Entry Strategies: Strategic Alliances

Topics: Strategic management, 2006, Strategy Pages: 13 (3996 words) Published: September 30, 2006


The past two decades has been an era of global evolution, in which the globalisation of markets, the convergence of and rapid shifts in technologies, and the breakdown of many traditional industry boundaries, has rendered strategic alliances a competitive necessity (Ohmae, 1989). A single firm is unlikely to possess all the resources and capabilities to achieve global competitiveness. Therefore, collaboration among organisations that possess complementary resources is often necessary for survival and growth (Dussauge, Garrette and Mitchell, 1998). Defined as a long-term, explicit contractual agreement pertaining to an exchange or combination of some of a firm's resources with another firm(s), strategic alliances allow firms to share risks and resources, gain knowledge and technology, expand the existing product base, and obtain access to new markets (Burgers, Hill and Kim, 1993; Dacin, Hitt and Levitas, 1997; Hagedoorn and Schakenraad, 1993; Morosini, 1999). Not surprisingly then, strategic alliances have become an increasingly popular strategy, particularly for entry into international markets (Osborn and Hagedoorn, 1997; Cullen, 1999). Approximately 20,000 alliances were formed worldwide between 1996 and 1998 (Harbison and Pekar, 1998; cited in The Economist, May 15, 1999), and it has been estimated that the number of strategic alliances will continue to increase at an annual rate of 25 per cent (Day, 1994). However, despite the frequency with which today's alliances are occurring, there is overwhelming evidence to suggest that alliances fail to deliver anywhere near the promised payoffs. The percentage of alliances that are failures runs the gamut across the research from a low 30 per cent (Cullen, 1999), to a high 70 per cent (Dacin et al, 1997). Apart from the inherent risk of entering into an alliance, partner compatibility is often cited as the main reason for alliance failure (Dacin et al, 1997).

In this context, the purpose of this paper is to analyse – using relevant international business theories – three newspaper articles that fall within this topic area. Specific reference will be made to the objectives and reasons for engaging in strategic alliances and the key characteristics that a firm should consider when evaluating a prospective alliance partner. Finally, the implications of these articles for the Australian government and businesses will be canvassed.


All three articles appeared in the Australian media between 22 February 2006 and 3 May 2006, and deal specifically with the concept of strategic alliances between either an Australian domestic company and foreign firm or between two domestic companies seeking to leverage the international scope of one of the partners in order to expand into new markets. More specifically, Joyce Moullakis in "CPH, Wizard in Global Loan Foray" (Australian Financial Review, February 22, 2006) discusses the alliance between two Australian firms – namely Wizard Home Loans and Consolidated Press Holdings (CPH) – which has recently been formed with the objective of taking "the mortgage business into developing countries" (Moullakis, 2006, p. 55). The motivation for the strategic alliance between the Australian firm S8 Ltd (which recently acquired Harvey World Travel) and the UK-based Virgin Group is almost identical. The article "S8 Travelling with Virgin in Britain" (The Age, May 3, 2006) describes the alliance as part of S8 Ltd's "global expansion plans … to create a network of ‘next generation' travel agencies in Britain" (The Age, May 3, 2006). And for the Virgin Group, the alliance will allow it to capitalise on the travel agency experience of S8 Ltd, thereby enabling it to increase its "retail presence in Britain" (The Age, May 3, 2006). The final article deals with the partnership between Qantas and Air New Zealand, which is somewhat...

Bibliography: Burgers, W.P., Hill, C.W.L. and Kim, W.C. (1993), "A Theory of Global Strategic Alliances: The Case of the Global Auto Industry ', Strategic Management Journal, Vol. 14 No. 6, pp. 419-432.
Cullen, J.B. (1999), Multinational Management: A Strategic Approach, South-Western College Publishing, Cincinnati.
Dacin, M.T., Hitt, M.A. and Levitas, E. (1997), "Selecting Partners for Successful International Alliances: Examination of US and Korean Firms", Journal of World Businesses, Vol. 32, pp. 3-16.
Davis, E., Shore, G. and Thompson, D. (1993), "Continental Mergers are Different" in Bishop, M. and Kay, J. (eds), European Mergers and Merger Policy, Cambridge University Press, Cambridge, pp. 328-347.
Day, G.S. (1994), "The Capabilities of Market-Driven Organisations", Journal of Marketing, Vol. 58 No. 4, pp. 37-52.
Frazier, G.L., Spekman, R.E. and O 'Neal, C.R. (1998), "Just-in-Time Exchange Relationships in Industrial Markets", Journal of Marketing, Vol. 52 No. 4, pp. 52-67.
Hagedoorn, J. and Schakenraad, J. (1993), "Strategic Partnering and Technological Cooperation" in Dankbaar, D., Groenewegen, J. and Schenk, H. (eds), Perspectives in Industrial Organisation, Kluwer, Dordrecht.
Hall, J. (2006), "Qantas, Air NZ Back on Same Flight Path", Australian Financial Review, 31 March 2006, p. 72.
Hansen, M. (2000), "Mergers and Acquisitions in Financial Services", Booz-Allen & Hamilton Online.
Hitt, M., Ireland, R. and Hoskisson, R. (1990), "Mergers and Acquisitions and Managerial Commitment to Innovation in M-Form Firms", Strategic Management Journal, Vol. 11 (Special Issues), pp. 29-47.
Hitt, M., Ireland, R. and Hoskisson, R. (1999), Strategic Management: Competitiveness and Globalisation, 3rd edition, West Publishing Company, Minneapolis.
Hunt, J., Lees, S., Grumbar, J. and Vivan, P. (1987), Acquisitions: The Human Factor, London Business School and Egon Zehnder International.
Kogut, B. and Singh, H. (1988), "The Effect of National Culture on the Choice of Entry Mode", Journal of International Business Studies, Vol. 19, pp. 411-432.
Lane, H.W. and Beamish, P.W. (1990), "Cross-Cultural Cooperative Behaviour in Joint Ventures in LDC", Management International Review, Vol. 30 (Special Issue), pp. 87-102.
Lei, D. (1993), "Offensive and Defensive Uses of Alliances", Long Range Planning, Vol. 26 No. 3, pp. 32-41.
Morosini, P. (1999), Managing Cultural Differences: Effective Strategy and Execution Across Cultures in Global Corporate Alliances, Elsevier Science, Oxford.
Moullakis, J. (2006), "CPH, Wizard in Global Loan Foray", Australian Financial Review, 22 February 2006, p. 55.
Ohmae, K. (1989), "The Global Logic of Strategic Alliances", Harvard Business Review, March-April, pp. 143-154.
Osborn, R.N. and Hagedoorn, J. (1997), "The Institutional and Evolutionary Dynamics of Interorganisational Alliances and Networks", Academy of Management Journal, Vol. 40 No. 2, pp. 261-278.
Park, S.H. and Ungson, G.R. (1997), "The Effect of National Culture, Organisational Complementarity, and Economic Motivation on Joint Venture Dissolution", Academy of Management Journal, Vol. 40 No. 2, pp. 279-307.
Prahalad, C.K. and Hamel, G. (1990), "Core Competence of the Corporation", Harvard Business Review, Vol. 68 No. 3, pp. 79-93.
Pratten, C. (1988), A Survey of Economics of Scale, Research on the Cost of Non-Europe, Commission of the EC, Brussels.
Saxton, T. (1997), "The Effect of Partner and Relationship Characteristics on Alliance Outcomes", Academy of Management Journal, Vol. 40 No. 2, pp. 443-461.
Schneider, S.C. and De Meyer, A. (1991), "Interpreting and Responding to Strategic Issues: The Impact of National Culture", Strategic Management Journal, Vol. 12, pp. 307-320.
Tetenbaum, T. (1999), "Beating the Odds of Merger and Acquisition Failure: Seven Key Practices that Improve the Chance for Integration and Synergies", Organisational Dynamics, Autumn, pp. 22-36.
The Age (online edition), May 3, 2006, "S8 Travelling with Virgin in Britain", viewed 3 May 2006, www.theage.com.au/articles/2006/05/03/1146335777792.html.
The Economist, January 9, 1999. "After the Deal", Vol. 350 No. 8101, pp. 19-21.
Todeva, E. and Knoke, D. (2001), "Strategic Alliances and Corporate Social Capital" in Allmendinger, J. and Hinz, T. (eds) Sociology of Organisations, Kölner Zeitschrift für Soziologie und Sozialpsychologie.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Strategic Alliances Essay
  • Strategic Alliance Essay
  • Strategic Alliances Research Paper
  • Strategic Alliances Essay
  • Strategic Alliance Essay
  • Strategic Alliances Essay
  • Strategic alliance Essay
  • Essay on Strategic Alliances

Become a StudyMode Member

Sign Up - It's Free