Choosing The Best Partner For A Strategic Alliance Essay

Length: 5 pages Sources: 3 Subject: Business Type: Essay Paper: #85464728 Related Topics: Strategic Management, Strategic Planning, Strategic Analysis, Best Practices
Excerpt from Essay :

Strategic Alliances Joint Ventures

Strategic Alliances And Joint Ventures

Building Strategic Alliances and Joint Ventures

In the modern business environment, the creation of sustainable value for shareholders and customers calls for the development of effective alliances. The alliances are critical building blocks for firms in the achievement of more efficient and stronger market presence. The alliances have been placed as facts of business life with important pieces of existing operations and future strategy. This paper provides essential and useful perspective regarding strategic alliances. Approaches, models, examples, among other tools have been discussed as ways of developing an understanding of the competitive advantage from agreements achieved.

The outcomes show that there are different ways of building competitive advantage while making dependence on the management of such alliances. The firms attach union management through centralized organization structures while others have a preference of distributing responsibility in alliances across various business units. The competitive advantages in strategic alliances depend on the strategic and organizational circumstances.

The option of forming strategic alliances varies based on the goals of firms involved and the national laws that they do business. The most appropriate partnerships take advantage of the core expertise and strengthen weaker business points (Sebahattin & Demirkan, 2014). Well-developed partnerships provide benefits such as sharing of business risks. Working in partnerships permits an approach of offsetting market exposure. Strategic alliances are successful where firms involved have complementary comfort and seeking to further their prospects of profitability. Joint ventures as examples of strategic alliances also promote the sharing of knowledge among collaborating firms. While partners make contributions of brands, skills, assets and market knowledge with synergistic effects (Ahlstrom & Bruton, 2009). The outcomes are set of resources that are valuable as compared to when firms were separate. Strategic alliances promote opportunities for growth. Increased access to a partner's distribution networks allows partners to take advantage of favorable brand images while helping them gain market share faster as compared to before. The focus on core strengths promotes good partnership as it offers complementary strengths while freeing up the focus on different areas of business. For instance, it is probable that product development shares partner focus on marketing and sales. Joint ventures increase access to resources. Partners are in a position of helping by giving greater access to resources including specialist staff, technology and finance (Doole & Lowe, 2008). In turn, this helps firms increase productivity through efficient and high-quality means.

Strategic alliances facilitate higher access to target markets. The works between local partners are one of the ways that people access target markets. This is especially evident through developing mutual goals to avoid being over-exploited of resources. Lastly, joint ventures and strategic alliances deliver on economies of scale (Ireland, Hoskisson & Hitt, 2008). This is achieved while various firms bring their resources together to cooperative strategies to allow smaller companies join in competing against the larger ones. Eli Lilly as a global pharmaceutical company has established diverse strategic alliances with various firms that have enabled it to carry out functions like innovation, product improvement, and marketing in the most efficient way. Its partnership with BioMS from Canada and Kyowa Hakko Kogyo Co., Ltd. from exemplifies this.

International collaboration among businesses is complicated making it hard before the right relationships are built. It is important to set clear objectives. This involves the venture objectives with total clarity and communication to people involved (Hitt, Ireland & Hoskisson, 2014). Ventures lack success in case the goals conflict with various objectives that are not identical. Setting mutual goals is also a challenge to successful alliances. If partners develop different goals in their joint ventures, achieve viable returns on investment as profits are split among partners. Strategic alliances and joint ventures have difficulties in finding a balance. For instance, the various levels of expertise, assets or investment brought within ventures are aimed at making partnerships work (Ahlstrom & Bruton, 2009). This requires higher levels of commitment in terms of management time and finance. In case, relationships break down, the ownership of the investment plan develops variances in products of the issue. Ensuring a smooth integration for work practices is also difficult....


Working with companies from overseas could result in strained co-ordination and integration because of cultural issues of doing business. Partners should provide sufficient support and leadership early, as partners require the provision of adequate support and guidance in their early stages (Doole & Lowe, 2008). Further, the collaboration with larger companies is based on be pressures of going in directions that more major partner prefers. Mutual commitment and trust may not be a quadrate and participants may fail to develop mutual engagement and trust.

Companies find the competitive landscape with dramatic changes in the global business space of accelerates. Customers continually turn to highly sophisticated and demanding approaches and products. Northwest Airlines and KLM entered into a successful strategic alliance in the 1990s that later acted as an example that other players in the industry adopted. This was occasioned by the increased traffic and revenue earnings because of the proper connection of their collaborations. Markets have been moving towards very complicated sequences as companies seek to remain current on all competencies, information, technologies, and resources needed achieving success in such markets (Sebahattin & Demirkan, 2014). The strategic alliances present viable means of companies accessing new markets, obtaining cutting-edge technology, expanding geographic reach, and complementing core competencies and skills fast. The strategic alliances are becoming key competitive advantage sources of for firms while allowing cope with increased technological and organizational complexities that emerge in such global markets (Cullen, Johnson, & Sakano, 2000).

Strategic alliances are featured as relational contracting. The elements of relational contracting are flexible arrangements that emphasize on mutual collaboration as they respond to the business changes and circumstances (Hitt, Ireland & Hoskisson, 2014). The example of Disney and Hewlett-Packard that dates back to the time when HP as formed exemplifies this. Under the arrangement, HP supplies IT infrastructures to Disney's theatres even in the current digital age. The issues also involve the fluid situation that emphasizes on the receptiveness of modifying inflexible and detailed front-end documentation over time as compared to stated expectations. HP has played some serious role in enhancing the partner's "imagineering" concept. The alliances possess common features of current mutual interdependence that are conditions that parties are vulnerable to others with behavioral control of former concepts (Hoffmann & Schlosser, 2001). Overarching themes that unite alliances include the fact the needs of other's abilities have an advanced level of respective interests. Further, competitive advantages determine strategic alliances that involve addressing all disadvantages. The alliances have costly involvement in terms of due cash and the departure of the company's efforts. The returns of the identified components involve investments of more managerial time resources to establish viable alliances, managing them, and resolving conflicts of interest among partners on the alliance's functioning (Ireland, Hoskisson & Hitt, 2008). Moreover, alliances and joint ventures create indirect costs through blocking possibilities of cooperating with competitors. Therefore, there are possibilities of denying companies different financing options. For example, alliance with individual companies in a given area of communications reduces the possibility of contracts with competitors. In most cases, these would put the firms at risks when the partner is weakened or when the structure is in jeopardy (Cullen, Johnson, & Sakano, 2000).

However, many various problem areas lead to failure in alliances. One of the issues, in this case, includes poor project management. Firms involved in the associations should have a continuous monitoring on how advances in technology and fast-moving markets modify expected outcomes and assumptions (Hitt, Ireland & Hoskisson, 2014). The trouble starts as executives underestimate the amount of energy and time that should be committed toward the management of multiple partner alliances. The second challenge is strategic gridlock (Ahlstrom & Bruton, 2009). The unanticipated conflicts in terms of objectives, operations, and business plans cause dramatic changes in viability of particular alliances (Harrison & John, 2013). Volkswagen entered into what became a failed alliance with Suzuki in 2009. Whereas both companies were seeking to help one another in entering the markets for which they commanded (Europe and Asia) the partnership was marred with serious cultural differences and other contractual challenges. The arrangement did not last even for a year. The same problem affected Apple and IBM's alliance because they encountered challenges related to patenting and direct competition. This shows that alliances do not always succeed.

The loss of control over basic strategy is an area of focus as well. In most alliances, partners relinquish control as they expect shared returns. The participants unduly depend on associations for further growth. This is closely related to the overall business strategies and failure to focus on existing business. A drastic thing that happens with other strategic alliance concepts includes having partners end the creation of new competition (Hoffmann & Schlosser, 2001). The other challenge is the focus on ascertained benefits to the partners. The overall failure of parties to implement action is the union of focus…

Sources Used in Documents:


Ahlstrom, D., & Bruton, G. 2009. International Management: Strategy and Culture in the Emerging World. New York: Cengage Learning.

Cullen, J.B., Johnson, J.L. & Sakano, T. 2000. Success through Commitment and Trust: The Soft Side of Strategic Alliance Management. Journal of World Business. Volume 35, Issue 3, Pages 223 -- 240

Doole, I., & Lowe, R. 2008. International Marketing Strategy: Analysis, Development, and Implementation. New York: Cengage Learning EMEA.

Harrison, J., & John, C. 2013. Foundations in Strategic Management. New York: Cengage Learning.

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