Strategic Alliance Essay Samples
Type of paper: Essay
Topic: Strategy, Alliance, Company, Management, Law, Business, Criminal Justice, Experience
A strategic alliance is formed when two or more businesses join hands to work together in order to achieve strategic objectives that mutually benefit the alliance partners. These businesses are not direct competitors to each other but offer similar products and services that are targeted towards the large audience. The failure rate of strategic alliances is around 70 percent (Steensma et al., 2000).
One of the major challenges of strategic alliances is the response from the subordinates. It is highly possible that the actions taken by the subordinates are not in compliance with the top management policies. This can turn out to be challenging because it can disrupt the activities of an organization as some companies still remain competitors despite being in alliance with each other. If companies are in strategic alliance and they go about marketing their products on their own, this can result in the break-up of alliance of both the companies and also in legal issues that can take years to settle the dispute. For example, an attempt of Volvo to merge with Renault in 1993, tentatively damaged the shareholder wealth of Volvo (Steensma et al., 2000).
Another challenge is the operational differences in both companies that have formed a strategic alliance. It is possible that one company is delivering its goods behind the schedule or not according to the standards and quality expected. This can lead to distrust between both the companies (Yunus, 2001). This can often result in a possible takeover, for example, the strategic alliance between Foote, Cone and Belding (FCB) and Publicis Communication occurred to cover the strategic needs of each other. The strategic alliance was created so that FCB can reach the international market whereas the Publicis can use the FCB experience in South and North America. This alliance ended with expensive legal proceedings, and a bitter experience and then FCB fought off US$ 28 per share takeover attempt by Publicis that owned almost 18.5 percent of shares in the company (Yunus, 2001).
Steensma, K.R., Marino, L., Weaver, K.M. and Dickson, H.P. (2000), The influence of national culture on the formation of technology alliances entrepreneurial firms, The Academy of Management Journal, Vol. 43, No. 5, pp. 951-73.
Yunus K. (2001) An Overview of Strategic Alliance, Management Decision, pp. 205-217.