Accordingly, a strategic alliance may enable the individual firm to close what has been termed a strategic gap - the difference between what that corporation would like to achieve and what it has the resources to achieve. This is particularly the case when the strategicalliance involves specialization and complementary expertise, and each therefore brings to the alliance something that the other lacks. Another reason for forming strategic alliances is that they can be a useful means of reducing the unpredictability of the free market and of regularizing relationships.
Strategic alliances offer a means of ensuring specialization and division of labor often in relation to suppliers. By allying with a firm that supplies raw materials, it is possible for a corporation to obtain both better financial terms and to guarantee that supplies of necessary materials will always be available. This form of strategic alliance is perhaps best encapsulated in the Japanese keiretsu, a set of arrangements in which suppliers are bound very closely to those firms that depend on the product for their manufacturing processes.
Although it is possible to identify several distinct reasons why firms engage in strategic alliances, in practice more than one consideration is usually involved. Strategic alliances promise multiple benefits: they "enable partners to share financial and operating risks and costs, obtain benefits associated with scale economies and operating synergies, and increase market share".
Not surprisingly, these alliances can take many different forms. One type is the franchise alliance, which generally involves an alliance between a larger, more developed company and numerous independent, smaller, more tightly managed companies. A second form is what might be termed the compensatory alliance inwhich two companies recognize that each one acting alone has inherent weaknesses that can be offset by the other's strengths. A variation on this is what could be described as a specialization alliance in which one company forms an alliance with another that can fulfil specialized tasks beyond the existing capacity of the first organization.
There is a kind of contractual relationship as regards specific tasks and responsibilities. Another form of strategic cooperation occurs through what are sometimes described as countertrade alliances in which goods are exchanged for goods. Yet another variant is the supplier alliance in which there are regularized relations between the suppliers of basic raw materials and firms that transform these materials into consumer products.
This is not a comprehensive description of the infinite variety of strategic alliances, but it does highlight some of the most important forms of these alliances. It does nothing, however, to explain why some strategic alliances succeed and others fail. The starting point for considering this issue is a recognition that the basis for strategic alliance is mutual need.
Each firm has something that the other needs or wants. Yet, even if ally selection is appropriate and there is a basic mutuality of interest underlying the initial impulse for cooperation, this is no guarantee either of continued harmony or that the alliance will be successful. Strategic alliances between transnational corporations encounter many problems.
The strategy, chemistry and operations must all be right. The participants in strategic alliances usually come from different cultures, operate according to different precepts and principles, and, in spite of their common interest, may have different needs and priorities. Clash of cultures, discrepant and incompatible operating procedures, and divergence of interests and priorities are all inherent possibilities in strategic alliances amongst transnational corporations from different home nations.
Another consideration is that the alliance may result in unequal or asymmetrical gains. This can lead to resentment on the part of the firm that believes its benefits are not commensurate with what it has put into the alliance. Even if this does not occur, the possibility that the partner may defect - for example, after assistance with the initial market penetration one of the firms might conclude that it is now capable of going it alone - can create an aura of suspicion that can undermine continued cooperation.
As one analyst has argued, when one of the participants engaged in cooperation can obtain considerable short term advantage by defecting, then the possibility for the breakdown of the alliance is ever present.
Another cause of alliance breakdown may be unauthorized actions by subordinates or particular divisions within the corporation. The effective functioning of an alliance generally requires that the top level management has strong internal control.
Actions taken by subordinates that are not congruent with top level directives can prove particularly disruptive, especially in instances where companies remain competitors in spiteof their strategic alliance.
If one transnational corporation -for whatever reason - continues to engage in independent marketing activity, for example, even though it has agreement with another on joint marketing or selling this could provoke a reappraisal of the alliance. Yet another possibility is that the alliance simply does not live up to expectations.
In counter-trade alliances, for example, late delivery of goods or the supply of inferior products can erode the level of trust and may lead one of the partners to seek an alternative ally. In short, strategic alliances may be easier to create than to maintain. Expectations that were very high will often be disappointed as performance falls short of promise. Disappointed expectations can result in lack of trust and the erosion of effective communication. The result is that while strategic alliances are very popular initially they often lose some of their luster.
Since transnational criminal organizations are essentially profit maximizing and risk reducing entities, it is hardly surprising that they too engage in strategic alliances. Cooperation among these organizations is a natural activity particularly as they share the common problem of circumventing law enforcement and national regulations.
As suggested above, there is an added incentive forcooperation that stems from the illicit nature of the activity. Whereas transnational corporations have to negotiate with governments in order to obtain access to new markets, TCOs have to negotiate with the illicit power structure.
This again may encourage a propensity to create strategic alliances. From this perspective it is clear that at least some of the alliances among transnational criminal organizations can be understood as risk reduction alliances. There are several kinds of risk that criminal organizations are anxious to reduce: the risk of interdiction or seizure of the illicit product they are supplying, the risk of apprehension of members of the organization; the risk of infiltration of the group; and the risk of their profits being seized.
A very good example of a risk reduction alliance - at least from the perspective of one of the partners - is that between the Colombian Cartels and Mexican drug trafficking families. In many ways, this is a very natural alliance that can also be understood as a contractual relationship in which the Mexicans perform a highly specialized task for the Colombians. Mexican criminal groups, often with a family basis, have long had a well-developed smuggling infra-structure for the transport of goods and services across the extensive frontier with the United States.
The Sinaloa drug trafficking organization led by Joaquin Guzman Loera who was arrested in is one of the best connected of these groups but there are several others that have extensive and systematic linkages with Colombian drug trafficking organizations. The Mexican groups understand the "frontera" and what is required to ensure the viability of smuggling activities. For the Colombian Cartels, therefore, allowing the Mexican families to do something in which they are extremely experienced and skilful makes eminent sense.
The strategic alliance with Mexican smuggling organizations is an important means of risk-sharing or even risk avoidance for the Cartels in one of the most high risk aspects of the business -crossing the border into the United States. And for the Mexicans, the alliance is important in allowing significant participation in the cocaine industry - an industry that has higher profit margins than the marijuana industry that has traditionally been the preserve of Mexican smugglers. Although the risks are certainly not negligible in cocaine smuggling, they are outweighed by the very substantial economic benefits that come both from the contractual arrangements and the fact that Mexican organizations control much of the cocaine distribution in California.
Elsewhere in the United States, the cocaine is returned to Colombian traffickers who control the wholesale trade. Another intriguing alliance has developed between Mexican smugglers and Chinese criminal organizations involved in trafficking illegal immigrants into the United States. Once again, the Mexicans are able to provide a major service since they possess the ability to smuggle migrants across the border into the Southwest United States with minimum risk of detection.
The result has been what the Los Angeles Times described as"a clandestine corridor linking the villages of Fujian, the shores of Mexico andCentral America, and suburban safe houses in heavily Chinese enclaves of the San Gabriel Valley".
Los Angeles Times June 21, p. The scale of the enterprise became clear during the first six months of when the Border Patrol arrested over Chinese, of them in San Diego, and acknowledged that for every captured illegal alien two others escape detection. The implication is that when trafficking routes and methods of proven effectiveness are available not only is the product drugs or people virtually irrelevant so far as the criminal organizations are concerned, but these organizations are willing to engage in any kind of alliance that facilitates their illegal enterprise.
Another kind of alliance is that between some of the Nigerian drug trafficking organizations and the Colombian Cartels. The Nigerian criminal organizations are classic free market entrepreneurs. Engaged in both cocaine and heroin trafficking, they have progressed from being couriers for others to being major players in their own right.
They have developed an alliance of sorts with the Colombians based on product exchange. There have been several instances in which Nigerian trafficking organizations have supplied heroin to Colombians in return for cocaine. This has helped the Colombians to develop their own heroin market, while also offering opportunities for the Nigerians to sell cocaine in Western Europe.
How extensive this form of counter-trade actually is remains uncertain. Nevertheless, there is some evidence that it is a not insignificant set of activities. Another important motive for the development of strategicalliances has been the desire to enter new markets.
This has been perhaps most evident in the relationship between the Colombians and the Sicilians. During the late s and the early s it became clear that there were growing linkages between the Colombian Cartels, especially the Cali Cartel, and the Sicilian Mafia.
These linkages can be explained in large part by the desire on the part of the Colombians to enter the European market. Such an entry was necessary because of the saturation of the United States cocaine market, and highly desirable because cocaine sold for higher prices in Europe and therefore offered higher profit margins. In some respects Europe was also an area of lower risk of product seizure in that European law enforcement was not as engaged in counter-narcotics activity as the United States authorities who had even mobilized the United States military in the war against drugs.
At the same time, it was not risk free especially for Colombians who generally had a higher profile and greater visibility than was desirable. Although the Colombians had developed their own marketing and trafficking strategies for Western Europe - with access mainly through Spain and Portugal - the costs had been relatively high in terms of the number of arrests.
In 2, cocaine traffickers were arrested in Western Europe 27 per cent of whom were Colombians. Against a backdrop of this kind, alliance with the Sicilians had a dual payoff. The Cosa Nostra not only had well established distribution networks for heroin that could also be used for cocaine, but also had excellent knowledge of local conditions andwas able to go further than the Colombians in neutralizing law enforcement authorities through bribery and corruption. If marketing considerations drove the alliance, therefore, it can also be understood as an attempt by the Colombians to overcome limitations in their indigenous capacity to penetrate the European market.
Alliance with the Sicilians, in effect, compensated for the lack of a Colombian ethnic network in Europe that had been central to the success of Colombian drug trafficking activities in the United States. From the Sicilian perspective, there was also considerable benefit to be gained from alliance with the Cartels. The Sicilian role in the heroin market in the United States had been superseded to a large extent by the Asians themselves. What at one point had been predominantly an alliance in which the Chinese supplied the opium and the processing was done in Sicily, was transformed as the Chines began to integrate forward and do much of the processing and trafficking for themselves.
The results were evident in the way in which Southeast Asian heroin came to dominate the United States heroin market in the latter half of the s. And even in Europe, Turkish criminal organizations, trafficking heroin from South West Asia, made great inroads into the heroin market. For the Sicilians, therefore, alliance with the Colombians offered opportunities to recoup some of the ground that had been lost in other areas.
Although the needs of the two organizations were very different, therefore, they were sufficiently compatible to lead to a strategic alliance. The effects of this alliance can be seen inthe way in which the cocaine market has developed in Europe.
American law enforcement officials had been warning their European counterparts for some time about the impending cocaine blitz on Western Europe, but it was not until and that this materialized.
Although seizures alone are not a particularly good indicator of supply levels since they can also be explained by greater law enforcement effectiveness in interdicting supplies they do tend to reveal broad trends.
In this connection, the number of seizures went up so dramatically between and as to suggest that there had been a qualitative leap in trafficking cocaine to Western Europe. In the first three months of around kilos of cocaine were seized counting seizures over kilograms each.
In the first three months of that figure had risen to almost 12, kilograms. Another kind of relationship has arisen reflecting the need for specialized services on the one side and the capacity to provide them on the other. Once again, it appears that the Sicilian Mafia and the Colombian Cartels have developed arrangements in which the Sicilians engage in money laundering on behalf of their Colombian allies.
There have also been agreements between the Sicilians and some of the Russian organized crime groups to engage in money laundering. The Cali Cartel has also been laundering money through illegal numbers racketeering in Rio De Janeiro that may be closely linked to the activities of the United States Mafia.
The notion of neutralizing potential competition throughalliances - or at least through tacit agreement on limiting competition - has also been discernible. A good example of this occurred in the Czech republic. In October members of the Italian and Russian Mafias met in Prague, and divided up the areas of their respective operations. Italian gangs use the Czech Republic as a place for recreation and support, while the Russians use it for money laundering as well as arms dealing, drug trafficking, blackmail and prostitution.
Even if this agreement does not qualify as a strategic alliance, it does highlight one means of limiting conflict among TCOs. Other important relationships, especially those in the drug trafficking industry, can be understood as franchise alliances.
There are many well established relationships of this kind, with African-American groups, Dominicans, Puerto Ricans and others involved as retailers for Colombian wholesalers of cocaine and Chinese and Nigerian wholesalers of heroin. It is clear even from this brief survey that strategic alliances among TCOs have become increasingly common. Some observers have seen this as the development of a Pax Mafiosa and argued that it involves an attempt to carve up the globe into criminal fiefdoms.
The analysis here, however, suggests that these linkages can be understood in less grandiose and more prosaic terms. They are essentially alliances of convenience based on strictly economic considerations rather than part of a global criminal conspiracy.
This is not to denigrate their importance as it is clear that they greatly enhance the capacity of transnationalcriminal organizations to circumvent government controls. Moreover, it has to be recognized that alliances are only one of the many instruments used by transnational criminal organizations to further their activities. There are several alternatives to fully fledged alliances. Criminal organizations sometimes reduce their vulnerability by co-opting non-criminals.
The Nigerian organizations have been particularly good at this and have succeeded in recruiting couriers especially American women who did not fit a profile that would immediately arouse suspicion on the part of customs or law enforcement officials.
It is also clear that fully fledged alliance between large criminal organizations such as the Cartels and Sicilian Mafia provide only part of the picture. Strategic alliances between large organizations are accompanied by many smaller, more tactical alliances.
A good example of this was uncovered in January , when Mexican authorities seized 52 kilos of heroin and arrested 4 Thais, a Laotian and 4 Mexicans in Ensenada, a port city 70 miles south of San Diego. The scheme was an ingenious one in which heroin was sent into the United States by mail. It was operated by criminals who had infiltrated the postal services in both Mexico and Thailand.
Initially bath products were sent to Thailand to false addresses. They were then stuffed with heroin and sent back as undeliverable. Because they had not originated in Thailand they were not inspected by Mexican customs. In many respects such activities seem to be typical of a significant part of the drug trafficking industry ie. Not only are there many of these small tactical alliances based on transnational networks, but when they are effective then they have an inherent capacity for growth.
At the same time, the loose, fluid nature of these networks makes it equally plausible that they will be disbanded and their constituent elements reformed in different constellations.
Tactical alliances are made for specific purposes and are often followed by the search for other partners to make shipments to different locations using different modes of concealment. In attempting to place strategic alliances in perspective, it is also necessary to keep in mind that TCOs also make alliances with governments - either through corruption or coercion or, more often, a mix of both.
Corruption can reach such a level in some cases that the government can be regarded as collusive ie. High ranking members of the government may benefit directly from the actions of transnational criminal organizations, receiving large payoffs in return for facilitating trafficking activities, and providing protection and safe havens.
There are also increasing links between transnational criminal organizations and terrorist organizations. Indeed, the distinction between terrorist groups pursuing essentially political objectives and transnational criminal organizations pursuing economic goals is likely to be become increasingly blurred. The loss of statesponsorship for terrorist organizations means that they are likely to seek alternative sources of financial support for their activities.
Drug trafficking and other forms of enterprise crime are obvious means of doing this. On the other side, criminal organizations may find that the opportunities for large scale extortion through the possession of smuggled nuclear material encourages them to use the threat of terror for business purposes.
This process of convergence is likely to make cooperative linkages more frequent. Another point that needs to be made about strategic alliances - particularly if the parallels with corporate alliances are accepted - is that although these alliances can be very effective means of enhancing the capacity for criminal activity, both their initial development and their continued maintenance may encounter significant problems.
The desire to circumvent the common enemy of law enforcement provides an underlying incentive for sustained cooperation. Even so, alliances may encounter significant problems.
These can stem from different criminal cultures and codes of honor among thieves, from different priorities, and from concerns over relative gains and who is benefiting most from the collaborative ventures.
In addition, the lack of total control over operatives and the inability to prevent independent actions may cast doubt on the validity of the cooperative agreement. Continued independent marketing operations outwith the alliance may also be seen by one of the partners as inconsistent with any accord that has been reached. Some of the problems that can arise are revealed by even a brief examination of the evolution of the relationship between the Medellin and Cali Cartels.
During the early s there was a close working relationship between drug trafficking organizations in Medellin and those in Cali. The cartels themselves were formed partly because of a recognition of the benefits of cooperation but there was also an element of serendipity.
The kidnapping of Martha Ochoa, daughter of a leading drug lord led to a meeting of traffickers in which they agreed to form a paramilitary arm to take action against the kidnappers. This marked the beginning of a period of intense collaboration, joint ventures in transportation, and the common underwriting of large cocaine loads into the United States. It was also a period of rapid market expansion in which profits burgeoned.
During this period the relationship between the Cali and Medellin Cartels was exceptionally good. The two cartels shared risks, sometimes used the same airstrips and processing facilities, and appeared to have agreed on market shares in the United States.
Andy let Bacetto sleep at his Rotterdam apartment and use it as a logistical base as he moved between Amsterdam and Rotterdam to meet with Colombian suppliers.
All the while, investigators were on their trail, and mapped out the path of at least one large suspected shipment. This payment needed to be settled ahead of November 25, the day the drugs were meant to arrive in the port of Rotterdam from Guayaquil, in Ecuador.
Police wiretaps suggest the backpack held , euros in cash. Rather than the expected kilogram shipment, investigators believe the final total was kilos, split down the middle between the Giorgis and their Romanian associates. Investigators believe Bacetto and the Giorgis bought 62 kilos of cocaine from the Colombians in the Netherlands, 12 of which were presumably transported to Italy in December A few months later, German investigators heard Bacetto talking at his apartment in the town of Seelfingen — which had also been bugged — about another cocaine deal with an Albanian and a Romanian both living in Belgium.
This deal, police suspect, involved a shipment of one-kilogram packages of cocaine. Both the Albanian and the Romanian are suspected traffickers based in Belgium, while the Romanian manages a handful of logistics companies there. Once these shipments had safely made it to Europe, the Giorgis got to work. Transporting cocaine and money in their fruit trucks, police say, they are first believed to have moved around Germany and later headed to Turin, where they were helped by relatives with the logistics.
These clients were mainly other Calabrians, for whom the family reserved the largest portions of their shipments. The Giorgi then sold a smaller part to average dealers — bar owners in Turin, Sicily and Sardinia, for example. In these cases, the price climbed up to 57, euros per kilo, or between 5, and 7, euros per grams, according to wiretapped conversations between Giorgi family members. According to the Operation Platinum order of custody, the Giorgis had enough logistical capacity to supply their clients with drugs on a weekly basis.
To unload illicit cargo, they had to rely on Latin American suppliers, their higher-placed Calabrian allies, or other gangs like the Albanians.
Once through the ports, the cocaine began its winding truck routes. Drivers — one was paid 3, euros per trip, according to the Operation Platinum order of custody — had to mimic the routes of legitimate food delivery services following pre-planned GPS coordinates to avoid arousing police suspicions. Along the way, drivers in other vehicles would approach the truck in a pre-arranged location and remove the drugs before the truck continued on its route.
The Giorgi family operated like a company, with each of the four brothers putting the cash they earned into the cassa comune, managed by Francesco. Their weekly profit came to around , euros, according to bugged conversations. Bacetto relied heavily on family members and other Calabrians to help manage his German operations. Calabrian associates also ran two German companies, one of which, GSG Food, owned the Paganini from to as well as importing and exporting groceries.
In a bugged conversation, Giovanni, in Sardinia, instructed Francesco, in San Luca, to bury , euros in cash. Further conversations show the brothers were hiding fortunes in buried barrels, while always keeping at least , euros handy for regular expenses.
The Giorgis had their own derogatory nickname for him — The Dwarf — but despite such jibes, Bacetto and his crew knew they badly needed the services that he could provide. Because Maluferru was so good at what he did, the Giorgis bit their tongues. For long periods, Maluferru remained a ghost to the authorities. The Giorgis, who had been ordering cocaine from him since at least , swapped rumors among themselves that he had been spotted in Brazil, the Netherlands and Mexico, and may even have disguised himself as a priest.
Cracks began to appear, though, when in August police caught another break. The Giorgis were still using their encrypted EncroChat phones.
Remarkably, Giovanni and Marvelli would later start reading their EncroChat conversations with Patrick Assisi out loud, describing the logistics of the operations in detail. The bugged chats revealed that the Assisis — who are known to have mostly shipped cocaine in liquid form — would be sending a consignment in 2. The Assisis said they would send a shipment of kilos, according to the conversations, which investigators told OCCRP was because the logistical costs and bribes needed for each load made smaller loads impractical.
Using the trail laid out by the Giorgis and their accomplices, German police identified containers that fit the profile for the would-be Assisi shipment. But when inspections were made in Hamburg in October , no drugs were found. The detectives got luckier a month later, on November 8, when they raided a container suspected of carrying Assisi cocaine bound for the Giorgis, and uncovered kilos of cocaine stashed in packages of cotton swabs.
Around this time, their agreements with the Assisis had begun to hit a roadblock, and Marvelli planned to go to Brazil to meet Patrick Assisi in person.
Maluferru, though, had other plans, making a move to cut the Giorgis out, and beginning to deal with Assisi directly. Assisi, it turned out, preferred dealing with Maluferru, who was reliable, invisible, and had the keys to unlock some major European ports. Little did they know, however, that dark clouds were also beginning to hover over both Maluferru and the Assisis, and the pipeline from which they had made their own fortunes.
This story was partly funded by grants from Journalismfund. Yang has since been linked to alleged procurement corruption, and a Philippine Senate committee has suggested he could face criminal charges.
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To find our more details, view our Cookie Policy. Key Findings According to investigators, the Giorgi-Boviciani clan helped oversee a multi-million-dollar cocaine pipeline from Latin America to Europe. The Giorgis played a key bridging role, buying this cocaine from faraway cartels and selling it to European buyers, who then filtered it to street dealers.
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