In a strategic alliance, two or more businesses come together to pursue a set of agreed upon goals but remain independent. The companies share the rewards of the alliance and control the performance of assigned tasks. The combining of resources, investment and risks happen for mutual gain. Strategic alliances usually transcend the narrower focus and smaller duration of joint ventures.
Alliances could possibly be targeted at world market dominance within a product class. Even though the strategic partners cooperate within the boundaries of the alliance partnership, they frequently compete fiercely in other areas of their business.
Numerous companies enter into alliances with foreign firms to get access to the most recent technologies without having to spend large amount of capital on R&D. For example, Johnson and Nicholson India Ltd., a paint producer, has strengthened its position in the Indian market and also diversified into industrial electronics with its German partner, Carl Schevek AG of Germany. There are several successful strategic alliance examples in world.
From software programs to steel, aerospace to apparel, the speed of strategic alliances globally is increasing. Alliances signify strategic responses to the powerful forces of deregulation, globalization, technological changes, and time-to market issues. These factors have made the business environment enormously competitive, complicated, and unstable than in the past. Organizations are embracing business partnerships as a way to manage their uncertainty and risk and particularly to access an array of competencies, technologies, and market segments. But you should also keep in mind that there are several pitfalls of strategic alliances.
In simple terms, alliances are two businesses sharing their technological and marketing resources. On the other hand, these partnerships can be extremely sophisticated, involving a number of organizations, operating out of different countries. These companies may in turn be associated with other businesses in separate alliances. The outcome is a web of intertwined businesses, that may be rivaling each other in several product areas while working together in some.
Furthermore, these alliances vary from informal “handshake” agreements to formalized contracts where the partners may also exchange equity, or contribute capital to create a joint venture corporation. A lot of the discussion in the literature on alliances involves strategic partnerships between two businesses, however, there is a growing craze towards multi-company alliances.
A strategic alliance example: a six-company business alliance was created between Motorola, Apple, Philips, Sony, AT&T and Matsushita to form General Magic Corporation to create communications software.