In May 2012, Fiat and Tata Motors have ended their alliances after a 5 year relationship. According to the article, Tata stated that “the venture with Fiat has not been as active as we had thought”. Why are alliances failing? How can they succeed?
Alliances between companies have become crucial to business success and it cannot be done without a disciplined approach. In order to maximize success, there are 5 key elements which should be in placed:
In order to select a good partner, the company needs to collect information, data from informed third parties and conduct face-to-face meetings between senior managers. Both partners should have common strategic aspirations with each other and also resources and capabilities to achieve strategic goals.
Poor partner selection may lead to failure in alliances. Having a right choice will reap in benefits to introduce new technology, skill, personnel, access to new markets and dividing risks.
Both partners should move from a range of individual opinions and considerations into a single alliance’s decision. To help this, a clear template could be implemented that outlines the criteria to be used in discussions, guiding both partners to evaluate in the same direction.
In February 1994, Volvo and Renault announced the dissolution of their strategic alliance. Robert B. & Robert S. (1998) found that there was a significant lack of alignment between them. Both managements were not doing enough to explain their interest in the alliance. This was evidently clear that they have not created a set of standards and procedures to scale up the alliance.
Setting Long Term Goals
Instead of focusing exclusively on reducing cost and increasing revenue, the alliance should establish indicators to measure its overall performance. These could be in areas of information sharing and development of new ideas. This is beneficial, because it can highlight differing...
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