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In order for it to succeed, must a strategic alliance be an alliance between equals?

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Introduction

In order for it to succeed, must a strategic alliance be an alliance between equals? In recent years collaborative partnership as a form of business operation has increased rapidly. This has been mainly due to increased levels of competition, the emergence of new markets and technological developments in todays global market. Estimates of the annual growth of strategic alliances in the early 1990's averaged between 27 and 30 per cent for industrialised countries (Anderson, 1990). An alliance may be seen as the 'joining of forces and resources, for a specified or indefinite period, to achieve a common objective' (Takec and Singh, 1992). Forming strategic alliances offers a company the chance to improve its competitive position by sharing costs, technology, resources and knowledge. The idea is that if two companies pool their resources, their joint objectives can be achieved more easily and economically (Strategic Management Journal, 1991). A strategic alliance may be vertical, between a buyer and supplier or horizontal, between two different companies at the same point in the supply chain. The main debate raised by the question is the extent to which equality between the parties is a prerequisite for the success of an alliance. Central to this debate is determining what is considered to be a successful strategic alliance. The notion of success is a subjective opinion, which could mean something to one firm and something quite different to another. In order to tackle this question, several different criteria for successful alliances shall be used and the extent to which the parties involved must be equal considered. ...read more.

Middle

Inter-organisational cooperation can also result in a reduction in transaction costs and therefore enable competitive advantage through increased economic efficiency (Williamson, 1975). This type of cooperative alliance is known as an alliance of complimentary equals and is common in hi-Tec industries where research and development costs are high. For example, the three major aero manufacturers, Rolls Royce, General Electric and Pratt & Witney cooperate because individually, they do not have the necessary financial resources to invest in R&D when developing new engines. Strategic alliances are formed on particular projects in order to reduce risk and share development cost. They can also each gain from the alliance by gaining access to new markets. This would not be successful if they were not equal in terms of technological capabilities and it is this mutual dependency that holds the alliance together. This illustrates the importance of partner selection in forming alliances. A partners' objectives must be complimentary and the partners should be compatible in terms of resources, knowledge, technology, management style and corporate culture. Research indicates that resource complementarity is crucial to collaborative success (Harringan, 1985; Bleeke & Ernst, 1991). There are two aspects to this; uniqueness and symmetry. Complimentarity is important in order to achieve strategic objectives (Killing, 1983) and a balance of unique strengths creates partner interdependence. When both partners are highly dependent on each other it provides them with incentive to make the relationship work and endure (Buchanan, 1992). They are more likely to share information and create a mutual understanding and are more sensitive to each others needs. ...read more.

Conclusion

If the power between the parties becomes asymmetric, the alliance will fail. It may simply break up or a dominant party will start to erode the net benefits, leading to a premature end. References Book references: Aulakh, P, S & Madhok (2002) Chapter 2 "Cooperation and Performance in International Alliances: The Critical Role of Flexibility" from Cooperative Strategies and Alliances, Elsever Science Ltd Butler, R & Gill, J (2001) Chapter 7 "Knowledge and Trust in Partnership Formation" from Effective Collaboration: Managing the Obstacles to Success, Palgrave Publishing Child, J. & Faulkner (1988) Chapter 5 "Managing Alliances: Challenges and Tasks" from Strategies of Cooperation: Managing Alliances, Networks and Joint Ventures Cox, A (1995) Chapter 1 "Strategic Procurement Management in the Private and Public Sectors: The Relative Benefits of Competitive and Collaborative Approaches" from Strategic Procurement Management in the 1990s concepts and cases, Stamford: Earlsgate Faulkener, D, O & De Rond, M (2000) Chapter 1 "Perspectives on Cooperative Strategy" from Cooperative Strategy: Economic, Business and Organisational Issues, Oxford University Press Genefke, J & McDonald, F (2001) Chapter 11, "Managing Effective Partnerships" from Effective Collaboration: Managing the Obstacles to Success, Palgrave Publishing Gray, B (2000) Chapter 11 "Assessing Inter-Organisational Collaboration, Multiple Conceptions and Multiple Methods" from Cooperative Strategy: Economic, Business and Organisational Issues, Oxford University Press McDonald, F (2001) Chapter 9 "The Role of Power Relationships in Partnership Agreements between Small Suppliers and Large Buyers" from Effective Collaboration: Managing the Obstacles to Success, Palgrave Publishing Olk, P (2002) Chapter 6 "Evaluating Strategic Alliance Performance" from Cooperative Strategies and Alliances, Elsever Science Ltd Stiles, J (2001) Chapter 2 "Managing Strategic Alliances' Success: Determining the Influencing Factors of Intent within Partnerships" from Effective Collaboration: Managing the Obstacles to Success, Palgrave Publishing Sudarsanam, P. ...read more.

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