Strategic Alliance Essay

3401 words - 14 pages

Strategic Alliance

Organizations are facing exciting and dynamic challenges in the 21st century. In the globalized business, companies require strategic thinking and only by evolving good corporate strategies can they become strategically competitive. A sustained or sustainable competitive advantage occurs when firm implements a value – creating strategy of which other companies are unable to duplicate the benefits or find it too costly to initiate.
Corporate strategy includes the commitments, decisions and actions required for a firm to achieve strategic competitiveness and earn above average returns. The goals of corporate strategy are challenging not only for large firms ...view middle of the document...

Scores of studies have made known that participating in strategic alliances can boost a firm’s rate of patenting, product innovation and foreign sales. Alliances have a tendency to be informal and do not involve the creation of a new entity.

There are numerous reasons why companies may be inclined to enter into strategic alliances such as setting up to work on a particular project without there being official arrangements. Such alliances are more like market relationships and come about in circumstances where there is no need to have joint management that is, where assets can easily be separated from their parent company; or where there might be the risk of one member partnership making off with another’s assets. Therefore, when strategic alliances are initiated, there should be sufficient groundwork and preparation because without a proper foundation and adequate planning an organization can be set back the organization due to the long-drawn-out proceedings which would in turn discourage employees.

Doz & Hamel (1998, p. 6-7) state that strategic alliances are now forged rarely to co produce single products but increasingly to develop complex systems and solutions that call for the resources of many partners. They further add that strategic alliances are inherently more difficult to manage because they are considered to being less certain, less stable, and at the competitive edge.

Strategic alliances are assuming a more and more prominent part in the strategy of leading companies, large and small. Such cooperative associations can help firms achieve new competencies; safeguard resources and share risks; move more rapidly into new markets and generate attractive options for potential investments.

This essay will attempt to cover certain fundamentals of corporate relationships, answer the question of why companies go into strategic alliances and make known the various types of strategic alliances.

What are strategic alliances?

Several terms have been used to describe forms of strategic partnering. These include ‘international coalitions’ (Porter & Fuller, 1986), ‘strategic networks’ (Jarillo, 1988) and, most commonly, ‘strategic alliances’. Definitions are equally varied. An alliance may be seen as the ‘joining of forces and resources, for a specified or indefinite period to achieve a common objective’.

Definition of strategic alliance:

Barringer and Ireland (2008, p. 424) define a strategic alliance as a partnership between two or more firms that is developed to achieve a specific goal.
Strategic alliances are partnerships of two or more corporations or business units that work together to achieve strategically significant objectives that are mutually beneficial. The potential of strategic alliances strategy is massive. If implemented properly, some authors claim it can dramatically improve an organization’s operations and competitiveness.
Some explains that an alliance is a lot similar to a marriage. There may be no...

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