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SOCAR was not known in Switzerland, and if you can enter a partnership with a big brand with a positive reputation, it is a good strategic advantage to introduce your own brand. Therefore, if you have a partnership with a well-known company in the country, it is much easier to become known and highly reputed in Switzerland. Concerning the choice in favor of Migrolino, there are two big brands in the food and convenience store industry, and Migrolino is open to partnerships, so SOCAR had no other choice. The other big company prefers to perform alone, so that was not an option. In the end,, branding with a reputable company is very important. From that point of view, it was the right position for SOCAR in this market, because we could introduce ourselves.
2. Were there any disagreements inside the company or with Migros representatives? How did you overcome them? (V?zquez, 2009). Did you have to make any drastic changes in the performance of the company in order to meet the requirements outlined with Migros representatives?
-Yes, there were disagreements and difficult challenges. First of all, there are going to be commercial disagreements, as every company wants to gain an advantage even if it comes at your expense, so it took quite a while to agree with Migros. In the process and even after signing the contract, you end up finding new opportunities and have to find compromise to reach a financial agreement. Also, there are disagreements about conceptual things. For example, we really wanted to be independent from the supermarket chain. Migros' staff cannot intervene in our management, but Migros has the right to manage the assortment. We also had to change many things. For instance, we had our own category management and we had a team that was in charge of all shop business, but in partnership with Migrolino, we had to close these activities because Migrolino has control over these aspects. Other important thing is information technology. It is extremely important for good communication in a partnership, but you have to be clear about it. You need to have right system, right information flow, and right management of information, and initial struggles with this made it hard to negotiate that at first. You cannot just demand to get everything you want, so we had to make some changes on managerial and operational levels.
3. What are the main benefits of this partnership? How does the company use them? What are the challenges? How does the company manage such issues?
-The main benefit is the brand. For us it is very important. We were able to position ourselves at the very beginning as a result. The second benefit is a know-how. We could implement Migros expertise into our shops immediately. The third element is perception. Customers really think that if they see SOCAR with Migros, this means they sell consumables of good quality. The fourth element is growth potential, as we had partner, with which we can grow. The fifth element is long-term strategic direction. I personally believe that the convenience store market should grow with strong brands. Of course, there are many challenges. For example, you have to give up a degree of freedom, meaning we cannot make certain decisions without Migrolino's input. We are managing that very well based on our franchise agreement. There are many financial issues as well. For example, here are a lot of costs. We need to pay for franchise and brand, for other issues related to partnership and loyalty. And of course there cultural issues. As we have shareholders with different ideas and cultures, there are of course going to be some conflicts between Migros and SOCAR. It is very positive that Migros likes to work with professional companies. I think that the main challenge is to keep such a partnership going strong. The question is how to make sure that partnership work on interpersonal and managerial levels.
4. What is an approximate life cycle of this partnership? Are there any companies that can attract SOCAR? How do you see the fact that Migros establishes similar partnerships with your strongest competitors like Shell?
-Lifecycle of partnership depends on status of partnership. When you enter the partnership for the first time, you should do it at least for 5 years. You have to change the brand, staff, assortment, and many things that would not be worth the trouble if the partnership were short-term. Thus, your partnership should always have an intention of being long-term. Of course, it can break. But you must enter the partnership with the intention of keeping it alive because partnership heavily influences how you are seen by customers. They are used to seeing SOCAR and Migros together, so if they break up it could cause confusion customers. That is why you need to think about the consequences if you break up a partnership. If it is well managed, a life-cycle partnership should be long-term, but you can get out after 5 years. But the main philosophy of a partnership is to remain long-term. You should always look into you partnership as a long-term: imagine your company growing together with your partner through a long period. There are of course companies that might be intriguing to form a partnership with g, and we are open to them, at least to listen to because you should always be willing to listen to possible alternatives. However, while strong brands certainly exist in Switzerland, relative to other countries there simply are not a lot to choose from. The only thing we could imagine is to develop our own shop concept and run it on our own. So, yes, there are alternatives, but we should think first about whether it can be a long-term relationship. As for Migrolino, opening the same partnerships with others does happens in principle (like with Shell, for example). However, there can be contractual limitations to open similar partnerships, and therefore I would not like to comment on that much because it is a little a secret of our contracts.
5. Are there any conflicts or misunderstandings during the partnership? How do your leaders manage such cases, and what are the attitudes of various workers towards such incidences?
-Naturally, problems happen in day-to-day operations; for example, when Migrolino does not deliver enough products or their quality is not sufficient. For these conflicts, there are always procedures and contacts, from which you can learn it. As an analogy, a comparison can be made between the relationship with a partnership and with that of your family. Sometimes you get angry, and when you get a good friend, you solve it. Things might get a bit heated emotionally, but you manage the problem. We have a little bit more of a formal relationship, so the management of SOCAR and Migrolino sit together and compile a list of major problems that come up and discuss how to manage them. All problems are discussed on a managerial level if they are really important, and even if they are less important but relate to daily operations. As an example, if the products are not delivered, you have customer service to deal with the problem; likewise, if a particular assortment does not fit customer needs any longer, you have merchandising support. It is all about proper communication, as it helps to sort all things out. You have to establish communication with your partner to address these issues immediately. There are a lot of things that happen in reality. We talk about some elements that we mention in the agreement, like service level agreements. For example, one of our agreements is that Migrolino is required to deliver X percent of products at any time, so if they fail to fulfill their end of the bargain, there are consequences that are written in the contract. You have to communicate whatever happens to get the problem managed as soon as possible.
6. Do cultural differences affect communication with Migros? (Singh, 2010) Are there any barriers that should be managed? If so, how do both companies regard such obstacles?
· There are indeed cultural differences that occasionally pose a problem. In principle, we have three cultures. SOCAR Energy Switzerland and Migrolino are more or less similar in their social cultures, but have significant differences in their business respective cultures. Therefore, we sometimes have conflicts in this area. Migrolino is more hierarchical, whereas we are more democratic, partnership and coaching style oriented. That of course often leads to conflicts. Migrolino says, "We want to sell this product from the shelf", while we respond with, "Okay, but let's discuss it first to determine whether it is worth it" Then you can see cultural differences, not on social side, but in a way we do business. "Yes" should always mean "yes." However, Migrolino managers may say "yes", and then come back and say that their senior management thinks differently. This sometimes creates tension. But if you have a good relationship, you manage it. Migrolino has to be different. It has 4, 000 employees, so there are some restrictions and limitations, as the company has to be able to maintain control over everything. SOCAR Energy Switzerland is only 800 employees, and as a result, we are more flexible. Of course, it makes a big difference between us. So, we have to be willing to find compromise between each other.
7. What are the plans for the future? Will SOCAR establish similar alliances in other countries? Is it a credible course for action in other countries, and what are the risks of becoming dependent on such strategic alliances?
-Of course, we would like to expand our activities to other countries. But at the moment there are no viable deals, although we are always looking into opportunities. If we have a chance with the other company and the conditions are right, we probably would be agreeable to consider an alliance. The first thing that we would do is to make an assessment. This would involve assessing a company and the country where it is operated and then make a decision on it. As for the conflicts of a dependency on such alliance, you cannot just drop your responsibilities to the partnership on a dime. When you enter alliance, you have to reflect what if you have to break up, what are the consequences if you want to get out of it. We have a wonderful partnership with Migrolino. You know about cumulus points, and Migros gives loyalty points to customers. For many of our customer this is very important. Imagine if we broke up today. We would lose many customers and the ones who remained would be unhappy. So, there might be severe consequences for a break-up, unless you find better alternatives ahead of time. That is why you should think twice before breaking up a partnership.
8. What did SOCAR learn from partnership with Migros? Can this knowledge be used in independent performance of the company?
-We learned a lot. As previously noted, we learned that branding is important and that you have to be willing to compromise if you want to be successful in partnership. You are not going to be in a position where you can always get your way, you will have to give. We learned that you have to be very clear about benefits and additional costs. In addition to looking at your potential, it is important to consider upside risks. You need to imagine how your company will look like in the future, and what risks you might face. Also, communication in a partnership is a key. Keeping a good communication at every work level is a key to success. You should be ready to address issues immediately as it is very important. An additional observation is that you need to determine what is your strategic fit. With Migrolino, we are very happy because it is indeed a good strategic fit. For example, SOCAR in Switzerland is regarded as a high-quality brand. If we formed a partnership with low-quality and price-cutter supermarket chain, we would have many conflicts because customers could become confused. They might ask why a company would involve itself in discount shopping while also engaging in the business of selling expensive fuel. So, strategic fit is very important.
9. What is the role of technology in this partnership? How do companies agree and manage this issue in relation to costs and implementation? Is there are any space for research and development?
-As I have mentioned, information technology is extremely important. In a world where we see one of the changing moments in payment systems, in digitalization, in customer relationship management tools, in data protection management, I must say that the most important thing is that you have to be very clear when it comes to delegating responsibilities . In principle, you can choose whatever you want done by you and other partner, but you have to be clear, because otherwise it leads to endless conversations about future investments. Every shareholder must be responsible for a certain part of the entire system. Generally, the most important thing is to be clear about the setup: who is going to organize what part of information infrastructure, if it comes to information technology? You also have technology in the shops like fridges and coolers, and bakery, and the question is who is responsible for this infrastructure. But I remain in IT, because IT is important for who is going to make future investments. Regarding innovation, we have conflicts from time to time. We want to make SOCAR progressive and flexible company, so we are very interested innovation. We want to develop a SOCAR app with many functions, but it cannot be integrated with Migrolino, but we then have to make some updates for it. There are additional expenses that we would rather avoid. You need to have a common ground for software applications and hardware installation that it is extremely challenging, so you can do it well if you have good terms in the contract. The cost should be clear and well defined. You have to communicate about that as well and find some agreements.
10. How can you can describe a character of relationship between two companies? Does it go beyond terms of business communication? Why or why not?
-It goes far beyond business communication. If the partnership is good, you start growing together. You start communication between employees, you really become more and more like one team. If a partnership is silently growing together, that is very interesting. It is probably one the companies we would like to grow together. I even imagine that one day SOCAR and Migros will be much closer even than we are today.
References
Singh, S. (2010). Handbook of business practices and growth in emerging markets. Hackensack, NJ: World Scientific.
V?zquez, L. (2009). How passive ownership restrictions affect the rate of franchisee failure. The Service Industries Journal, 29(6), 847-859.
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