A strategic alliance happens when more than one organizations join up for a fixed time frame. The firms, typically, aren’t in direct competition, however have related services or products which are targeted at the same audience.
Partners may provide the strategic alliance with resources including products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is actually a co-operation or collaboration that is meant for a synergy where every partner desires that the advantages of the alliance will probably be higher than those from individual efforts. The alliance frequently involves technology transfer, economic specialization, shared expenditures and risk.
Stages of Strategic Alliance Formation
- Strategy development requires researching the alliance’s feasibility, goals and reasoning, concentrating on the key problems and issues and development of resource techniques for production, technology, and people. It entails aligning alliance goals with the overall corporate strategy.
- Partner assessment requires studying a potential partner’s weaknesses and strengths, making approaches for accommodating all partners’ management styles, preparing suitable partner selection criteria, understanding a partner’s reasons for joining the alliance and dealing with resource capability gaps which may exist for a partner.
- Contract negotiations requires identifying whether both sides have reasonable goals and objectives, forming high calibre negotiating teams, defining each partner’s contributions and rewards and also safeguard any proprietary info, dealing with end of contract clauses, penalties for bad performance, and featuring the degree to which arbitration procedures are clearly explained and understood.
- Alliance operations consists of addressing senior management’s commitment, discovering the calibre of resources dedicated to the alliance, connecting of budgets and resources with strategic priorities, calculating and rewarding alliance performance, and evaluating the performance and results of the coalition.
- Alliance termination will involve winding down the coalition, for example when its goals and objectives are fulfilled or can’t be achieved, or when a partner tunes its priorities or re-allocates resources somewhere else.