Strategic Alliances
Strategic Alliances Strategic alliances are becoming more and more prominent in the global economy. A strategic alliance is ``an agreement between firms to do business together in ways that go beyond normal company-to- company dealings, but fall short of a merger or a full partnership’’ (Wheelen and Hungar, 2000, p. ... These alliances range from informal ``handshake’’ agreements to formal agreements with lengthy contracts in which the parties may also exchange equity, or contribute capital to form a joint venture corporation. Firms are forming strategic alliances to achieve goals that would be too costly, time-consuming, or difficult to accomplish on their own. They also pursue alliances to encourage product innovation, reduce risk, expand product portfolio, and provide enhanced packages of customer services. Alliances become the basis for valuable customer advice. ... Benefits of a Vertical Alliance Vertical alliances can be upstream in the supply chain towards suppliers or downstream towards distributors and customers. ... And creating synergy Improved responsiveness if just-in-time management techniques are employed Creation of new barriers to entry Production of logistical economy of scales Generation of superior information on activities at all stages of the supply chain Tying in of customers to the business Stages of Building an Alliances Das and Teng (1997) suggest that the process of forming an alliance can be divided into seven mayor steps: 1. Consideration of a Strategic Alliance: At the first stage Strategic Alliances are evaluated as a strategic option compared to other alternatives. As compared to market transactions, strategic alliances have the advantage of reducing risk and uncertainty including demand uncertainty and competitive uncertainty. ... It is proposed when market conditions are risky and uncertain, the firm should look for a Strategic Alliance. Considering a strategic alliance is therefore a viable option for XCOM.