilities, being added to the offer profile form. An

attribute manager (refer to figure 5-9) contains a comprehensive list of attributes

from which to choose. In the event that an attribute is missing, the candidate partner

can define and add a new one to the library. Once suitable attributes are selected, the

candidate partner assigns the value that reflects their abilities to each. For example

location may be given a value of Beijing. Other values may be numerical, ranges or

simple yes or no answers. It is these attributes and values that the candidate partners

are expected to meet in order to be considered as potential partners. Company

information and expertise are used to populate the template along having regard for

the partnership strategy and the partnership terms. Once completed, a set of offer

attributes, and performance values will be known. The remaining step involves

saving the offer. This action adds the offer profile to a database for consideration

during the source a potential partner process. If further adjustments are needed the

ePartner Manager contains an editing function to facilitate such adjustments. Figure

4 below illustrates the IDEF0 steps included in generating an offer profile.

200

offer profileSave offer


offer attributes

A23

A22

A21

ePartner Manager

offer attribute values


company information

external expertise

external expertise

Add offer attributes

Assign values to offer

attributes

partnership terms

Figure 4: A2 Generate Offer Profile

Appendix

201

A3: Generate Request Profiles

In order to identify potential partners, an OEM needs to describe their requirements.

A mechanised profiling method using the ePartner Manager is suggested. The

process used to generate a request profile is divided into six steps namely; (a) add

request attributes, (b) assign values and weightings to request attributes, (c) select

knock-out request attributes, (d) select sourcing request attributes, (e) select search

results cut off point, and finally (f) save request. To begin this process, a member of

the candidate partner company uses their login details to log onto the ePartner

Manager system and initiates the menu option to create an offer profile (refer to

figure 5-7). Firstly, the attributes that fit the OEMs requirements are added to the

request profile. An attribute manager (refer to figure 5-9) contains a comprehensive

list of attributes from which to choose. In the event that an attribute is missing the

OEM can define and add a new one to the library. Once suitable attributes are

selected the OEM implementation team assigns the required value to each. For

example, location may be given a value of Beijing. Other values may be numerical,

ranges or simple yes or no answers. It is these attributes and values that the

candidate partners are expected to meet in order to be considered as potential

partners. Weightings between 0.1-1.0 are also added during this step to each

attribute. These represent the level of importance that an OEM gives to a particular

attribute. For example location may be assigned a value of 1, while training in

management techniques may be assigned a value of 0.2. The third step involves the

OEM implementation team deciding which, if any, attributes are considered knock

out attributes. These include factors that the OEM considers vitally important when

sourcing potential partners. If the offer attribute does not include this attribute and

match the required value, the offer is immediately eliminated, regardless of its other

attributes or their values. The next step involves the OEM deciding which of the

request attributes defined are to be applied during the sourcing step. Some attributes

are too detailed to be considered during sourcing and instead are addressed during

the evaluation stage. Then, the cut off point for the returned search results is

selected. This can either be score based (e.g. greater than 80% match) or rank based

(e.g. top 10 matches). Company information and expertise is used to populate the

template. The remaining step involves saving the request. Figure 5 below illustrates

the IDEF0 steps included in generating a request profile.

202

sourcing attributes

Add request attributes

Assign values & weightings to

request

attributes

Select search results cut-off

point


request attributes

request attribute weightings

A35

A33

A32

A31

knock-out attributes

Select knock-out request attributes

- ePartner Manager

Select sourcing request

attributes A34

cut-off point

company information

external expertise

external expertise

partnership terms

Save request

A36

request profile

Figure 5: A3 Generate Request Profile

Appendix

203

A4: Source and Select Potential Partners

The ePartner Manager software is utilised during this stage of the implementation

methodology to source potential partners to match an OEM request profile. Four

steps make up this process including; (a) select request profile for search, (b) search

for potential partners, (c) review search results, and (d) select potential partners.

Firstly, the OEM opens the request profile that reflects what they seek in an EE

partner (an OEM may have several request profiles developed). The ePartner

Manager software acts as a knowledge management system storing both request

profiles and offer profiles. Once the relevant request profile is uploaded, the search

command is initiated (refer to figure 5-7). The search process applies a mathematical

algorithm to compare the request attribute values with the offer attribute values of

candidate partners stored in the systems database. Only those request attributes,

which have been selected in the previous stage for sourcing purposes, are evaluated.

Attributes assigned knock out status allow unsuitable offers to be quickly eliminated.

Matching attributes are counted in order to assign a score to each candidate partner.

Those with the highest score and within the chosen cut off point are ranked and

returned as the search results (refer to figure 5-11). The third step is conducted

manually using the OEM’s internal expertise and any external expertise employed.

This involves reviewing the search results. The profile of each offer is made

available to the OEM for assessment. Based on this assessment the OEM makes a

selection of potential partners. Those selected are approached to determine whether

or not they are interested in engaging in the evaluation process to ascertain their

suitability to form a partnership together. Figure 6 illustrates the IDEF0 diagram to

accompany this stage of the implementation methodology.

204


Select request profile for

search

Search for potential partners

Review search results

Select potential partners

partnership strategyrequest profiles


search resultsoffer profiles

list of potential partners

A44

A43

A42

A41

review findings

ePartner Manager

external expertise

internal expertise

Figure 6: A4 Source and Select Potential Partners

Appendix

205

A5: Evaluate Potential Partners

Once potential partners have been identified detailed evaluation is needed. This

stage, evaluate potential partners, of the implementation methodology fulfills this

need. It is divided into five main steps namely; (a) obtain MOU and LOI, (b) run

ePartner Manager evaluation option, (c) visit potential partner companies, (d)

conduct face-to-face negotiations, and (e) document evaluation findings.

Traditionally in China, a European organisation must receive the approval of the

Chinese government before engaging in partnership discussions with a Chinese

company. Approval is in the form of a Memo of Understanding (MOU), which is an

expression of interest to negotiate a partnership, and a Letter of Intention (LOI),

which is an agreement to the concept of investigating the establishment of a

partnership. When approval has been secured evaluations can take place. The

ePartner Manager facilitates the OEM in mathematically assessing the closeness

between the OEM’s complete set of requirement attributes and the potential partner’s

offer attributes (refer to figure 5-13). Potential partners with offer attributes closely

matching the OEM’s weighted requirements emerge with a high score value.

Visiting the potential partners company is an important step in the evaluation

process. During the visits the OEM can see the facilities and surrounding

environment first hand, and get to meet the employees and senior management face

to face. Negotiations are another important element of the evaluation of the potential

partners, and these negotiations should, if possible, be carried out face-to-face.

Visits and face-to-face negotiations play an important role in enabling the OEM and

potential partner learn about each other’s culture and begin to develop a trusting

relationship. The request and offer profiles form the basis for all three types of

evaluation. Execution of the evaluation steps is iterative with changes been made to

the request and offer attributes in the profiles to reflect the findings and agreements

that take place between the OEM and potential partner. When both parties are

satisfied that sufficient evaluation has taken place the final step involves

documenting the evaluation findings in order to aid the selection decision in the next

stage of the implementation methodology. The steps to evaluate potential partners

are illustrated in figure 7 below.

206

evaluation report

Obtain MOU and LOU

Run ePartner Manager

evaluation

option

Visit potential partner

companies

Conduct face-to-face

negotiations

Document evaluation findings


list of potential partners


MOU / LOU

ePartner Manager evaluation results

visit findings

A55

A54

A53

A52

A51


updated profiles

ePartner Manager

external expertise

internal expertise

Figure 7: A4 Evaluate Potential Partners

Appendix

207

A6: Select Partner and Establish Partnership

Following a detailed analysis of each of the potential partners, a selection decision

can then be made and a partnership established between the OEM and the chosen

partner. This stage is divided into the following steps namely; (a) analyse the

evaluation findings, (b) select EE partner, (c) sign contract, and (d) review

partnership establishment process. Senior management and the implementation team

from the OEM organisation conduct the analysis of the evaluation findings. The

updated profiles also aid this step, which leads to a set of analysis results being

prepared. Once the analysis is completed senior management must decide which of

the potential partners, if any, they deem suitable to form an EE partnership with. It is

important that both the overall and partnership strategies are taken into account

during this step. As a result, the selected partner is informed of the OEM’s decision

and, providing that the potential partner is in agreement, a contract is signed by

senior management from both parties. The final step of this stage involves a review

of the partnership establishment process in order to provide feedback and improve

any further applications of the implementation methodology. The IDEF0 diagram to

accompany this stage of the implementation methodology is illustrated in figure 8

below.

208

contract

lessons learnt

Analyse evaluation findings

Select EE partner

Sign contract

Review partnership

establishment

process


senior management

updated profilesanalysis results

selected partner

A65

A63

A62

A61

list of potential partnersevaluation report

external expertise

internal expertise

Figure 8: A6 Select Partner and Establish Partnership

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