9 Most Important Benefits of Strategic Alliances

ii. Due to shared equity participation, the risk and cost are also shared. It enables a firm to undertake activities which may otherwise are unaffordable to it.

iii. The two firms through synergy effect can achieve co-specialisation. To illustrate, in IBM- Cisco alliance, IBM’s global leadership in the services market place, complete portfolio of technology, and hardware is combined with Cisco’s leadership in networking products for the internet.

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iv.Cheaper and comfortable market entry broadens the scope of a firm’s inter-nationalisation.

v. Permits the firm to reconfigure its value activities so as to achieve the necessary cost and differential advantages.

vi. Alliances allow firms to bring in technology to the marketplace faster.

vii. They facilitate the learning experience due to exposure to other firms with different managerial systems.

viii. They facilitate the learning experience, which may be caused by their competitors.

ix. In some cases even strong firms (Yahoo! and eBay) may form alliance to position themselves against a potential powerful rival (Google).

Most of the successful companies of the world contribute their success to strategic alliances. According to Freidheim, firms with alliances outperform their unallied peers by a considerable margin. He has described four types of strategic alliances – pro-competitive alliances (between manufacturers and their suppliers or distributors as a win-win solution); non-competitive alliances (intra-industry combination among non-competing firms, neither would want to become a major player in the particular market segments, for example alliances between South Korean and western car manufacturers to produce low cost cars for Asia or Latin America only), pre-competitive alliances (firms from different and often unrelated industries to work on technology development, for example Du Pont and Soni’s cooperative development of optical memory-storage products); and competitive alliances (direct competitors in the same sector, for example the Advanced photographic System was jointly developed a consortium including the directly competing photographic film makers Kodak and Fuji.

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