Read example of successful and failed alliances and please answer the question, taking a HR perspective: what are the conditions of successful cooperation?

THE VOLVO-RENAULT STORY

Renault and Volvo had built a respectable relationship for almost 20 years before becoming alliance partners in 1990. With the formation of this alliance, the ownership of the car and truck sector within both companies changed. Renault bought 25% of Volvos car production sector while Volvo became the owner of 20% of Renaults motorcar division. In the truck sector, Renault and Volvo each held 45% of the other companys truck division. Based on the responses from the interviewees, the key factors that impacted the Volvo-Renault alliance and eventually sealed its fate are identified as follows.

Partners' Objectives: The alliance between Renault and Volvo would create the sixth largest car manufacturer, and the second largest manufacturer of heavy trucks in the world. It was motivated by (1) both firms wanting to exploit the potential of what the two partners could gain in joint product development, purchasing as well as quality and manufacturing, and (2) due to the economic recession, there was an increasing saturation of demand with the capacity utility in Europe at 66% (Bruner, 1999). Volvo needed financial help for innovations, new product development and a nest egg for years of scarcity, which could only be achieved by a partnership.

Partner Selection: An alliance with Renault seemed a good offer to Volvo especially in the car production sector, know-how, and in terms of financial capital. While Renault hoped to gain Volvos excellent product engineering capabilities and exploit Volvos brand reputation for safety. Further, the firms' product lines did not overlap. Volvo was a premium car brand, while Renault focused more on mass production. Notably, however, unlike BMW or Mercedes for example, Volvo had relatively small output and a small range of products which barred the firm from achieving production efficiencies necessary to compete effectively on the global market.

Resource Contribution: Both Renault and Volvo engaged a variety of resources for the alliance such as technology, materials and knowledge. Given their relative size, Renault contributed more working hours, while Volvo focused on engine development.

Network: Each firm had access to the other firm's network and was able to establish and deepen relationships in the alliance partner's country. One of the senior managers, who was an expatriate from Renault to Volvo during the collaboration period, stated during the interview that he himself established a close relationship with Volvos CEO Gyllenhammar at the time and his team built a "good connection" with the Volvo team in Gothenburg and Skvde, as well as with suppliers common to both alliance partners.

Cultural Factors: All participants agreed that the major problem was the clash of cultures which seriously affected cooperation between employees from the two firms. In particular, the French and the Swedes held different opinions about product development and working style. Both firms made attempts to adapt to the cultural differences organizing language courses and special classes to raise cultural awareness among their workers. However, given that the instructional language was English, it hampered communication. As one senior manager from Renault stated, "My biggest regret was that I did not learn Swedish so the exchange among us was limited". On the other hand, Swedish mangers commented that, "French like to think of themselves as being better educated coming from good engineering schools", while Swedes tend to trust even strangers quickly which results in Swedish people coming across as being more naive. Consequently, communication problems started to arise with the French starting to negotiate in French only in order to exclude the Swedes". The Swedish managers pointed out that certain decisions were made by Renaults employees from a perspective as if they held a higher managerial status than Volvo employees. These differences in managerial status created problems during discussions especially relating to technical problems. Although the Swedish employees were technically more advanced, French were more rhetorical and quick-witted always downplaying technical difficulties by "engaging in vast discussions".

Organizational Factors: Based on the interviews, organizational factors are categorized as follows.

• Leadership Style: An open communication is a hallmark of a successful alliance. While, Gyllenhammar of Volvo was said to be a visionary, he was aloof and lacked skills for leading a corporate transformation described as a totalitarian commander not feeling comfortable in the role of a follower, a listener, a coach, a cheerleader . Indeed, he may never have had to learn followership, since at a young age he was appointed CEO of Skandia Insurance by his father, and then of Volvo by his father-in-law (Bruner and Spekman, 1998, p.147). Gyllenhammars management style created a climate of distance and doubts within his firm, as well with his alliance partner.
• Management: Both Renault and Volvos top management pushed the alliance too fast aiming to achieve their individual rather than common objectives. As a result, they could not establish a common corporate culture accepting of the national differences amongst the partners' employees. Employees simply were not given adequate time to adjust to the changes brought about by the formation of the alliance.
• Commitment and Trust: In order to generate commitment and trust, the alliance required a cross-acquisition of shares as well as a poison pill when seeking exit of the alliance making it costly for either party to dissolve the alliance. However, the leadership style in Volvo also impacted on this process and failed to build any confidence amongst its workers, as well as investors and shareholders making them doubtful about the credibility of alliance with Renault.
• Public Opinion: The Swedish general public considers Volvo as one of Swedens biggest assets as well as a famous landmark. Swedish tabloids began reporting rumors about a possible merger between Renault and Volvo and fiercely opposed and questioned the merger which had a massive impact on the public opinion, as well as on the relationship between the two firms. The media was poorly managed by the two firms.

Learning: Both firms acknowledged that in retrospect they learned that an alliance bore a larger risk than they had initially anticipated, and that it was not easy to terminate and switch partners if either partner's objectives change and are no longer aligned during the collaboration process. Renault completely changed their alliance management team, the way of doing business with their partner, and made efforts to adjust to their partners culture and took much more time for making final decisions and changes.

On February 17, 1994, Renault and Volvo announced the dissolution of the strategic alliance. This was expensive for Volvo as it entailed a payment to Renault under the poison pill, a partial repurchase of Renaults interest in Volvo, and a write-off of good- will. All joint projects were terminated, except for an agreement to exchange engines and gearboxes between the two firms (the same arrangement in force since 1971).