Corporate venture and its impact on organizational effectiveness

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Table of Contents

Introduction
Ways in which corporate can be done
Conclusion
References

Introduction

Venturing in every company is an important tool for the growth of a company to be on the lead. Venturing in corporate companies is one way of the innovations where the company gets ideas from another company and incorporates them in its ideas so that there is a mutual benefit.

The benefits of the company may vary from a big company to a small company. New venturing companies aim to grow and expand and this has an effect to the company that it is venturing into. For the new venturing companies, they need to have new ideas to succeed.

The larger company may invest in a smaller company to accelerate innovation and growth. Venturing can also be used as a source of finance. Venturing makes it possible for a small company to have access to particular skills of knowledge, perhaps in management or technical wise where a smaller company would not have access to.

Also the big company may provide access to established marketing and distribution and high level of technology. Corporate venturing involves leveraging the assets and capabilities of the existing company to help small company to improve their skills in production or management even in marketing. We shall dwell on how new ventures contribute to advancing new management.

Ways in which corporate can be done

Corporate venturing can be done in four ways

Firstly it can be done by taking a passive minority position in the outside businesses (corporate venture capital), secondly, by taking an active interest in an outside company, thirdly, by building a new business as a stand –alone unit ,and fourthly by building a new business inside the existing firm with a structure allowing for management independence. (Rigby, 2011, p.1)

Contributions of the new venture to the advanced management strategy

There has to be a correlation between the two companies. This is contributed through some steps as explained below. Firstly, the new venture must enter into detailed strategic alliance with the corporate partner: “The strategic alliance is a relationship between two or more firms involving sharing of complementary disciplines, technology, products, services, organizational structures and marketing or financial resources”’ (Nester, 2008, p. 1).

Nester (2008) put forward that the type of strategic alliance you have agreed on either, funding, joint venture, merger, product and services or cooperative has to be agreed on in hand shake or write outs or through legal documents so that the alliance may play a role on the agreement made. This means that the new venture must corporate in the management practice effectively to ensure there is order in the new venture participation and the company knows its weaknesses and strengths and points of improvement.

Secondly, the new venture must work effectively with the larger company to ensure that the aims and the goal will be achieved. Thirdly, the company must show success in growth thus showing interest in reaching the target set.

As the larger company makes it possible for the smaller company to access the already developed market, the new venturing company must show creativity in using the market for its gain and the benefit of the larger company.

In addition the company must create and establish strategic objectives where new ideas are to be created for long term projects which could be knowledgeable to the main business. The new company must create a team to monitor the progress of the company and evaluate the employees if they are achieving the target put forward by the company (Mednick, 2005):

Develop strict metrics and timetables to monitor the development process. In some instances, employ staged funding to ensure progress is on schedule. In all cases, look for means to transfer knowledge from the venture into the broader organization. (Rigby 2011).

However in examining the contributions of the new venture to the existing core business company, there could be some tensions arising due to the struggle in asserting their position in the company and marketplace such that one of them will not dominate over the other in their contribution as follows.

These could be in the core assets where the new venture would need to leverage core assets while the larger company needs to protect its core assets e.g. the branding.

Secondly in the human resource, the new venture could want to attract experienced personnel from the core company business to bring knowledge and linkages while the core company could want to keep the experienced and qualified personnel.

Thirdly, the new venture might want to encourage entrepreneurship and recognize and reward risk taking while the large company would want to maintain fairness in reward systems. (Albrinck et al., 2001, p. 1)

The above are some of the challenges that venturing faces. It will require that high level of management skills are applied to iron out these challenges and make them work for the good of both companies. More challenges have been pointed out as follows:

In revenue and growth, the new venture may need to create new revenue streams which may complete their core business while the main company may want grow traditional revenue streams.

Fifthly, in the leadership, the new venture may want to receive strategic guidance and expertise from the larger company while the larger company may want to sustain and focus on the main business; and in the financial resources, the new venture may want to redirect finances into a new venture, while the larger company may want to continue investing in its business.

In speed and flexibility, the new venturing company may wants to encourage rapid decision making and high risk tolerance while the larger company may want to adhere to established policies and procedures and to manage risks. In the new ideas, the new venture may want the larger company to give ideas while the same large company may want to control those ideas. But in all this the larger companies have learned to manage these tensions. (Albrinck et al., 2001, p. 1)

Case study of GlaxoSmithKline

GlaxoSmithKline is a company which is rooted to the years of 1880s.Burroughs welcome and company was founded in London by Henry Welcome and Silas Burroughs. Glaxo was founded in New Zealand in 1904. Originally, Glaxo was food Company and produced food for babies.

Latter the Glaxo is reported to have become Glaxo laboratories and it opened up new units in London in 1935. This company discovered amoxillin. It is reported that the company tried to merge with UK Chemists Boots in vain. All through, the company became successful in buying companies and merging them.

1843 saw the birth of Beecham, which started with Beecham’s pills which were laxative. The company grew and in 1982 it merged with SmithKline and formed SmithKline Beecham which then moved to England. In 2000 the Glaxo Welcome and SmithKline Beecham came together in a corporate venture forming GlaxoSmithKline (GlaxoSmithKline, 2011).

This history has shown how the corporate venture was formed resulting to a strong new company which led to a number of gains to the newly formed venture which include access to a wide market worldwide. This venture has made it possible for the company to become one of the worldwide suppliers of pharmaceutical and chemical products.

In the recent past, the Taj Pharmaceuticals group has set up a corporate venture with the GlaxoSmithKline and Eli Lilly Company. The GSK has signed an agreement deal of ten years with the Eli Lilly Company, to raise corporate funds.

The Eli Company is raising the money for the new venture. In the new venture, Professor Mark Pepys the head of medicine at Royal Free and University College Medical School in London would develop a treatment for a rare form of amylidosis by staying at the Medical School.

The GSK provided the facility and funding. The GlaxoSmithKline Company in its series of its development has always been in new ventures alongside other companies (Press, 2011).

In this latest venture, the company has made an agreement with the Eli Lilly Company to improving and fund Professor Pepys’ company, Pentraxin Therapeutics. This shows innovativeness and it is a good case of how new venture could improve and achieve the goals and aim over given time.

Conclusion

The new venture contribution in the advancing management strategy is of great importance in the growth of a new venture. From the case study of GlaxoSmithKline, the alliance based on funding has been sealed for ten year with the Professor Pepys’ company, Pentraxin Therapeutics, whose objective is to ensure that discovery of the drug has been achieved.

The GSK has provided the avenue for which Professor Pepys’ company; Pentraxin Therapeutics will have a way since the GSK will provide the funding and the facilities which could otherwise be accessed by the professor’s company. Thus the company may achieve great goals with the Corporate Venture put in place. Both companies mutually benefit.

References

Albrinck et al. (2011). Adventures In Corporate Venturing. Web.

Glaxo Smith Kline. (2011). Our History. Web.

Mednick, S. (2005). Corporate Venturing For Emerging Growth Companies. Web.

Nester, A. C. (2008). Strategic Alliance-a key business strategy. Web.

Press. (2011). Glaxo Smith Kline, Taj Pharmaceuticals and Eli Lilly starts spin-outs fund for corporate venturing. Web.

Rigby, D. (2011). Corporate Venturing. Web.

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