Strategic Alliance: A Tool For Organizational Sustenance And Growth

Write a literature review for "Strategic alliance" (it might its types, formation, performance and success factors, partner selection criteria etc)

Introduction to Strategic Alliance

The term strategic alliance signifies inter firm collaboration between two organizations in order to achieve greater market penetration, achieve organizational sustenance and introducing new technologies. In this regard, it can be said that the organizations opting for strategic alliance has shown significant growth in organizational functioning and sustenance. It has been noticed that the formation of strategic alliance between two organizations is considered an important way of growth in the ever-increasing competitive environment. It has also been defined that strategic alliance is regarded as a marketing tool that opens new paths of innovations. strategic alliance between two organizations is regarded as one of the most prominent constituent elements that includes the nature of organizational innovation. In order to operate in a new as well as competitive environment, strategic alliance is hence regarded as an effective marketing tool. In addition to this, it can be said that the adoption of strategic alliance helps the organizations in order to understand the ever changing and complex issues that an organization might face while operating in a global market or aiming at expansions. Moreover, it has been noticed that the organizations opting for strategic alliance generally aim at achieving the different organizational goals as well as overcoming the inherent challenges. It has been noticed that the primary challenges that the organizations face while expanding in the global market is the lack of resources and effective marketing strategies. In this regard, the importance of strategic alliance can be understood as it allows both of the organizations in incorporating and using the resources and market presence of the other organization. Hence, it is easily understandable that the organizations forming strategic alliance helps the organizations in increasing the chances of achieving competitive advantages as well as building innovative marketing strategies. Hence, the discussion focuses on the different types of strategic alliance as well as the importance of selecting effective and efficient partner to form alliance. In addition to this, various examples of strategic alliance between two prominent organizations have also been analyzed in order to understand the importance of strategic alliance in organizational sustenance.

According to Franco and Haase (2015), strategic alliance is the agreement between two or more number of organizations to work collaboratively in a particular business activity. The strategic alliance helps the organization to get the benefits from the strengths of each other and eventually gains competitive advantage. The formation of the strategic alliance helps in handling the risks of increasing uncertainty, globalization and complexity within the business environment. The strategic alliance aims at sharing the knowledge and the expertise of the different business organizations to reduce the risk and the costs in various areas for example the relationship with the suppliers and developing new technologies and products. Joint venture is one kind of strategic alliance in which two organizations work with each other in order to increase the quality of their service and products. However, alliance involves competitors and it generally lasts for a short duration.

Types of Strategic Alliance

Albers, Wohlgezogen and Zajac (2016) stated that strategic alliance have emerged in the recent years as an important and common structural vehicles which help in business development. Although it is still unknown about how the collaborative activities are administered and organized within the governance structures. The existing schemes for classification were totally based on the type of activities, legal structure and the characteristics of the partners. The authors also explained the five key parameters for the strategic alliance they are – structural interface between the partners, the structural interface within the partners, their specialization, centralization and the formalization of the strategic alliance. This will show how these five basic parameters will provide deeper understanding of the governance of the alliances and will also suggest how the partners of the organization can achieve various level of steering and connectivity in their collaborative ventures.

According to Griffin (2013), Strategic alliance can be of different types depending on the nature of the business and the partners. Some of the types of strategic alliances are- Joint ventures, outsourcing, Affiliate marketing, technology licensing, product licensing, franchising, R&D etc. Joint venture is the agreement between two or more organizations to form a single a particular entity for completing a particular project. Each of the companies who are involved in this agreement has equal stake in the share of the revenue, profits and the expenses. Outsourcing is the process, which rose in the market in 1980, and it continued till date. Globalization and outsourcing of manufacturing allows the organization to reduce the costs, which benefits the customer by lowering the cost of the services and the goods. It helps in the economic expansion and in the process of reduction of the level of unemployment. Outsourcing increases the productivity of the organization. Affiliate marketing has helped number of organizations to increase their market. Amazon is a great example of the affiliate marketing. They currently have thousands of websites who promotes their products on the basis of their performance. Technology licensing is a types of contractual arrangement in which intellectual property, trade secrets and the trademarks are licensed to particular firm. The author explained that the technology licensing is used generally to enter into the foreign markets. The downside is the loss of control over technology and when it enters in to the hands of others the exploitation increases. Franchising is the most effective way of expanding the business worldwide. The R&D can be explained as the research and development project between two or more organization, in which the organizations work to bring a new products or services in the market. The R&D can also be classified under the joint venture. The author also described distributors as a type of strategic alliances in which the distributors helps the manufacturing company by increasing the product awareness in the market. The distributors help in expanding the market in quick time and increase the revenues of the organization.

Importance of Strategic Alliance

According to (Tjemkes,  Vos and Burgers (2017), formation of the strategic alliance can help in providing a number of advantages to the organizations. Strategic alliance helps in acquiring new resources and skills. When two or more organization comes into collaboration to work together, they learn lots of new skills and help them in getting lots of resources. Strategic alliance helps in enhancing the competiveness of the organizations. Trade projects require a high level of expertise from the various fields. In the past, the organizations have tried to maintain and develop all the skills that is required but with increasing administrative and technological consideration the companies have learned that they cannot manage everything by their own. The most competitive business organizations are trying to enter into a partnership with other business organizations to enhance their performance. Risk sharing with the help of partnership is most common in the research and development. The research and the development costs are increasing and so does the innovation. In order to tackle with competition and bring innovative products the organizations need to innovate continuously. Partnership helps in sharing the risks in the other areas as well. For example, it can help the companies in sharing the distribution and transportation; this saves a lot of money and helps in faster delivery of the products. The collaboration will create a new product and services that will help in creating a new market in the industry and will emerge new opportunities. Several competitors might develop similar technologies at about the same time. It is very difficult to predict whose technology will set the standard for the industry, so trying to be the first into the market with a new technology can be very risky. Therefore, the alliance needs to be done effectively and efficiently.

It has been noticed that the major organizations take up strategic alliance for multiple reasons. One of the most important reasons of taking up the Strategic Alliance is to acquire access of resources of other companies. The adoption of strategic alliance enables an organization to gain knowledge about the resources used by other organizations operating in the similar industrial field. According to Rothaermel (2015), by using the tool of Strategic Alliance an organization gains competitive advantage over other organizations, as the tool enables the organization to work more efficiently.

In addition to this, Kleymann and Seristö (2017) have pointed out that the adoption of strategic alliance tool is adopted by an organization in order to achieve economies of scale. It has been pointed out that the organizations use the tool as a method to generate economies of scale. Studies have suggested that partnership enables both the participating organizations to assemble and use the resources in a more efficient manner. This leads the organizations to achieve easy success. IšoraIt? (2014), has also opined that the participating organizations that have complimentary resources and skills can use the efficiency and expertise of each other in order to gain competitive success over other industries.

Effective Partner Selection for Alliance

Gomes, Barnes and Mahmood (2016), have also pointed out that in addition to gaining economies of scale partnership can be considered as highly effective in enhancing the competitive advantage. It is widely known that the participating organizations tend to have different expertise. It has been monitored that in the initial stages the companies try to retain its expertise in a broader field. However, along with the gradual expansion the companies tend to concentrate in specific sectors. Hence, Albers, Wohlgezogen and Zajac (2016) have indicated that along with the technological advancements most of the organizations tend to focus on their core competence and work in order to retain them. Hence, a strategic alliance is very helpful in order to cover up the gaps in skills of an organization.

However, Morschett, Schramm-Klein and Zentes (2015), have pointed out that multiple organizations adopt strategic alliance as a method of decreasing the risk in the global business.it has been monitored that the organizations often face difficulties while making expansions. This difficulties varies in terms of different skills required, understanding the different environment in the new environment. In this regard, it can be said that the organizations applying strategic alliance reduces the risk of expanding into a new business market. Moreover, Morden (2016), has also pointed out that the organizations that are taking up strategic alliance can also achieve other advantages in the sectors of distributing the cost of establishment. In addition to this, () have also mentioned that the strategic alliance can proof to be helpful in the process of deciding the necessary marketing strategies as well.

In addition to this, Dunning (2015), has opined that the organizations adopt the framework of strategic alliance in order to setting up new standards. The development of multiple new technologies expand new opportunities for the organizations. It has been noticed that, the organizations that adopt partnership as a method for expansion and gain competitive advantages also aim at setting up new standards for the organizations. In this regard, reference of Lin and Darnall (2015), can be taken, while explaining the motifs behind adopting strategic alliance. It has been monitored that the organizations taking up the partnership method also try to ensure that their technologies and innovations are being acknowledged by the market. Warner and Sullivan (2017) have monitored a safer way of introducing new technologies and innovations are to opt for strategic alliance. To elaborate it furthermore, it can be said that the organizations seek for support from the partner companies in regards to the new technologies. It has been perceived that the technologies adopted by the organizations tend to be acknowledged by the industry if the partner companies support and acknowledge them.

In addition to this, Kaynak (2013) has pointed out that support from the partners also help the organizations in the process of entering in the foreign markets. It has been noticed that partnership provide chances of establishing marketing and distribution system. In addition to this, it has also been noticed that the organizations that seek partnership from foreign companies often aim at using the knowledge of that organization in dealing with the foreign market.

Hill, Jones and Schilling (2014) have pointed out that the organizations often adopt strategic alliance as their strategies to survive in the competitive scenario. It has been pointed out that the organizations often cooperate with each other in order to help each other in the process of marketing and distribution. This helps them to overcome the existing competition. To elaborate it furthermore, it can be said that the process of forming alliance with major organizations help in reducing the competition from other big entities.

Hence, it can be understood that strategic alliance is an important tool that can be used to achieve multiple advantages in the competitive scenario.

The selection of partners are highly important aspect of strategic alliance. Ahlstrom et al. (2014), have opined that the process of selecting partners hold a significant part, as the success of the organization depends largely upon the business partners. In order to identify the potential and effective partners for the strategic alliance, multiple factors are to be considered as important. It can be understood that the organizations the organizations need to monitor the skills and the efficiency of the companies that are to be selected as partner.

It can also be monitored that the organizations that are to be selected as partners, has to be of good repute. As opined by Yan and Luo (2016), the selection and adoption of strategic alliance is to be done keeping in mind the reputation and popularity of the aimed partners. It can easily be understood that the organizations that have a significant hold over the market, it will be helpful in providing sufficient support in the process of industrial sustenance. In addition to this, the organizations that have sufficient skills and resources can help its partners in gaining a competitive success by providing effective strategies and technological support.

In addition to this, Akhavan et al. (2015) have also mentioned that selecting an effective partner will enhance the chances of survival and success. In this regard, it can be understood that the organizations that have greater turn over can be selected as to be more efficient partner for alliance. In this regard, it can also be mentioned that support from an organization that is already recognized by the industry will be helpful in the process of achieving recognition for the other organization as well.

It has been proven by multiple statistical findings that the adoption of statistical alliance has proved to be an important and beneficiary strategy. According to Barth (2017) has mentioned that, adoption of strategic alliance is a growing trend amongst the globally recognized organizations. In this regard multiple examples of partnership between the leading global organizations can also be given. One of the most prominent examples of strategic alliance is the partnership between Google and Intel. These two organizations formed strategic alliance in order to support the process of Google’s adoption of cloud computing. It has been widely known that these two organizations have worked closely for a longer span of time. Hence, an alliance between these two has provided both of the organizations support in exploring new technological solutions. In addition to this, Dü and Lechner (2015) have mentioned that, adoption of strategic alliance increase the chances organizational flexibility as well as scalability for both the organizations. A prominent example of this is the strategic alliance between SAP and Google. As a reply to the fast changing technological needs and rapid digital transformation, the strategic alliance between these two organizations have proven to be highly beneficial for both the organizations as well as its consumers.

In addition to this, Lew and Sinkovics  (2013) have opined that strategic alliance between two organizations not only support the technological and digital needs, but also helps in the organizations in financial terms as well as in terms of marketing and promotions. In this regard, example of strategic alliance between the British merchandise giant Tesco and French supermarket retailer Carrefour can be given. The organization has recently formed a strategic alliance with Carrefour in order to support their goals of global expansion and long term purchasing. It has been noticed that the alliance will help both of the organizations in forming strategic relations with the global suppliers. In addition to this, the strategic alliance will be helpful in multiple fields such as marketing services and data collection. Moreover, Post, Rahman and McQuillen (2015) have opined that the strategic alliance between these two organizations will be helpful in the process of joint purchasing of self-brand products. It has been mentioned that the strategic alliance between Tesco and Carrefour is vital agreement and partnership as it helps in the process of amalgamation of the purchasing expertise of these two leading organizations that complement each other in terms of their geographical locations as well as their operational strategies.

Conclusion:

To conclude it can be said that the organizations adopting strategic alliance tend to witness higher growth in organizational front. A strategic alliance helps organizations in reaching to a cooperative arrangement, which helps the organizations in developing a common strategy to enter a new business market. In addition to this, it has been noticed that adopting strategic alliance helps the organizations to gain a ‘win-win’ situation, in which both the organizations are being benefitted. Moreover, the process enables the organizations in sharing the strengths of each other. Hence, strategic alliance between two organizations lends power to both of the enterprises. As it has been analyzed in the above discussion, strategic alliance helps in the process of effective using of the resources and investments as well as helps in decreasing the risks. However, it has been monitored that strategic alliance between two organizations has not always been successful. In this regard, it can be said that selecting efficient and effective partner is highly important to achieve organizational success.

Reference:

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