The basic reason for entering into strategic alliance is to enhance their organizational capabilities and there by gain competitive advantage.
Reasons for Forming Strategic Alliances
The basic reason for entering into strategic alliance is to enhance their organizational capabilities and there by gain competitive advantage. Towards this they strive to gain access to new markets and new supply resources sufficiently they enter into strategic alliances. Specifically speaking the following are the principal reasons.
To obtain technology and / or manufacturing capabilities
For example, Intel formed a partnership with Hewlett-Packard to use HP’s capabilities in RISC technology in order to develop the successor to Intel’s Pentium microprocessor.
To obtain access to specific markets
Rather than buy a foreign company or build breweries of its own in other countries, Anheuser-Busch chose to license the right to brew and market Budweiser to other brewers, such as Labatt in Canada, Modelo in Mexico, and Kirin in Japan. The alliance of coco cola Inc. with local bottling mergers in the global market and even in India.
To reduce financial risk
To reduce the risk of financial investment a company may join hands with another company or companies
Because the costs of developing a new large jet airplane is becoming too high for any manufacturer, Boeing, Aerospatiale of France, British Aerospace, Constucciones Aeronautics of Spain, and Deutsche Aerospace of Germany planned a joint venture to design such a plane.
To reduce political risk
Political risk is another important factor. Besides cultural factors, political factors are complex and difficult to mange. It is better to tie up with a local firm to find way s of overcoming such risks.
To gain access to China while ensuring a positive relationship with the often restrictive Chinese government, Maytag Corporation formed a joint venture with the Chinese appliance maker, RSD.
To achieve or ensure competitive advantage
Alliances may be formed for mutual advantage to use of the specialized nature of resources or skills.
General Motors and Toyota formed Nummi Corporation as a joint venture to provide Toyota a manufacturing facility in the United States and GM access to Toyota’s low-cost, high-quality manufacturing expertise.
IBM’s current alliance strategy in large measure is due to several key driving factors:
1. To enter new markets, 2. To fill gaps in its product line with other firm’s offerings,
3. To shorten product development time, 4. To learn new technologies, 5. To restructure some existing operations, and 6. To block other key rivals from encroaching on the U.S. and European markets too quickly. IBM has formed more than 500 strategic alliances (of varying degrees of complexity) with partners around the world. These strategic alliances involved not only shared marketing and software development efforts, but also major commitments of investment funds to build ultra-modern facilities that are beyond the financial means of any one company. The following Table 10-1 portrays some of the most significant alliance relationships the IBM has entered as of December 1997.
Tags : Strategic Management - Strategy Formulation
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