Why are global strategic alliances so prone to failure?
Analyse the key challenges to be overcome and suggest practical ways of improving the chances of success.
GLOBAL STRATEGIC ALLIANCES
Global Strategic alliances are often international associations which further the common interests of two or more firms across time and geographical boundaries. It involves corporate agreements covering a wide area of functions ranging from outsourcing jobs, Component sourcing through R&D to Production & Marketing. Global strategic alliances are also a means to an end, not just an end in itself. It often takes place between firms of different industries and of varied sizes, using vertical or horizontal links to consolidate strategic positions across international boundaries to achieve MNE’s objectives. Strategic alliance enables MNE’s to get the opportunity to widen their customer base, offload or utilize their surplus capacity, integrate vertically,by complementing each other’s in areas of strengths and weakness,they are able to penetrate international markets. WHY ARE THEY SO PRONE TO FAILURE
Mosad ,and Torbjörn , (2003). States that There are implementation problems associated with these alliances where the failure rate can be as high as 70 percent . MNE’s that enter into global strategic alliances focus on the benefits that such alliances provides without often taking into account other costs involved in formation and maintenance of such alliance. Despite the potential benefits, the costs incurred are both extensive and often difficult to predict [Morris and Hergert 1987]. Global Strategic alliances can run into major problems if not properly handled from the onset, for example, the collapse of the merger between the French firm Carnaud and British Metalbox Packaging. The failure of this merger was attributed to different decision making styles as well as both firms having competing subsidiaries [Lorange and Roos 1993].Also Day...
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