More and more companies are recognising that to gain a competitive advantage they may have to enter into alliances with other firms. Referring to examples, identify possible motivations for entering into a strategic alliance and then critically evaluate the possible problems that may be encountered and how to overcome these problems. According to David A. Aaker (2001:277), we may differentiate between alliances and strategic alliances. The author states that an alliance may be defined as a voluntary association that furthers the common interests of the constituent members. On the other hand, a strategic alliance may be defined as at least two companies or partners voluntary combining value chain activities, architecture, and value chain linkages for the purpose of increasing individual and collective value addition, increasing competitive advantage, and achieving agreed or common objectives. In this essay, we will focus on strategic alliances. In the first part, we will point out what different alliances can be spotted and what motivations may bring companies to enter strategic alliances. Then, in the second and last part, we will highlight the possible problems that may be encountered when entering strategic alliances and how to overcome these problems.
[...] These factors account for performance risk, or the probability and consequences that alliance objectives are not achieved, despite satisfactory cooperation among partner firms (T.K. Das Bing-Sheng Teng, 1998). For example, despite a keen desire to learn, partner firms often fail to achieve effective learning and knowledge transfer in alliances (Dean Elmuti and Yunus Kathawala, 2001). Unlike relational risk which is unique to inter-firm cooperation, performance risk is present in all strategies, including strategic alliances. We now are going to discuss the ways in which firms can have relational and performance risks, inherent in strategic alliances. [...]
[...] There are many alliances designed to divide fixed costs of production and distribution, seeking to improve volume. Nestlé and Haagen Dazs are an example of it. In 1999 Nestlé and Haagen-Dazs announced an alliance for production and marketing in the United States. Nestlé sought to build critical mass in the ice cream sector and this joint- venture was a way to reduce costs by operating its plants in California and Maryland at full capacity. Nestlé would contribute its frozen dessert technology, while Haagen Dazs would contribute to distribution. [...]
[...] Das and Bing-Sheng Teng (1999), instead of forming alliances, such as joint ventures, in which firms work closely, firms may choose to form alliances in which partners work separately as in the case of funded R&D and outsourcing agreements. Finally, when high performance risk is the major risk and the firm contributes mainly knowledge, there is a concern that one's knowledge may not result in acceptable alliance performance. To deal with this risk and enhance the odds for success, firms need to focus on the productivity of knowledge, that is to say on how its knowledge should be used to yield effective results in an alliance (T. [...]
[...] We therefore are going to review the main motivations that could bring two or many companies to create a strategic alliance. George Luffman et al. (1996:164) found two types of reasons to create strategic alliances: internal and external reasons. Concerning internal reasons, the authors firstly highlights the notion of dividing risks. For certain projects, risks of failure are high and even higher when investments are elevated. For instance, the joint venture between General Electric and Snecma was made to develop and produce a new airplane propeller. [...]
[...] Although both firms had significant amounts of complementary resources, the alliance was later dissolved because AT&T's bureaucratic organizational culture clashed with Olivetti's dynamic and entrepreneurial culture. The issue here is the inability to make learning happen and the resulting lack of desired integration of each other's knowledge. It illustrates that not all knowledge can be simply transplanted without modification. Superior knowledge can be productive only if it meets the needs of the alliance (IBID). All along this essay, we saw that companies do not have the same needs and this is why several types of alliances are used such as joint ventures, consortia, Networks, franchising . [...]
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