A strategic alliance gives you access to new markets and an immediate competitive advantage. However, this concept can be difficult to understand. Why would two companies that often compete for the same customer join forces? Let's check.
What is a strategic alliance?
Strategic alliance is a concept from the world of the largest business. Usually it concerns two companies that have some kind of advantages that competitors do not have. By combining potentials, they can often achieve a new quality.
“A business strategic alliance refers to all kinds of relationships between firms for the purpose of winning competitive advantage. (...) Although cooperation between companies is nothing new in the business world, the unique feature of today's strategic alliances is their use on a large scale, in many fields and for a significant time as a key tool to gain or maintain competitive advantage. " - Refik Culpan writes at work "A fresh look at strategic alliances: research issues and future directions"Developed at the American University of Pennsylvania. An important principle of the alliance is the independence maintained by both sides. This is different from a takeover, merger or merger.
Strategic alliance - advantages and disadvantages
Like all types of business collaborations, a strategic alliance has advantages and disadvantages. The latter is the lower risk associated with developing a new product or entering an unknown market when it is spread over two partners. It also gives a remarkable negotiating advantage. In the past, companies were able to influence legislation or governments after they were acquired. The combination of potentials also allows you to save resources and take advantage of the economies of scale.
Work "The role of strategic alliances in complementing firm capabilities", Published by Cambridge University Press, lists the advantages of alliances:
“Research on strategic alliances has emerged to explain the formation process of alliances based on the reduction of transaction costs and the reduction of the business cycle. Subsequent research, as well as early Japanese work, emphasized the role of alliances in transferring knowledge between organizations. Recently, research has focused on the development of joint, potentially unique resources of both parties involved in the alliance. "
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Additionally, sometimes a strategic alliance and crisis management go hand in hand, and by entering into beneficial - also in terms of image - cooperation, it is possible to reverse unfavorable trends in terms of the opinion about the company or the value of its shares. The disadvantages of this type of cooperation should also be mentioned. They may mainly result from the imbalance of forces in such a system. There is always a risk that one partner will become more powerful at the expense of the other. In a partnership of two companies from one industry, it can easily come to unfair competition and reach for solutions from the partner. You can eliminate such a risk by establishing a strategic partnership with a company from a slightly different industry. An example would be the collaboration of a particular bookstore chain with a chain of cafés that cooperate strategically but are unlikely to compromise their core interests. The situation is different when the company includes two companies from the same industry, e.g. fuel or automotive.
Strategic alliance - examples from 2020
Last year provided a particularly large number of strategic alliances. Only between January and April, as many as 200 of them were created in the world to accelerate the fight against the pandemic and the coronavirus itself. Biotechnology or pharmaceutical companies, which might not have decided to cooperate in other conditions, decided to join forces in the face of new challenges. They had common goals - to accelerate research and acquire better know-how. There have been occasions when a strategic alliance has gone beyond the medical industry, as in the partnership between Dell and EON Reality. Together, they created training for schools and institutions based on virtual reality, using Dell's reach and EON software. It was also possible thanks to the fact that a new one was created target groupwhose needs have not yet been met by anyone.
Preparation for a strategic alliance
The above examples prove that a strategic alliance can be implemented quickly, despite the fact that it is, after all, a complicated undertaking with far-reaching consequences. It will come in handy at first brand offensive strategy along with the recognition of current and future challenges ahead. Decision makers at Dell and EON responded rapidly after just a few weeks of the pandemic, predicting that millions of people would be more than usual to work and learn remotely. There is no doubt that in order to be able to take such a bold step quickly, the company must be managed in an extremely flexible manner, and marketing strategy it should be modifiable depending on the direction of changes.
The strategic alliance will bring new opportunities. Opportunities and threats must be anticipated keeping the interests of the company in mind. It happens that an external manager is responsible for the strategic alliance. This largely ensures the system is impartial and even, and also minimizes the risk of "leakage". It is also important that the terms of the agreement are negotiable. The partnership is concluded for a limited period of time, and over the months or years the dynamics of the arrangement may change significantly. It is important that both parties could then renegotiate the terms on which they concluded it.