9.3 Strategic alliances
As indicated in the previous section 'International involvement options' the term strategic alliances has different meanings depending on the author and the context in which the author uses it. A good general definition of strategic alliances by Czinkota et al. (2005, p. 367) is
.an informal or formal arrangement between two or more companies with a common business objective. It is something more than the traditional customer-vendor relationship but something less than an outright acquisition.
At its most basic level, a strategic alliance is where 'two or more firms choose to cooperate for their mutual benefit' (Griffin and Pustay 2005, p. 368). Examples of such alliances abound in the motor vehicle industry. General Motors had, until 1995, a joint venture with Toyota ; Toyota has a licensing agreement with Lotus. Chrysler owns 15% of Mitsubishi; Mitsubishi supplies cars and engines to Chrysler, technology to Porsche, and diesel engines to Ford. Chrysler buys diesel engines from Nissan; Nissan builds VW cars: VW owns 99% of Audi.
The advantages of strategic alliances are that they:
- may facilitate entry to another country
- share the costs (and risks) of developing new products
- bring together complementary skills and enable both parties to do together what they could not do separately
- may facilitate the setting of industry standards
- reduce competitive pressure.
The disadvantages of strategic alliances are that they:
- risk disclosure of trade secrets
- may result in more gains for one party than the other.
Activity 9.2
Think about strategic alliances in the your industry. Now make a checklist of the problems of control in a strategic alliance. (You might wish to review the previous sections on 'Coordinating and integrating mechanisms' and 'Control systems' before you start on your list.)
The following are key points in structuring and subsequently managing strategic alliances.
Choose a partner
- who shares your vision of the future
- whose objectives are complementary to yours
- who can be trusted not to take advantage of the relationship.
Structure the alliance by:
- walling off critical technology
- establishing contractual safeguards
- agreeing to swap valuable skills and technology
- seeking credible commitments.
Manage the alliance by building trust through:
- interpersonal contact
- networking
- workshops to build interpersonal skills
- learning from partners so that the relationship carries benefits into the future and through not regarding the alliance as a one-off exercise.
All of this is put together very nicely by Hill (2005, p. 500) who notes that strategic alliances are cooperative agreements between competitors, but the issue of control will always be present even when a high level of cooperation exists.
In your text
Hill 2005, Chapter 14, pp. 500-505.
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