Business

What is Strategic Alliance? – Advantages and Disadvantages

The Strategic Alliance refers to the agreement among two or more firms that unite to pursue a standard set of goals but remain independent after allying. In other words, when two companies come together to attain a common objective by sharing their particular strengths (resources) is called a strategic alliance.

Advantages and Disadvantages of Creating a Strategic Alliance

Before telling you how to make a strategic alliance between companies, we believe that you must know all its pros and cons. Thus, you will avoid possible “surprises”.

1. Advantages

  • It makes the job easier: the central “grace” of all this is having a person or company that helps you get where you cannot.
  • Cheaper: We don’t just mean that you save on costs, but also on time that you don’t have to invest in learning a new field.
  • You reach more people: the usual thing is that you resort to alliances to enter a sector that you do not dominate and thus, at least, have a presence.

2. Disadvantages

  • It can be complicate at first: especially since it is normal for each business to work in a different way ( quality controls, functional areas of the company, etc.) and getting to the rhythms of each other can cost.
  • Sensitive information is shared: if your business has an “ace up its sleeve” that only you know, it can reach your partner, and you no longer have it exclusively.
  • Loss of control: the work team grows, and it is inevitable that the bosses no longer control everything as much as before, although it is a time to show if they are good leaders or not.

Types of Strategic Alliance

When you seek to join forces with someone outside your company, it is evident that it is done to achieve a specific goal. Depending on the goal set, alliances can be classified into four types.

1. Reach a New Market.

Although this option is more common in large companies, it does not mean that other companies cannot use it. In this case, we could say that what you are looking for is a “mole”… in the best sense of the word, of course. We will explain it to you with an example. Imagine that you have a vehicle factory and that, for now, you only sell them in Spain. Since business is going well, you want to expand your business and start selling in the United States. But of course, the type of car used there is very different from the one in Spain.

2. Technological Association

Indeed, on more than one occasion, you have read that a company is the technological partner of another, but what does that mean? Well, something straightforward. For all companies, but especially for small and medium-sized ones,  taking 100% advantage of all the benefits offered by technology is essential. But of course, not everyone can afford (or does not want to have) an exclusive apartment for something like this.

3. Marketing of Innovations

It is known that essential innovations in the world do not necessarily originate from big corporations. There are cases in which big companies have sought to make small or medium-sized inventors their partners in the exploitation and marketing of a certain invention.

4. Startup Patronage

Ideas are what move the world. All the innovations we enjoy today are thanks to people who, with their efforts, made them a reality. The issue is that sometimes someone may have a great idea but, due to limitations, cannot carry it out. 4. Startup patronage

Ideas are what move the world. All the innovations we enjoy today are thanks to people who, with their efforts, made them a reality. The issue is that sometimes someone may have a great idea but, due to limitations, cannot carry it out. If this is your case, and you think it has potential, you can present it to a company related to that sector. If he likes it, he will most likely offer to make it happen in exchange for:

  • A percentage of the profits.
  • Have distribution exclusivity.

It is something like the patrons of the Renaissance, who put their money at the service of others with more talent.

How to Achieve a Successful Strategic Alliance

At this point, you know all the theories about this tool for your business. Now, it’s time to get to work. And for everything to go well, you have to follow these simple tips .

1. Choose your Partner Well

When we told you that it was not worth sending alliance proposals as if they were spam, do you remember before? Well, we didn’t mean this. For example, as tempting as it may be, it’s not always a good idea to attempt a partnership with a giant in your industry. Keep in mind that this is about sharing goals, challenges and needs. If you get a large company, the better, but in this case, size does not matter.

2. Commit to Being a Good Ally

As the saying goes, two don’t fight if one doesn’t want to. Well, the same thing happens with business unions. If a company accepts your alliance proposal, it will be because it was also looking for it. But of course, for the relationship to work, your business will have to be a good partner.

  • She is explaining what you will contribute.
  • What are the benefits you offer?

It all boils down to one thing:  you need trust between the parties. That is the main base.

Conclusion

A strategic alliance is an agreement between two or more parties to pursue a set of agreed-upon objectives needed while remaining independent organizations.

Also Read: Types of Clients you can Find and How to Deal with them

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