Thanks again for your enlightening thought on strategic alliances.
It’s special when you have a fellow scholar sharing his perspective on the topic.
Our virtual community is enriched!
Professor D. Green
In today’s global market and advancement in e-commerce, companies are facing more and more competition. In order from companies to be able to compete against the increase of companies, they have to find ways to create a competitive advantage over their competition. One way many companies are gain an advantage on their competition is by forming a strategic alliance. Wen and Hong (2010) explain, “in the face of such pressure, integrating enterprise resources by strategic alliances will maintain the flexibility of the enterprise and improve its competitive advantage” (p.707). Strategic alliances allow for companies the ability to share risk, reduce production cost, and improve technology (Wen & Hong 2012, p. 707). Due to the benefits of strategic alliances, many companies are looking to partner up with companies in the emerging market. In conclusion, the global market is becoming more competitive and companies are trying to find ways to gain a competitive advantage over their competition. One way for companies to do so is by forming a global strategic alliance.
Hung-Wen, L., & Jhy-Hong, D. (2010). The effects of e-business on the performance of strategic alliances. Total Quality Management & Business Excellence, 21(7), 707-724. doi:10.1080/14783363.2010.483085
The concept of strategic alliances in a global market
Some of the reasons why companies embark on strategic alliances are to increase revenue, develop new markets and to increase its value within the industry. There are some benefits as well as some disadvantages to these alliances in the global market. It provides reduced cost and expertise for the participating organizations (ASEA,2011) . It can provide local contacts and resources that may be critical to the success of the program. However, it can be ineffective if one partner doesn’t perform at the expected level and usually limits the objectives of the alliance (ASEA, 2011). Therefore careful consideration and research should be taken to ensure that the strategic alliance will be beneficial for both parties involved before an agreement is finalized.
ASEA (2011) American Society of Association Executives. Benefits of Strategic alliances and Partnerships. Washington, DC. Retrieved from http://www.asaecenter.org/aboutus/content.cfm?itemnumber=137633
For a company, going global can have many advantages. Many times globalization is thought of as a way for large companies to gain more profits, however small businesses are also benefiting from going global. Mielach (2011) states, “…24 percent of small businesses are currently engaged in global commerce, and many of those businesses are experiencing a large return from global trade”. This shows that nearly ¼ of the many small businesses in existence are already going global. This is just another way that small businesses, which are so important to the business world, can be competitive with others.
Mielach, D. (2011). Going global may be the key to future success for small businesses. Retrieved from: http://www.businessnewsdaily.com/1845-smb-exporting-survey.html
We live in a world where globalization has been operating in high gear. “More and more companies tend to expand the global market through strategic alliance, which according to Liu is “the structure of collaboration to accomplish the strategic goals of members between different organizations” (2009). The goal of strategic alliances for companies is to minimize risk, while maximizing leverage and profit. The type of alliance can be a short-term or long-term contractual cooperation, and the members of alliances agree to cooperate on specific business issues.
Many reasons force companies to form an alliance, including low technology, insufficient resources, low pace of innovation, high manufacturing costs and market access. Strategic alliances offer companies a competitive advantage over competitors.
There are advantages for companies who participate in strategic alliances. A critical reason for developing strategic alliances is the sharing of knowledge between alliance partners. First, they have easier access to the global market. Second, companies can share the risk and cost of a product by engaging in a strategic alliance. Third, it is a means of accumulating technologies and assets. Finally, companies can assure the sufficiency of their resources, including new technologies, to maintain their competitive advantage (Liu, 2009).
Liu, W. (2009). Advantage competition of inter-partner learning in international strategic alliance. The Journal of Global Business Issues, 3(2) 123-126.
Strategic alliances are an important part of small and large businesses in today’s competitive business environment. With an economy living in the shadows of a recent recession, and company executives fearful of future growth and employment opportunities, strategic alliances have become a necessity for future success. A recent publication in the Journal of Global Business & Technology stated, “Strategic alliances allow companies to develop products and rapidly expand their markets while managing risk and costs through sharing resources. In recent years, there has been a dramatic increase in strategic alliances by firms. According to recent studies, a majority of executives believe that alliances will be a prime vehicle for future growth, dramatically improving an organization’s operations and competitiveness” (Elmuti, 2012). The current economy is forcing companies toward the old adage of do more with less. Unfortunately the ability for future growth is limited by this dilemma and ultimately increases the importance of successful strategic alliances.
Elmuti, D., Abou-Zaid, A. S., & Jia, H. (2012). ROLE OF STRATEGIC FIT AND RESOURCE COMPLEMENTARITY IN STRATEGIC ALLIANCE EFFECTIVENESS. Journal Of Global Business & Technology, 8(2), 16-28.
Strategic alliances are becoming even more important for companies due to the ever increasing and changing globalization of the world. Strategic alliances are a key component to companies wanting to expand internationally. “The strategic alliance based on combination of different countries, enterprises, and institutes has been becoming a new way for technology transfer” (Chunhua & Mengchun, 2011, p. 1). When aligning internationally each partner brings a specific talent that the other may not have. Partners may provide an advantage in areas such as products, distribution channels, capital equipment, knowledge, technology, or intellectual property.
Chunhua, F., Mengchun, D., & Baojun, S. (2011). A Comparison Research on Industry-University-Research Strategic Alliances in Countries. Asian Social Science, 7(1), 102-105.
I think its great you are bringing globalization into the discussion because technology has brought the world closer and closer together, therefore businesses are able to work together much easier. This has paved the way for strategic alliances of companies here in the U.S. and companies in China and Japan to name a couple.
There are four potential benefits that international business may realize from strategic alliances (Bernadette Soares, 2007)
Ease of market entry, Shared risks, Shared knowledge and expertise, Synergy and competitive advantage.
I believe that in order for a company to thrive in this day and age it needs to align itself with comparable businesses thus enabling a wider market share and less competition.
Alliances and partnerships are by design intended to be mutually beneficial. Such is not always the case, one or more partners in an alliance may take it as an opportunity to take advantage of others. If this can be avoided strategic alliances are a very effective tool in business. Cross-border or international partnerships can be particularly effective. As stated in Culpan (2002) cross-border alliances allow entrance into new markets with much more limited risk and significant influence. Once the intitial difficulty of negotiation is overcome these partnerships are one of the most effective tools for entering new and emerging markets.
Culpan, Refik. Global Business Alliances. Greenwood Publishing Group, 2002.
Strategic alliances are very important today in a world of globalization and will only become more important as times continue to change. This type of agreement is something that is very important to businesses and must be put into place if businesses want to expand and compete internationally. The concept of strategic alliances is not a new concept but in the world of business it can be described a little differently. The idea of strategic alliances in business is developing relationships with other countries for the purpose of sharing resources which in return will hopefully bring both countries wealth. According to Tas and Teng (2000) “Strategic alliances are voluntary cooperative inter-firm agreements aimed at achieving competitive advantage for the partners.” As the world around us changes we must adapt to these changes and continued developing relationships in order to remain competitive.
Das, T., & Teng, B. (2000). A Resource-Based Theory. Retrieved on February 13, 2013.