Strategic Alliance Definition, It’s Characteristics And Many More: Strategic alliances, agreements between 2 or more than 2 companies to assist each other in business activities for mutual benefit.
The strategic allies (partner firms) have no formal ownership ties. They prefer to collaborate under an agreement. Companies form strategic alliances to achieve win-win outcomes (none of the parties lose; rather, all gain).
Strategic alliances lay the groundwork for allies to collaborate on joint research, share technology, and improve products.
Strategic Alliance Definition, It’s Characteristics And Many More
What Exactly Is A Strategic Alliance?
Strategic alliances can be formed between two organisations that are from the same industry, from different but related industries, or from different industries.
In recent years, strategic partnerships/alliances have surpassed joint ventures as the preferred mechanism to join forces for pursuing strategically important diversification opportunities.
Because they can more easily accommodate multiple partners than a formal joint venture.”
An Alliance’s Distinguishing Characteristics
- Two or more organisations form an alliance to pursue a set of mutually agreed-upon goals, but they remain independent after the alliance.
- The benefits of alliance and control over the performance of the assign tasks are shared by the partnering firms.
- Some of the other key areas, such as technology product development, are supported on an ongoing basis by the partners.
- A strategic alliance, also known as a strategic partnership, is a collaborative arrangement between two or more organisations.
- It is a non-equity cooperation agreement between two or more companies for the purpose of enhancing their joint competitive advantage.
- A strategic alliance is formed when two organisations or businesses work together to help each other in organisational or business functions for mutual benefit.
- It does not imply the formation of a new organisational entity.
- Strategic alliance partners do not have formal ownership ties, as in a joint venture.
- The partners prefer to collaborate under an agreement. To ensure long-term success, the collaborative arrangement must produce win-win outcomes for all partners.
- None of the parties lose; rather, everyone wins.
- Strategic alliances lay the groundwork for allies to collaborate on joint research, share technology, and improve products.
They collaborate on technological development, sharing R&D information, developing new products that complement each other in the market, and developing networks of dealers and distributors to handle their respective products.
HP and Intel, Microsoft, AT&T, and UPS are examples of strategic alliances, as are Merck and J&J, IBM and Dell, and Pfizer and Warner-Lambert.
Why Do Businesses Use Strategic Alliance Strategy?
- Firms form strategic alliances for different reasons. If they cooperate within or outside the national boundary, they can gain a variety of benefits.
- The following are the primary reasons for strategic alliances, both within and outside of a country:
- Strategic alliance use within National Boundary organisations:
- To avoid a more costly process of developing a company’s capabilities in order to access new opportunities.
- For significantly boost competitiveness.
- To work together on technology or the creation of a new product.
- For compensate for gaps in their technical and manufacturing knowledge.
- To completely learn new skillsets.
- For increasing the efficiency of supply chain.
- For achieving economies of scale in manufacturing and distribution.
- Joint marketing agreements will be used to improve market access.
- To expand industry opportunities through collaboration with partners.
- Strategic alliances are used by organisations in international markets.
- To establish a market presence in foreign markets.
- Taking advantage of the technological and information age revolution through collaborative partnerships with other sound companies.
- To assemble a more diverse set of skills, resources, technological expertise, and competitive capabilities than a single company can.
- Obtaining technology and expertise at a low cost.
- To pool competencies and resources across counties that are more valuable in a collaborative effort than when departments work separately.
- To obtain valuable resources or capabilities that a company could not obtain on its own through alliances.
- gaining ‘inside knowledge’ of unfamiliar markets and cultures in foreign countries
For gaining access to valuable skills (such as manufacturing, fashion design, and software design) that are concentrate in specific countries (e g., Italy is famous for fashion design, competencies and Japan has ah excellent reputation for efficient manufacturing skills).
Why Do Strategic Alliances Fail at Times?
Approximately two-thirds of strategic alliances failed.
The following are the primary causes of unstable alliances:
- The partners’ inability to collaborate.
- Failure to respond to or adapt to changes in the internal and external environment.
- Lack of willingness on the part of alliance partners to renegotiate alliance terms and conditions.
- Failure to value the skills and resources that each partner brings to the alliances.
- Failure or unwillingness of partners to negotiate further if circumstances necessitate it.
- The competition between partners in the marketplace.
- The partners’ inability to ensure win-win outcomes from cooperative agreements.
Bottom Line | Strategic Alliance
Strategic alliances will last as long as the partners maintain a serious ongoing commitment, mutual learning, and close collaboration.
Furthermore, a company’s reliance on the alliance for critical skills and capabilities may prove fatal. To achieve market leadership, each company must develop its own expertise. It is difficult to manage an alliance.
Alliances fail due to ambiguous outcomes, ego and cultural clashes, and an unclear definition and perception of the alliance relationship. Alliances.
When properly managed, can result in the creation of a competitive advantage, risk mitigation, and the blocking of a competitive threat.
The organization’s identity is not preserve when a joint venture is takes over or acquire. If the organisation wants to keep its identity while collaborating, a strategic alliance is the way to go.