Strategic alliances take the form of coalitions and cooperation agreements, formed between a corporation and others in order to achieve certain strategic goals. They may be expressed as a union of two or more firms to pursue a set of agreed upon goals but remain independent subsequent to the formation of the alliance.
The partner firms share the benefits of the alliance and control over the performance of assigned tasks – perhaps the most distinctive characteristic of alliances and the one that make them so difficult to manage. The partners contribute on a continuing basis in different key strategic areas, as, technology, product, and so on. In specific circumstances, companies can realize the benefits linked with vertical integration without the bureaucratic costs, if they make long term cooperative relationships with their partners. Such long-term relationships are typically known as strategic alliances.
Joint ventures may be seen as a specific form of alliance, but in recent times the term has become more widely adapted to describe a variety of forms of cooperative agreement which may or may not involve shareholdings. In particular they have been formed in some industries in which the cost of new model development, technology investment, and the like has emerged as being beyond the resources of the individual corporation. Japanese corporations have been particular users of alliance cooperative agreements with European and North American firms, partially as a way to enter these markets. Such alliances have been identified as important mechanisms for developing a global perspective in the so-called Triad markets.
With an alliance strategy it has been possible for corporations to swiftly gain access to markets, exchange technologies, form defensive shareholding blocks, enter third markets in combination with other partners, and engage in otherwise prohibitively expensive technologies, production facilities etc. Strategic alliances have the advantage of being relatively easily formed and disbanded -more so than joint ventures -and by joining in multiple alliances firms may contain risk and hold down costs.
Despite these apparent advantages, however, many corporations have seriously questioned their value especially by those with proprietary technology, strategic cost advantage, and high market share. For such concerns it has been argued that the potential loss of technical skills, the provision of competitor access to markets, and organizational and cultural clashes may well outweigh any advantage. As a result, perhaps 50 per cent of such alliances are therefore regarded as failures. The selection of the right partner is critical to the success of an alliance. Any analysis of such a selection should be focused on fundamental strategic alliances and cultural fits. To achieve a fundamental fit between alliance partners, the activities and expertise of each should complement those of the other in order to add value overall. Questions that need to be considered therefore include the following:
What are the risks associated with realizing the potential of the alliance within a reasonable period of time?Is the partner really interested in eventually mounting a bid? How stable is the business environment? Is the partner interested in gaining access to our market, technology, and distribution system prior to entering as a competitor?
The partner firms share the benefits of the alliance and control over the performance of assigned tasks – perhaps the most distinctive characteristic of alliances and the one that make them so difficult to manage. The partners contribute on a continuing basis in different key strategic areas, as, technology, product, and so on. In specific circumstances, companies can realize the benefits linked with vertical integration without the bureaucratic costs, if they make long term cooperative relationships with their partners. Such long-term relationships are typically known as strategic alliances.
Joint ventures may be seen as a specific form of alliance, but in recent times the term has become more widely adapted to describe a variety of forms of cooperative agreement which may or may not involve shareholdings. In particular they have been formed in some industries in which the cost of new model development, technology investment, and the like has emerged as being beyond the resources of the individual corporation. Japanese corporations have been particular users of alliance cooperative agreements with European and North American firms, partially as a way to enter these markets. Such alliances have been identified as important mechanisms for developing a global perspective in the so-called Triad markets.
With an alliance strategy it has been possible for corporations to swiftly gain access to markets, exchange technologies, form defensive shareholding blocks, enter third markets in combination with other partners, and engage in otherwise prohibitively expensive technologies, production facilities etc. Strategic alliances have the advantage of being relatively easily formed and disbanded -more so than joint ventures -and by joining in multiple alliances firms may contain risk and hold down costs.
Despite these apparent advantages, however, many corporations have seriously questioned their value especially by those with proprietary technology, strategic cost advantage, and high market share. For such concerns it has been argued that the potential loss of technical skills, the provision of competitor access to markets, and organizational and cultural clashes may well outweigh any advantage. As a result, perhaps 50 per cent of such alliances are therefore regarded as failures. The selection of the right partner is critical to the success of an alliance. Any analysis of such a selection should be focused on fundamental strategic alliances and cultural fits. To achieve a fundamental fit between alliance partners, the activities and expertise of each should complement those of the other in order to add value overall. Questions that need to be considered therefore include the following:
What are the risks associated with realizing the potential of the alliance within a reasonable period of time?Is the partner really interested in eventually mounting a bid? How stable is the business environment? Is the partner interested in gaining access to our market, technology, and distribution system prior to entering as a competitor?
Strategic alliances should also always form an integral part of the strategy of the partners. It is therefore important to check the harmony and complementarity of partners' business plans, including strategic goals, product market strategies, technological strategy, the common time frame for achieving goals, and' adequate and clearly defined resource commitment.
Many alliances have failed as a result of differences between the cultures of the partners' corporations. This has been especially, true when they come from countries or regions with significantly different cultures, such as Japanese and Western Europe. Western corporations in particular pay too little attention to understanding the underlying cultural and managerial styles of partners from different cultures, despite the fact that this is a major reason for the breakdown of alliances. Analysis of partner cultures is therefore necessary to insure that an acceptable fit is possible before irreversible moves are made.
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