Thursday, May 20, 2021

Strategy alliance, more than an entry strategy is a competitive strategy

Strategy alliance, more than an entry strategy is a competitive strategy

A strategic alliance (also see strategic partnership) is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations.

The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specialization, shared expenses and shared risk.

A strategic alliance will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Typically, two companies form a strategic alliance when each possesses one or more business assets or have expertise that will help the other by enhancing their businesses.

Strategic alliances can develop in outsourcing relationships where the parties desire to achieve longterm win win benefits and innovation based on mutually desired outcomes.This form of cooperation lies between mergers and acquisitions and organic growth. Strategic alliances occur when two or more organizations join together to pursue mutual benefits.

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property.

A strategic alliance is an arrangement between two companies to undertake a mutually beneficial project while each retains its independence. The agreement is less complex and less binding than a joint venture, in which two businesses pool resources to create a separate business entity. A company may enter into a strategic alliance to expand into a new market, improve its product line, or develop an edge over a competitor. The arrangement allows two businesses to work toward a common goal that will benefit both. The relationship may be short- or long-term and the agreement may be formal or informal.

Strategic alliances can be flexible and some of the burdens that a joint venture could include. The two firms do not need to merge capital and can remain independent of one another. A strategic alliance can, however, bring its own risks. While the agreement is usually clear for both companies, there may be differences in how the firms conduct business. Differences can create conflict. Further, if the alliance requires the parties to share proprietary information, there must be trust between the two allies. In a long-term strategic alliance, one party may become dependent on the other. Disruption of the alliance can endanger the health of the company.

The deal between Starbucks and Barnes&Noble is a classic example of a strategic alliance. Starbucks brews the coffee. Barnes&Noble stocks the books. Both companies do what they do best while sharing the costs of space to the benefit of both companies.

Strategic alliances can come in many sizes and forms:

  • An oil and natural gas company might form a strategic alliance with a research labor/atory to develop more commercially viable recovery processes.
  • A clothing retailer might form a strategic alliance with a single manufacturer to ensure consistent quality and sizing.
  • A website could form a strategic alliance with an analytics company to improve its marketing efforts.
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