A Strategic Alliance is an agreement between companies (partners) to reach objectives of common interest. Strategic alliances are one of the numerous options which businesses can use to succeed in their goals; they’re based on cooperation between companies. This type of cooperation lies between M&A and organic growth. Strategic alliances are agreements between businesses which remain independent and are sometimes in competition.
Partners may give the alliance resources like products, manufacturing capability, financing, distribution channels, equipment, expertise, intellectual property, etc. The alliance is a collaboration that aims for a synergy where each companion expects that the advantages of the alliance will probably be more than those from individual efforts.
Definitions of Strategic Alliances
Faulkner, 1995: A strategic alliance is actually a particular mode of inter-organizational relationship where the partners (companies) make significant investments in developing a long-term collaborative effort, and common orientation.
Gulati, 1998: Strategic alliances are voluntary agreements among companies involving exchange, sharing, or co-development of products, technologies, or services.
Porter, 1990: A strategic alliance is long-term agreement between businesses that go beyond normal market transactions but fall short of merger. Forms include joint ventures, licenses, long-term supply agreements, as well as other types of inter-firm relationships.
Phan, 2000: An alliances is a long-term, trust-based relationship which entails highly relationship-specific investments in projects which cannot be fully specified in advance of their execution.
Benefits of Strategic Alliance
- Enabling each partner to focus on activities which best match their capabilities.
- Gaining knowledge from partners & developing competences which may be more widely exploited elsewhere.
- Adequate suitability of the resources & competencies of an organization for it to survive.
- Speed to market is important, and strategic alliances significantly improve it.
- Alliances can spread increasing research and development costs.
- Partnerships facilitate access to global markets.