Table of Contents
Introduction ……………………………………………………………………….. 3
Organizational Background ………………………………………………………. 3
Corporate Venturing ……………………………………………………………… 4
Conclusion …………………………………………………………………………. 7
Recommendations ………………………………………………………………… 7
The concept of corporate venturing is one of the marketing techniques used by commercial organizations with the main intent of utilizing the available innovation opportunities at the global level. These corporations use the innovative platforms to gain and maintain a competitive advantage in the targeted market segment whose major benefits include the augmentation of the company’s market share (Zahra, 2005). In order to acquire these benefits, the larger company uses the available investment opportunities by obtaining an equity stake in a small-sized firm. A large percentage of the business institutions that utilize this concept to increase their returns as well as augment their operational capacity at the international level are in subsections recording a high growth rate (Elfring, 2004). This includes such subdivisions as the technological and energy industries. Accordingly, it is important to detach the efforts of corporate venturing from the operations of a large commercial organization that adhere to the conventional principles in the execution of its business affairs.
One of the corporations that have benefited from the principles of corporate venturing is Intel. For example, the internal venturing efforts of this commercial organization have been a feasible strategy aimed at identifying and developing various technological innovations (Bhattacharya, Guriev & Centre for Economic Policy Research, 2008). An analysis on the operations of this business institution indicates that this strategy and the subsequent innovation of various products have been one of the major techniques of creating a valuable and profitable platform for further investments (King, 2002). One of the strategies that have been guiding the business activities of Intel Capital with reference to internal venturing includes its efforts to improve its objectives and other vital strategies by establishing and developing investments that are feasible and profitable.
Over the years, the corporate venturing activities of this commercial organization has increased to approximately seventy investment experts in more than twenty nations in various geological zones of the world (Pech, 2009). The available investment opportunities used by the management of Intel Capital to increase its returns include software, consumer internet, and cleantech (Burgers, 2008). Based on the principles governing typical activities related to corporate venturing, the company acquires an equity stake of between $ 2 and $ 10 million in its transactions with the smaller corporations. This tactical approach has facilitated the firm to engage in 119 business ventures in 2009 with their investments during this period equating to $ 327 million. These ventures also comprised of a significant number of Initial Public Opening (IPO) and acquisitions (King, 2002).
Despite the differences between intrapreneurial and entrepreneurial organizations with respect to their principles of operations, the aspect of corporate venturing is somewhat similar in both cases. This involves the portrayed essence of balancing the strategic efforts with those of entrepreneurship. Accordingly, these forms of investments seek to enhance the innovations established by a company in addition to renewing the ineffective strategies in various departments within the corporation (King, 2002). Moreover, since both forms of business ventures entail the proceedings of large organizations, it is important to detach the role and activities of corporate venturing from the main structure of such companies. The main reason behind this strategic positioning of the involved investments is the high level of risks and uncertainty associated with such activities. Where practical and appropriate measures are not in place to address such problems, the corporation under consideration may incur severe financial losses (John & Makhija, 2011).
Separating corporate venturing activities from the operations of the larger organizational setup that utilizes conventional principles is useful in acquiring a competitive advantage in the selected market segment. A large organization often faces various competition-based risks owing to the numerous constraints in the internal and external environments (Bhattacharya, Guriev & Centre for Economic Policy Research, 2008). For example, the case study of the enterprise owned by Greg Stamboulidis in the Australian market illustrates the possibilities of severe financial instabilities due to these internal and external forces. For example, a larger organization tends to acquire relatively low returns due to the wholesale transactions. A rise in the wholesale prices of the raw materials used in the production processes may lead to a decline in the profits despite the increased sales. Moreover, the costs incurred in hiring and maintaining the human resources in different departments is high as compared to the estimated expenses in a smaller corporation managed through the corporate venturing activities (Asset Alternatives Inc, 2000).
There are also numerous policy alterations at the local and international levels (Block & MacMillan, 2003). This concurs with other aspects such as the protection rules and principles adapted by the federal administration in Australia as depicted in this case study. These internal and external constraints are influential in the operations of such a large organization positioned in a significantly competitive environment. This state of affairs relate to the elements embedded in the contingency theory (Vintergaard, 2004). This supposition, which focuses on the determinants of the success of a typical organization, asserts that the hindrances in the external and internal environment of a business venture determine the effectiveness of the subsystems as well as the entire organizational structure. In the analysis of these contingencies, the supporters of this theory claim that the traditional principles governing a corporation are some of the major factors that influence the success or failure of a business venture (Keil, 2002).
Other unexpected events in the internal environment relate to the structural framework of the organization. Typically, a large organization is bound to experience numerous uncertainties and risks owing to the hefty financial investments, labor costs, and intertwined structural configuration (Block & MacMillan, 2003). In addition, some of the contingencies likely to occur in the external environment of such a large commercial institution relate to the risks and reservations in the technological, economic, legal, and sociopolitical domains. For example, as indicated in the case studies integrated in Pech’s discussion, most of the legal provisions endorsed by the federal government of Australia with reference to the business subsection have a larger influence on larger organizations (Pech, 2009). These arguments prove the need to separate corporate venturing activities from the structure of the larger organization.
In line with the discussed reasons for a new corporate venture, there are certain risks and obstacles experienced by the administrations of such companies. To start with, the case study highlighted in Pech’s book regarding Greg’s efforts to execute this strategy depicts problems in choosing effective suppliers in distant countries (Pech, 2009). This was mainly at the onset of the investment activities especially because of the high demand experienced by the country. Solving such problems required comprehensive evaluations on the identified suppliers in such markets as South Africa, Philippines, and Malaysia. This approach was also successful in dealing with contingencies regarding government sanctions and other legal elements (Gaule & Spinks, 2002). Another solution used by Greg to deal with such external hindrances included shipping the cargo to Namibia before repackaging the products to the Australian market.
Furthermore, the unreliability of some of the suppliers was a major obstacle that would negatively affect the operations of Greg’s company as highlighted in the discussion. For example, in 1998, the reduced supply capacity was because of the unreliability of suppliers in New Zealand and South Africa (Pech, 2009). In order to resolve these problems, the management of this company intensified its efforts in maintaining cordial relationships with the suppliers through negotiations. Likewise, the fire experienced in 2000 destabilized the operations of this company. However, the management was quick to reestablish the facilities in order to maintain a high market share. Through these unexpected events, the success of corporate venturing was evident. For instance, the administration increased its innovation and adjustment strategies in addition to reduced dependency on suppliers. Moreover, understanding the existing risks, uncertainties, and obstacles was useful in attaining a competitive advantage in the selected market segment (Keil, 2002).
Corporate venturing is a vital aspect in successful investments. It not only reduces the risks associated with labor costs, unreliable suppliers, and instabilities in the demand rates but it is also a suitable approach in dealing with contingencies in the internal and external environments. These unexpected events include the legal sanctions and unstable national economies because of the hindrances associate with the operations of a large organization, commercial institutions should detach the corporate venturing activities from these traditional principles.
In order to
enhance the effectiveness of corporate ventures in an organization, it is
important to evaluate, elaborate, and modify the existing strategic plan with
reference to these investments. The management should collaborate with other
stakeholders in formulating objectives and identifying tools and techniques
that will aid in their implementation (Gaule & Spinks, 2002). The fitness
of the relevant projects will act as a suitable measurement for the successful
implementation of these recommendations.
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