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When should firms use strategic alliances in their international operations?

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  1. Modes of foreign entry
  2. Access to new foreign markets
    1. Geographical
    2. Cultural
    3. Political / legal
    4. Fast internationalisation
  3. Reduce costs
    1. Economies of scale and economies of specialization
    2. Research and development
  4. Competition
    1. Bargaining power of strategic alliances
    2. Global Brand Formation
    3. Arrival of new competitors
  5. Specialise in competencies
    1. Learning within alliances
    2. Convergence of technology and products
  6. Risk sharing

Club Med, Coca Cola, Microsoft or even Nestlé are companies that have already used strategic alliances in order to be more competitive. Companies generally recognize that to gain a competitive advantage they may have to enter into alliances with other firms. According to David A. Aaker, ("Developing Business Strategies", 2001), we may differentiate between alliances and strategic alliances. He stated 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 voluntarily 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.

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