Strategic Alliance

Strategic Alliance

Strategic alliances are partnerships that are formed between two firms or more which come to the decision that they pursue both their goals through combining their resources. These strategic alliances are such as joint ventures, equity strategic alliances, none equity strategic alliances, global strategic alliances (Sepehri,2011).There are various pros and cons for each of these types of strategic alliances. Joint ventures are independent entities that are created jointly by two or more companies. They are advantageous since the firms share their profits, risks, costs and they end up benefiting from local partners markets and contacts. Equity strategic alliances are formed when two or more partners have a different ownership in terms of shares in a venture they form. The advantage of this alliance is the risk sharing factor. Its disadvantage is the fact that there can be a lot of disagreements that can lead to poor decision making hence failure of the venture. On-equity strategic alliances are agreements that are carried out through the creation of a contract and not the sharing of ownership. They are advantageous since they at as tools for marketing and information sharing. Global strategic alliances involve working partnerships that are made between more than two companies across national boundaries. Their advantages include the avoidance of import barriers, licensing requirements and other legislations. There is also the sharing of risks and costs as well as gaining access to particular markets. The main disadvantage is the fact that they are difficult to implement (Sepehri, 2011).

References

Sepehri,M.(2011).International management: Managing across borders and cultures (7th ed.). Upper Saddle River, NJ: Prentice Hall. Sepehri,M.(2011).Global Alliances and strategy implementation. Pearson Education,Inc.Prentice Hall.