The Current Rationale for a Strategic Alliance Between China and the US
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The Current Rationale for a Strategic Alliance Between China and the US

This is an analysis of how do a simple IFE (Internal Factor Evaluation) and EFE (External Factor Evaluation) for the purpose of creating a strategic alliance.

The three primary measurements for each Strategic Alliance in the world usually have these factors to consider:

A. Economic, B. Political, C. Historical.

Let’s begin by defining each of these variables.

A. By economic measurements, we mean the amount of actual net profit a country can derive from a strategic alliance with another country including full partnerships, limited partnerships, joint ventures, limited joint ventures or any other arrangement that provides a profit to a country.

B. By political measurements, we mean the amount of political support one country would have for any type of Strategic Alliance with another country among the people within its own borders, within its region of the world and in the international community at large.

C. By the historical measurements, we mean the recent and, to a lesser degree, the historically recorded relations between any two countries that may have a positive or negative impact on the potential Strategic Alliance.

It is interesting to note, that while each of these variables are important, they have different weights in the mathematical models for IFE, EFE and CPM analysis. IFE is an acronym for Internal Factor Evaluation, EFE is an acronym for External Factor Evaluation and CPM is an acronym for a Competitive Profile Matrix.

Let analyze a potential Strategic Alliance with two of these Strategic Planning tools (IFE and EFE):

Case Study 1 – Benefits of a China – United States Strategic Alliance

First, in order to create an IFE (Internal Factor Analysis) for this Case Study, we must list the key Internal Factors within each country and give a weight of 0 – 1 for each one. Then we will add a column for assigning a weight to the strength or weakness of this variable from 1-4. After we finish the second list of weights, we multiply the first column by the second to determine a weighted score. Then we add up the weighted scores to get a total score for that country’s IFE. We examine China, first.

China IFE

Variable                                            Weight of Factor                  Strength of Factor                         Weighted Score

Current State of the Economy -                 .4                                            4                                                 1.6

Stability of Government -                           .1                                            4                                                   .4

Cash Reserves -                                        .1                                            4                                                  .4

Security Concerns -                                   .1                                            3                                                   .3

Infrastructure Status -                                .1                                             2                                                  .2

Unemployment -                                         .1                                             3                                                  .3

Inflation Rate -                                            .1                                             2                                                  .2

Total                                                          1.0                                                                                               3.4

So we can see from this simple IFE that China has a score of 3.4 for its Internal Factors. This is a fairly high score, especially when we compare it the US.


Variable                                                        Weight of Factor            Strength of Factor                    Weighted Score

Current State of the Economy -                               .4                                      3                                         1.2

Stability of Government -                                         .1                                      4                                           .4

Cash Reserves -                                                      .1                                      2                                           .3

Security Concerns -                                                 .1                                       3                                          .3

Infrastructure Status -                                              .1                                       3                                           .3

Unemployment -                                                       .1                                       2                                           .2

Inflation Rate -                                                          .1                                       3                                           .3

Total                                                                       1.0                                                                                   3.0

As we can see from simple analysis, in 2011, the US is just slightly behind China 3.4 – 3.0 in strength of its IFE. Of course, these variables and their respective strengths can change in just one month (or sometimes even faster), so this is really just a snapshot in time, not a long term evaluation.

Now lets perform an EFE on the two countries. An EFE, or External Factor Evaluation is created exactly the same way as an IFE, except the listed variables are external, rather than internal.

EFE - China

Variable                                                    Weight of Factor                  Strength                 Weighted Score

Perceived International Power                                .3                                  2                                 .6

International Influence                                            .2                                   2                                .4

Balance of International Trade                               .2                                   3                                .6

International Debt                                                   .1                                   4                                .4

International Goodwill                                             .1                                    2                                .2

Perceived Interference Internationally                    .1                                    3                                .3

Total                                                                      1.0                                                                    2.5

So a quick analysis shows a rather mediocre score of 2.5 for China internationally, which might indicate that China does a much better job internally (IFE) rather than externally (EFE).


Variable                                                                    Weight of Factor           Strength              Weighted Score

Perceived International Power                                             .3                            4                              1.2

International Influence                                                         .2                            3                                 .6

Balance of International Trade                                            .2                            2                                 .4

International Debt                                                                .1                            2                                 .2

International Goodwill                                                          .1                             3                                .3

Perceived Interference Internationally                                 .1                             3                                 .3

Total                                                                                  1.0                                                               3.0

Though not an outstanding score at 3.0, the USA has certainly a better international score than China at 2.5. Once again, I must remind you that these scores can change in as little as one month (sometimes less under special circumstances)

So just by perusing these two simple tools of Strategic Management, we can see that China does a much better job managing its internal affairs than the US, but the US is still considered a superior player to China in external affairs.

So what would be the benefit of a Strategic Alliance between these two countries?

For one, the US might possibly learn something about management of internal factors from China. And for another, China could learn a thing or two from the US about creating a new global strategy. In this respect, if each country could get over the fact that it has weaknesses in one area or another, they might be able to strengthen both countries at the same time through an extensive strategic alliance.

Next time, we will examine the IFEs and EFEs of the variables of these charts, rather than of the general overview of the countries themselves. And we can also examine other potential strategic alliances between different sets of partners (US-Russia) (China-Russia) (US-EU) (China-India) and others.

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