In the new global environment, with greater competition from more and more products and choices, alliances are not just a planning option but a strategic necessity. The old adage “If you can’t beat them, join them” is being replaced “Join them and you can’t beat them.” In fact, new technology companies in software, biotechnology or telecommunications are now usually “born global”, for instance the Microsoft Corporation renowned for the manufacture and distribution of office software around the world. Companies are increasingly forging strategic alliances in form of joint ventures, development groups, partnerships, etc
Just doing business in another country may require the firm to license its product, form a joint venture with a local firm, or buy from local suppliers to meet “domestic content” requirements. As a result, many firms are rapidly developing global strategic networks, and victory is going to those who build the better global network.
Strategic alliances are booming across the entire spectrum of industries and services for the numerous benefits that underlie them. These include:
i) Help those organizations that cannot build markets on their own on account of little publicity/small scale of operations to do so.
ii) Filling gaps in current market and technology.
iii) Turning excess manufacturing capacity into profits.
iv) Reducing risks and entry costs into new markets.
v) Accelerating product introductions into the markets
vi) Achieving economies of scale in operations
vii) Overcoming legal and trade barriers
viii) Extending the scope of existing operations
ix) Cutting exit costs when divesting operations
x) Improved effectiveness in the delivery of missions (products and services) through strategic partnerships.
xi) Achieving national and/or global leadership in the operational areas. Even giant companies such as American Telephone & Telegraph (AT&T), International
Business Machines(IBM),Philips, Siemens are keen on strategic alliances for leadership purposes.
xii) Complementing or leveraging the individual companies’ capabilities and resources. The Star Alliance, for example, brings together 15 airlines-Lufthansa, United Airlines, Mexicana, Air Canada, ANA, Austrian Airlines, British Midland, Singapore Airlines, Tyrolean, Lauda, SAS, Thai Airways, Varig, Air New Zealand, and Ansett Australia-into a huge global partnership that allows travelers to make nearly seamless connections to about 700 destinations.
Even multinational giants are forging strategic alliances. Recently Coca-Cola partnered with several other global companies. In May 2000,Coke formed a marketing alliance with AOL Time Warner designed to both bolster Coke’s online marketing presence and promote AOL’s image off-line. Coke partnered with Inter public ad agency in December 2008 to coordinate its $1 billion annual global marketing effort. With these deals, Coke sought to capitalize on many of the strategic reasons for alliances listed above.
Despite the many good reasons for pursuing alliances, a high percentage end in failure. In order to craft a winning alliance, three keys seem to be the way forward i.e. strategic fit, a focus on the long-term and flexibility.