Strategic alliance

The strategic alliance is a relationship where the two companies have a partnership. Besides that, an arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.

Strategic alliances are a business concept that’s changing the structure and dynamics of competition throughout the world. Using a broad interpretation, Strategic alliance is a relationship between firms to create more value than they can on their own. The firms unite to reach objectives of a common interest, while remaining independent.

Strategic alliances are formed by two or more businesses in order to achieve strategic objectives they could not otherwise achieve alone. There are organizational, economic, strategic and political advantages in pursuing a strategic alliance. On the other hand, disadvantages include the fact you will have to share profit and possibly expose trade secrets. You may also create a potential competitor and have to give up other opportunities. An uneven power relationship between members can create problems, and there is always a risk of foreign government interference if the alliance involves foreign investment.

The advantages when use strategic alliance is:

A strategic alliance is collaboration between two or more companies which can take on many forms such as:

·         technology transfer

·         purchasing and distribution agreements

·         marketing and promotional collaboration

·         Joint product development.

·         Company to enter the market with a new product achieves advantages that are difficult for the competition to overcome.

·         It gets the best positions for distribution.

·         It invests initial profit margins in the production process, distancing itself further from the competition.

The advantages when use strategic alliance is:

·         not only due to cash leaving the company’s hands, but rather due to returns from which it could be denied

·         Involve the investment of managerial time resources in establishing the alliance and managing it.

·         Resolving possible conflicts of interest between the partners over the functioning of the alliance.