Strategic Alliance There are a number of reasons why companies engage in strategic alliances. Typically, these are rooted in the idea of comparative advantage, where the two companies bring their respective strengths to the project, theoretically these strengths complementing each other. There are some industries where the practice is quite common, in particular pharmaceuticals and defense. Indeed, in some of these industries, companies can have multiple strategic alliances at any given time. A good example of this is Boeing and Lockheed Martin, both defense contractors with expertise in aerospace. They have collaborated on an air transportation system for the commercial air industry (Boeing, 2007), and on jet fighters for the Department of Defense (Thompson, 2013). This paper will focus on the latter as the strategic alliance to be discussed. Ultimately, the long-range bomber project failed for the alliance, which actually highlights one of the major reasons why such alliances are common in the defense industry.

Company Histories

Boeing started as an aircraft producer for private use, and quickly became a supplier of aircraft for some of the world's first commercial airlines. By the Second World War, Boeing moved into military aircraft production, and it retained that position after the war. The Department of Defense typically wants to see competition so it ensures that all of its major defense contractors have enough business to survive. This is one of the reasons why Boeing was able to carve out a business as one of the handful of aerospace providers to the DoD. Boeing's defense business is today worth revenues of $30.9 billion, delivering 179 military aircraft, five satellites and 10,998 weapons systems. The company has a backlog of $62 billion in its defense business, spanning from those products to spacecraft and weapons. The company's...

It also sells to key allies, such as Japan, and has developed a Global Missile Defense System.
Lockheed Martin is primarily a defense contractor, worth $45.6 billion in annual revenue. It competes in many of the same segments as Boeing. One of its flagship products is the F-35 Lightning fighter jet, and it delivered 36 of these in 2014. It also sells to key allies, such as South Korea and Australia. LM also produces vessels for the U.S. Navy, has a cyber security business, works on commercial aviation management systems and has an IT business.

Prior History

As noted, Boeing and Lockheed Martin work together frequently. They worked together to promote a civil aviation management system as an upgrade on the current system. Both companies worked together on the Delta IV rockets that launched the Orion probe to Mars. On the project in question, the Department of Defense had put out bidding for a long-range bomber, the first such project of its kind in 30 years. There were two bids, from Boeing/Lockheed Martin and from Northrup-Grumman.

Long-Range Bomber

In the long-range bomber, Boeing was the primary contract and Lockheed the primary teammate. The objective of the strategic alliance was to win the bid for the bomber, said to be the largest military aircraft contract in over a decade (Seligman, Clevenger & Mehta, 2015). Observers felt that one of the reasons Boeing and Lockheed needed to partner is because Northrup Grumman had significant advantages in winning a bomber contract. Northrup had won the contract for the B-2 Spirit, the lead bomber in the Air Force's fleet. Boeing clearly felt the need to overcome this experience gap by teaming with Lockheed to bring…