Strategic alliances are one of the several alternatives which organizations can use to achieve their goals; they’re based on cooperation between companies. Strategic alliance means an agreement between businesses that remain independent and are at times in competition.
Alliance indicates cooperation between groups which produces superior final results that can be achieved from a transaction. Because competitive markets keep improving what you can get from transactions, an alliance needs to stay ahead of the market by making continuous advances.”
What is the Meaning of Strategic Alliance in Business ?
You can understand a strategic alliance as an agreement between companies to reach objectives of common interest.
- A strategic alliance is actually a specific mode of inter-organizational relationship where the partners make significant investments in developing a long-term collaborative effort, and common orientation. Faulkner, 1995
- Strategic alliances are voluntary agreements between businesses involving exchange, sharing, or co-development of products, technologies, or services. Gulati, 1998
- An alliance is long-term agreement among companies that go beyond regular market transactions but fall short of merger. Some types include joint ventures, licenses, long-term supply agreements, and also other types of inter-firm relationships. Porter, 1990
- A strategic alliance is a long-term, trust-based relationship which involves highly relationship-specific investments in projects which cannot be fully specified in advance of their execution. Phan, 2000
A strategic alliance in business is an arrangement between a couple of businesses which have made a decision to share resources to execute a particular, mutually beneficial project. An alliance is less involved and less permanent when compared to a joint venture, in which two businesses commonly pool resources to make a separate business entity. In an alliance, each organization retains its autonomy while getting a new opportunity. A strategic alliance could seriously help an organization develop a more effective process, expand into a new market or develop an edge over a rival, among other possibilities.
Partners may give the alliance resources like products, manufacturing capacity, funding, distribution channels, equipment, intellectual property, etc. The alliance aims for a synergy where each companion expects that the advantages of the alliance will likely be more than those from individual efforts.
A popular motive for getting into a strategic alliance is to have the benefit of another company’s innovations without the need to invest in new research and development. While businesses have used acquisition to achieve some of these goals in the past, forming a strategic alliance is more cost-effective.
Watch a Video On Meaning of Strategic Alliance
We can define strategic alliance in a number of ways. A few of the definitions focus on the fact that the partners don’t establish a new legal entity, i.e. a new company. This excludes legal formations like joint ventures from the field of Strategic Alliances. Others see joint ventures as possible manifestations of alliances.