What are strategic alliances?

This article appeared in the June 2020 issue of the magazine
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What are strategic alliances?
What are strategic alliances?

An alliance can be defined as the association of people, companies, or countries through which there is an obligation of assistance or mutual assistance in the achievement of a specific purpose with similar benefits to the parties that make it up. A strategy, on the other hand, is a plan of action that defines how an organization uses its tangible and intangible resources to achieve more Competitive advantage in the business environment in which it operates.

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The Strategic alliances They are a modality that more and more companies are resorting to today to share developed and abundant resources in one company and scarce in another; both financially and personally as well as in the areas of trade, engineering, technology, funds, investments, credibility, prestige and established sales systems on a national and international level.

This way of working is becoming increasingly important in the business world as global competition intensifies in terms of market access, new products, technology, financial resources, manufacturing costs or environmental restrictions.

Strategic alliances these days are a modality that more and more companies are turning to to share developed resources / Image: Luis Villasmil via Unsplash

Time to participate

When is it appropriate to analyze the possibility of an alliance in a small or medium-sized company?

1. Market access. It is common for large international companies to seek new market entry with companies from other countries that, although smaller, have a deep understanding of the market, local quirks and “doing” business in their country .

2. Use of technology. To update or improve the technology used in a product’s production processes, companies often turn to a technology partner. These types of alliances generally involve a transfer of Expertise in certain technology areas.

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3. Marketing innovations. It is well known that major innovations in the world do not necessarily come from large companies. There are cases where large companies have tried to make small or medium-sized inventors their partners in the exploitation and marketing of a particular invention.

4. Minimize risks. Many successful alliances initially require one of the partners to partner with another company in order to minimize the risk of investing in new products or research and development.

It is also known from experience that not all business marriages thrive. Incompatibility of interests, limited understanding of different corporate cultures and different criteria in terms of investment, capital, expansion and austerity policies are usually the main reasons why a large part of the strategic alliances in our country do not achieve the maximum synergistic benefits of such a union.

For these reasons, it is useful for companies envisaging expansion, prosperity, or even survival in a strategic alliance to carefully analyze the following points.

Transparency. The current situation of any company should be clear with the potential partners. Never hide information about your business and ask your partners to do the same. There are a few important aspects that you should keep in reserve.

strategy. In the negotiations before the alliance or the association, the strategic motives of each company must be clarified. the manner in which they will conduct the critical joint operation activities, government regulations, and disposition to the Alliance.

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Participation. Negotiations to form an alliance become more productive when all partners and executives from both companies participate. It is not fair to hide motives and internal guidelines or to impose restrictions on future partners. The cosmetic or the concealment of key situations for the merger must be clarified both internally and in truthful dealings with the potential partner. Many alliances fail because a company was hit by the lies, breach of agreed obligations or the presentation of changed information.

Alliances are becoming more and more numerous and important. The reason for growth is that it is better to have partners for competition. Gone are the days when companies were founded, operated, and grown with their own financial, human, technological, and market resources.

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