Strategic alliances are also known as strategic partnerships. A Strategic alliance is a collaborative arrangement between two or more companies. It does not entail forming a new organizational entity. The partners in Strategic alliances have on formal ownership ties like joint venture. Strategic partnerships and alliances have replaced joint ventures as the favored mechanism for joining forces to pursue strategically important diversification opportunities because thy can more readily accommodate multiple partners than a formal joint venture. The success of strategic alliances mostly depends on effective cooperation among the partners and successful adaptation to change. The collaborative arrangement must result in win-win outcomes for all partners to ensure ultimate success.
For example, Japan’s Toyota has developed a network of strategic alliances with its major suppliers of parts and components, IBM over 400 and Oracle over 15000 Strategic alliances. On an average, every large company in the USA is involved in around 30 alliances. The giants in mobile phone technology such Nokia, Motorola and Erickson have developed strategic alliances to maintain global market leadership through using their strategic alliance all over the world.
Major Benefits of Strategic Alliances: Many companies turn to Strategic alliances for one more of the reasons in order to gain and retain market leadership position through creating strategic partnership relation with one another.
- To avoid more costly process of building own capabilities by a company to access new opportunities.
- To substantially improve competitiveness.
- To collaborate on technology or development of a new product.
- To overcome deficits in their technical and manufacturing expertise.
- To acquire altogether new competencies.
- To improve supply chain efficiency.
- To gain economies of scale in production and distribution.
- To improve market access through joint marketing agreements.
- To open up expanded opportunities in an industry through collaboration with partners.
- To build a market presence in the foreign markets.
- To capitalize on technological and in formation age revolution through collaborative partnerships with other sound companies.
- To assemble more diverse skills, resources, technological expertise and competitive capabilities than a company can assemble alone.
- To gain access to technology and expertise in a cost-effective way.
- To bundle competencies and resources across the counties that are more valuable in a joint effort than when dept separate.
- To acquire valuable resources/capabilities through alliances that a company could not otherwise obtain on its own.
- To gain ‘inside knowledge’ about unfamiliar markets and cultures in foreign countries.
- To access valuable skills (such as manufacturing skills, fashion design skills, software design skills) that are concentrated in particular countries (foe example, Italy is famous for fashion designing and Japan has an enviable reputation for efficient manufacturing skills).