{"id":18997,"date":"2023-01-30T04:33:00","date_gmt":"2023-01-30T04:33:00","guid":{"rendered":"https:\/\/businessyield.com\/?p=18997"},"modified":"2023-02-07T15:33:05","modified_gmt":"2023-02-07T15:33:05","slug":"strategic-alliance","status":"publish","type":"post","link":"https:\/\/businessyield.com\/business-strategies\/strategic-alliance\/","title":{"rendered":"Strategic Alliance: Types & Examples in 2023","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

Alliances and partnerships are important components of business strategies<\/a> for both large and small firms. However, while many alliances begin with lofty goals and ambitions, not all of them turn out to be strategic. In the last few months, I’ve seen examples of new strategic alliance formed among the world’s top corporations. But, what exactly is a strategic alliance, what are the different types of strategic alliances, and how can they benefit \u2014 or harm \u2014 your company. Oh well, you heard me right, it does begin with the intention of benefitting companies but in the long run, it may harm your company. Also, why do we require them for success in today’s marketplace? Let’s start.<\/p>\n\n\n\n

What Exactly Are Strategic Alliances?<\/span><\/h2>\n\n\n\n

Strategic alliances are agreements between two or more separate companies to collaborate in the manufacturing, development, or sale of products and services, as well as other corporate goals. In a strategic alliance, for example, Company A and Company B pool their resources, capabilities, and core competencies to generate mutual interests in designing, manufacturing, or distributing goods or services. Let’s see the types of strategic alliances we have in the next section.<\/p>\n\n\n\n

Types of Strategic Alliance<\/span><\/h2>\n\n\n\n

There are three types of Strategic alliance: joint ventures, equity strategic alliances, and non-equity strategic alliances.<\/p>\n\n\n\n

#1. Joint Venture <\/span><\/h3>\n\n\n\n

The first type of strategic alliance is a joint venture. This is when the parent companies form a new child company, they form a joint venture. Company A and Company B (parent firms) can, for example, form a joint venture by forming Company C. (child company).<\/p>\n\n\n\n

Furthermore, if Firm A and Company B each control 50% of the child company, we refer to it as a 50-50 Joint Venture. The joint venture is categorized as a Majority-owned Venture if Company A owns 70% and Company B owns 30%.<\/p>\n\n\n\n

#2. Strategic Equity Alliance<\/span><\/h3>\n\n\n\n

In this type of strategic alliance, one firm buys a particular amount of the other business’s equity, forming an equity strategic alliance. An equity strategic alliance would be created if Company A purchased 40% of the equity in Company B.<\/p>\n\n\n\n

#3. Non-equity Strategic Alliance <\/span><\/h3>\n\n\n\n

A non-equity strategic alliance is a type of alliance formed when two or more organizations enter into a contractual agreement to combine their resources and talents.<\/p>\n\n\n\n

Having seen the different types of strategic alliances, let’s see the benefits and possible challenges.<\/p>\n\n\n\n

The Benefits of Strategic Alliances<\/span><\/h3>\n\n\n\n

Consider three different product life cycles to better understand the motivations for strategic alliances: Slow cycle, Standard cycle, and Fast cycle. The necessity to develop and continuously generate new items in an industry determines the product life cycle. The pharmaceutical business, for example, has a slow product lifecycle, whereas the software business has a fast product lifecycle. The motives for strategic alliances change for organizations whose products are in a distinct product lifecycle:<\/p>\n\n\n\n

#1. Slow Cycle<\/span><\/h4>\n\n\n\n

A company’s competitive advantages are protected for comparatively long periods throughout a sluggish cycle. The pharmaceutical sector has a delayed product life cycle because products are not developed every year and patents are granted for a long period.<\/p>\n\n\n\n

Strategic alliances are created to get access to a restricted market, maintain market stability (by establishing product standards), and build a franchise in a new market.<\/p>\n\n\n\n

#2. Typical Cycle<\/span><\/h4>\n\n\n\n

In a typical cycle, the company produces a new product every few years and may or may not be able to maintain its industry leadership position.<\/p>\n\n\n\n

Strategic alliances are created to gain market share, push out competitors, combine resources for significant capital projects, achieve economies of scale, or get access to complementary resources.<\/p>\n\n\n\n

#3. Quick Cycle<\/span><\/h4>\n\n\n\n

The company’s competitive advantages are not protected in a quick cycle, and companies operating in a fast product lifecycle must constantly produce new products\/services to survive.<\/p>\n\n\n\n

They are formed to accelerate the development of new products or services, share R&D costs, simplify market penetration, and combat uncertainties.<\/p>\n\n\n\n

Strategic Alliance Value Creation<\/span><\/h2>\n\n\n\n

Strategic alliances add value by doing the following:<\/p>\n\n\n\n

  1. Enhancing current operations<\/li>
  2. Changing the competitive landscape<\/li>
  3. Ease of access and exit<\/li><\/ol>\n\n\n\n
    1. Current activities have been enhanced as a result of:<\/strong><\/li><\/ol>\n\n\n\n