Strategic Alliances are agreements among firms in which each commits resources to achieve a common set of objectives. Companies may form Strategic Alliances with a wide variety of players: customers, suppliers, competitors, universities or divisions of government. Through Strategic Alliances, companies can improve competitive positioning, gain entry to new markets, supplement critical skills and share the risk or cost of major development projects.
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How Strategic Alliances work:
To form a Strategic Alliance, companies should:
- Define their business vision and strategy in order to understand how an alliance fits their objectives
- Evaluate and select potential partners based on the level of synergy and the ability of the firms to work together
- Develop a working relationship and mutual recognition of opportunities with the prospective partner
- Negotiate and implement a formal agreement that includes systems to monitor performance
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Companies use Strategic Alliances to:
- Reduce costs through economies of scale or increased knowledge
- Increase access to new technology
- Inhibit competitors
- Enter new markets
- Reduce cycle time
- Improve research and development efforts
- Improve quality
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