Strategic alliances is an agreement between two or more companies to work together for a certain time in order to achieve some business objectives, help each other reach new technologies or to be able to build core competencies against other competitors.
The traditional view about Strategic alliances is that they were formed for:
-Defensive to protect profits
-Means for preempting competition
-Competitive and win - lose orientation.
While nowadays there is a current perspective about strategic alliance that goes beyond the traditional view and it consists of:
-Collaboration can create opportunities for all participants to be successful -Can create multiple sources of competitive advantage
-Win † win orientation that relies on both collaboration and competition.
Strategic alliances could be formed for the following reasons:
1)Technology exchange: most of the recent strategic alliances (more than 50 %) are formed for technology exchange. this is done to obtain the necessary capabilities and resources needed for creating new technology or using some technologies to develop the companies’ competencies.
2)Global competition: strategic alliances are formed in order to allow the partners to build up more strength and be able to be more competitive in the global market against a common enemy better than each one fights alone.
3)Industry convergence: by this it means company gets together and become a single company in order to achieve more success in a certain industry.
Risk that faces strategic alliances:
Most alliances that work are done between two companies from industrial countries.
But even any kind of strategic alliance has some risks that might occur during this partnership:
-Strategic alliances are sometimes used by partners to build competitive advantages against each other, or might even make one partners stronger than the other that will manage to take more market share from him.
This will result in creating a new competitor for a partner that might enter a strategic alliance.
To avoid this risk, partners signs agreement for example, that after the period of the strategic alliance is over, the partner is not allowed to use this certain technology before at least 3 years of time.
- The inability of partners to take advantage of or to effect technology transfer between the two partners.
This can avoid by trying to understand the different cultures of the two partners and what could be the best way of getting the two sides communicate and exchange technology in an equal and fair way.
-Another risk is leadership. Who will control who? Who will take the decisions in the strategic alliances? So a leadership can be a problem that will create issues between the two partners in a strategic alliance
To avoid this risk, companies getting into strategic alliances are asked to thinking about the structure and see what are the duties of each partner and set clear structure of who is controlling which part and who have the final decision.
-Control is also an issue that can be a risk when it comes to strategic alliances. If a partner is production a product for the other partner in the strategic alliance, who can control the quality of the product, who can control the number of production?
To avoid this risk, partners also put agreement about the quality of production and number of productions …
How strategic alliance could be better?
The strategies and financial capabilities of potential partners should be analyzed thoroughly.
They key operating managers should be involved in the negotiating process
Clearly define scope.
Avoid escalating commitment syndrome
The scope of the alliance should be kept simple in the beginning and build upon when necessary.
Managing knowledge flow: the partners must get as much learning out of the alliance as possible, yet provide only essential info to partner. Also they should...