A global strategic alliance can be defined as one which involves cross-border transactions including a minimum of one global corporation. Unique to global strategic alliances, the partnership demands a networking component which makes it possible for the global network of production facilities to be interconnected to attain the goals of the alliance.
Advantages and Disadvantages of Global Strategic Alliances
Following are some reasons for global strategic alliance. The primary benefit is the ability to leverage assets you don’t own.
For a global corporation to be competitive they must have ground breaking technology. An international business making use of outsourcing and leading technology from other firms can easily bring its organization’s skill to a joint venture, and they can have the best product a client could desire to buy. Global businesses have the choice and reach to find, develop, and make the most of new, leading edge technology, whenever and wherever it may be located in the world.
Discovering methods to keep costs down are always on the forefront of operations managers’ list. Global strategic partnerships help in sharing fixed costs and resources.
When businesses pool their resources and allow each other to access production capabilities, economies of scale is possible. Cooperating with appropriate strategies also permits smaller businesses to operate together and to compete against big rivals.
Strategic global business alliances are powerful strategies to enter foreign markets. Partners can offer established marketing and distribution systems, in addition to knowledge of the markets they serve, ensuring that goods reach market faster and are more likely to be bought.
Sharing skills, brands, market knowledge, technical know-how and assets results in synergistic effects, which result in pool of resources that is more useful than the separated single resources in the particular company.
The difficulties to a global strategic alliance start during the initial phase of selecting a partner. Selecting the wrong alliance partner could be destructive if it is not capable to contribute to the growth of the business and offer a degree of dedication, honesty and integrity to the partnership.
Businesses small and large usually have trouble in their strategic alliance because of loss of control. Once you align with another organization, you lose some level of control over the way your company is perceived.
When a business is engaged in a foreign country, there is the risk that the authorities of this country might attempt to seize this local business so that the domestic organization can have all the market on its own. Alliances are costly, not only because of cash leaving the company’s hands, but instead due to returns from which it could be denied.
A global strategic partnership can generate indirect costs by obstructing the possibility of cooperating with competing businesses, thus potentially denying the organization various financing options.
Despite the fact that a material part of the costs of international strategic alliances like joint ventures may be predicted during the discussions for its establishment, on many occasions the balance of power between the alliance partners changes over the course of the venture’s life, and the parties to it may have a change of mind.
Without a certain level of trust and honesty, a relationship has no basis to build on. It is necessary for both partners forming an alliance to set their expectations clearly and concisely prior to the partnership is formed.
An alliance may often lead the organization in directions that serve the partner company much better than they do the company itself.
Global strategic alliances also expose the organization to its partners, and the unique technologies that it has are at times exposed to its partner organization, which may in the future turn into a competitor or could utilize the fruits of the venture or the know-how better than the startup itself.
In this article, I have tried my best to give you an idea about what is global strategic alliance and its advantages and disadvantages.