Scope, implementation and pitfalls of strategic alliances

4 important questions on Scope, implementation and pitfalls of strategic alliances

When entering a strategic alliance a company should consider at least these four factors:
  • Compatibility
  • Nature of a potential partner's products or services
  • The relative safeness of the alliance
  • The learning potential of the alliance

Describe the four factors in choosing a partner

  • Compatibility
    • Mutual trust
    • Effective work
  • Nature of a potential partner's products or services
    • Competitiveness of the firms on markets
    • Chose a partner that is not in directly competitive
  • The relative safeness of the alliance
    • Success or failure of previous alliances of the potential partner
  • The learning potential of the alliance
    • What does each partner hope to learn from the other?
      • Not share information that can result in competitive disadvantage

When entering a strategic alliance there are tree approaches on how to manage the alliance;
  • Shared management agreement
  • Assigned arrangement
  • Delegated arrangement

Describe the three types of management

  • Shared management agreement
    • Both partners participate actively
  • Assigned arrangement
    • One partner takes primary responsibility 
  • Delegated arrangement
    • Executives are hired to solely for the purpose of the JV or transferred from the participating firms. Responsible for day-to-day decision-making.

When entering a JV there are usually three types of ownerships:
  • Corporate form
  • Limited partnership
  • Public-private venture
Describe the different forms of ownership.
Furthermore, describe the opportunities and challenges in a public-private venture

  • Corporate form
    • Form where the partners can protect their own assets from those of their partners
  • Limited partnership
    • Managing partner assumes full financial responsibility regardless to the amount of its own investment. The other partner has liability limited to its own investment.
      • Is risky for the managing partner
  • Public-private venture
    • Partnership between a privately owner firm and a government
      • Opportunities:
        • New market
        • Government support
        • Reduced competition
      • Challenges:
        • Investment lost
        • Assets seized
        • Operation closed
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When entering a functional alliance there are four different types:
  • Production alliances
  • Marketing alliances
  • Financial alliances
  • R&D alliances

Describe each type of functional alliance.

  • Production alliances
    • When two ore more firms manufacture products or provide services in a shared or common facility
  • Marketing alliances
    • Two or more firms share marketing services or expertise
      • Established company helps the partner enter a market through its expertise in exchange for a fee or share in profit.
  • Financial alliances
    • Sharing financial risks in a project.
      • Either divide financial risks or one carries the financials and the other shares expertise.
  • R&D alliances
    • Joint research to develop new products or services

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