Reasons for Strategic Alliances - Essay Example

According to a study conducted by Booz and other researchers, during the period first half of the 1990s, over 2000 strategic alliances were in existence, and during the period of 1990 to 1996, over 36k alliances of different forms were created in the field of information technology which was fading away slowly and gradually (HILL, 2010, p.273). This writing will focus upon the factors that promoted organizations to form strategic alliances during the session of the 1900s (HITT, 2007, p.171). These factors may include both internal and external factors, these factors include an option of entering alien markets, sharing and decreasing cost of production, developing KSAs (knowledge, skills, and abilities) that are hard to develop, and adoption of upgraded technology.

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            The main reason due to which several companies accept and enter strategic alliances is to enter alien markets in order to increase their market share (IRELAND, 2008, p.177). For instance, several organizations wanted to enter the Chinese region for expansion purposes and in order to enter these markets, they needed the expertise of the local organization. This is because local organizations have a better understanding of the cultural and motivational values of the people living in the nation. Due to this, Warner Brothers created a strategic alliance with other Chinese firms in the entertainment industry to come up with movies for the locals of China (GRIFFIN, 2005, p.370).

            When organizations expand they have to bear the risk of expansion which includes investment in fixed technologies and financial risks (FUNG, 2008, p.5). If these costs are shared by the organizations the risk level of partnering organizations decrease. This is one of the motivational factors due to which organizations enter into a strategic alliance. For instance, when Boeing was involved in the creation of 787, it created a strategic alliance with several Japanese firms which led to the division of investment for the purpose of creating the jetliner (STEERS, 2006, p.228).

            Organizations even enter into a strategic alliance in order to obtain knowledge, skills, and abilities (KSAs) and assets lacked by either one or both of the partners of the alliance (KANG, 2001, p.37). They even enter into an alliance because developing these KSAs is a difficult task and an expensive one. For example, There was a strategic alliance formed between the organizations of Microsoft and Toshiba in order to create microprocessors that were embedded in nature and could perform various roles that were entertaining in nature, and these processors were embedded within the automobiles (ASWATHAPPA, 2010, p.385). These processors allowed customers to play music and use the internet while they were in their automobiles.