Strategic Alliance - Assignment Example

In strategic alliance, there is less involvement and it is temporary in nature which is unlike joint venture, for example, the strategic alliance between United Airlines and British airlines in 1988. This was done for regaining the lost market share and within a year the focus of the market shifter and the agreement of strategic alliance terminated. In alliances, two companies pool in their resources for creating their separate business entity. The companies are able to gain new opportunity though; they still hold and maintain their autonomy.

This alliance will help the company in developing a more effective process, expanding in the new market and also gain competitive advantage in the market (Dumela 2004). In strategic alliances the company do not form their separate entity rather collaborate their actions even though they remain apart and distinct. In the following paper, the main focus has been on explaining the major problems that are encountered by the companies at time off their alliance. Along with this, it will also highlight the importance of selecting effective partner in alliance.

The paper will give in-depth information about the problems of alliances with the aid of examples. Reasons for Alliance The major reason, for which the companies sought to enter strategic alliance is for enhancing their organisational capabilities and gain a competitively advantageous position in the market. For this purpose, the companies are continuously undertaking actions for gaining access in the new markets. The companies also aim at maximising their profit levels by using the modern technologies and optimally utilising the available resources.

The major reason why the companies make attempts for developing strategic alliance is when the companies do not find it feasible to create the potential resource internally (Glover and Wasserman 2003). Strategic alliances are used for entering into new markets, reducing the manufacturing costs, developing and diffusing new technology, accelerate product introduction and overcome legal and trade barriers. Types of alliances While undertaking strategic alliance it is important that the companies take into account the level of interactions they want with their strategic alliance partners.

Further it is also important that the potential for conflict that arise out of being competitors in the market is also paid due attention (Hitt, Ireland, and Hoskisson 2008). As per the values of dimensions whether high or low there are four types of strategic alliances that are formed. Following are the four types of strategic alliance: Precompetitive alliance: This type of strategic alliances takes place in inter-industries and such companies which have vertical value relations. These alliances are formed for benefitting the providing benefits to the vertical members of the supply chain.

In such alliance supplier and buyer enter into long term contracts for smoother functioning of the companies (Hill and Jones 2009). Non-competitive alliances: These alliances are formed between intra-industry and such forms are non competitive in nature. By entering into alliances these companies help the firms in permitting them to operate in the same industry but should not consider each other as rivals (Hill and Jones 2009). Competitive alliances: Under this partnership, two rival firm aim at working together in a cooperative arrangement.

In such situations, intense interactions