Discuss the concept of strategic alliances. Why do
organizations pursue strategic alliances? Explain with the help of an example
Ans :
A strategic alliance is a
relationship between two or more entities that agree to share resources to
achieve a mutually beneficial objective. For example, a company manufactures
and distributes a product in the United States and desires to sell it in other
countries. Another company wants to expand its product line with the type of
product the first company creates, and has a worldwide distribution channel.
The two companies establish an alliance to expand the distribution of the first
company’s product.
Critical Success Factors
A successful strategic alliance is
mutually beneficial to the two companies involved. Each must see a clear
benefit from the arrangement. The responsibilities of each company in
implementing the alliance must be clearly identified. Both parties must agree
on the objectives of the relationship and be flexible and adaptable in the
operation of the alliance. Each company may have a different culture and method
of doing business.
Basic Steps
To secure a strategic alliance,
define what type of partner you are seeking, along with the ideal characteristics
of a partner. Clearly identify what strengths you could offer the other party
and why the potential partner would want to forge a relationship with you.
Develop a list of potential alliance candidates. If possible, contact alliance
partners through someone you both know. If that isn’t feasible, send out a
direct letter outlining your interest and asking for an opportunity to explore
a relationship. Have an exploratory meeting and, if there is an interest,
develop a letter of understanding outlining how both partners will work
together and how money will be allocated. Have your attorney prepare a formal
agreement for both of you to sign.
Advantages
Strategic alliances permit a
company to pursue an opportunity more quickly, leveraging the resources and
knowledge of the other party. Fewer resources are required than if a company
pursued an opportunity on its own. An alliance can provide easier access to new
opportunities and a lower barrier to entry.
Disadvantages
Implementing and managing a
strategic alliance may be difficult because each alliance partner has a
different way of operating. Mistrust could occur, particularly when competitive
or proprietary information is involved. The alliance partners could become more
dependent on each other, making it difficult to operate again as separate
entities if required.
Tips
A successful alliance builds on the strengths of each party. Do not
quickly relegate the details of a relationship to an attorney without your
involvement. Successful strategic alliances are built on establishing and
nurturing relationships. This is particularly important during the early
stages.
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