Strategic Alliances and Globalization - Essay Example

The business world has changed a lot during the past fifty years. Due to the growth of business enterprises many companies needed new ways to expandtheir marketplace. The domestic market was no longer sufficient to meet the needs of these firms. As a consequence companies began to establish operations in foreign marketplaces. A globalization market entry strategy that has become very popular to gain access to foreign markets is strategic alliances. A strategic alliance can be defined as an arrangement between two companies that have decided to share resources in a particular project (Answers, 2011).

The purpose of this paper is to explain the key advantages and disadvantages of strategic alliances in the globalization of products and services. When two companies join forces they are able to share resources and exploit the expertise of each company. Corporations formed strategic alliances for a variety of reasons. In the service industry many companies are forming strategic alliances in order to outsource business functions oversee. A prime location for the exporting of customer service contracts is the nation of India.

A business function that is responsible for the formation of many strategic alliances is marketing. A lot of strategic alliances take the form of marketing alliances. There are four types of marketing alliances: product or service alliances, promotional alliances, logistic alliances, and price collaboration (Kotler, 2003). A product or service alliance occurs when one company licenses another to produce its product. This strategy has the benefit of reducing overall costs of producing the product or service.

In a promotional alliance one company carries out the promotion of another company. Logistic alliances involve one company offering logistical services to another. In pricing collaboration alliances two companies provide combined package discounts. Examples of two firms that traditionally use pricing collaboration are hotels and car rentals firms. There are many benefits associated with the implementation of strategic alliances. A list of the benefits of strategic alliances is illustrated below: 1.

Accelerate product development 2. Spread risk and share resources 3. Access to new markets 4. Expansion of customer base 5. Increase market share 6. Provide added value to customers 7. Access knowledge and expertise outside the company 8. Strengthen reputation and credibility (Sharma, 2001) When a company is able to accelerate its product development the firm enjoys the benefit of being able to bring a product to market faster. Strategic alliances enable companies to gain access to the resources of the partner.

This can save a company thousands even millions of dollars in capital investments. Gaining access to new markets enables firms to increase their revenues. Satisfying the customer needs is one of the primary objectives of any business organization. Along with the benefits there are also disadvantages associated with the use of strategic alliances. Some of the disadvantages of using strategic alliances are listed below: Selection of wrong partner Being overly optimistic Lack of management commitment from both partners Poor communication Poorly defined roles and responsibilities Poor chemistry Environmental issues Poor business plan Lack of experience (Sharma, 2001).

References Answers.com (2011). Strategic Alliances. Retrieved March 13, 2011 from http://www.answers.com/topic/strategic-alliance Kotler, P. (2003). Marketing Management (11th ed.). New Jersey: Prentice Hall. Sharma, H. (2001). Corporate Relationships: Pros and Cons. Retrieved March 13, 2011 from http://www.cata.ca/files/PDF/Resource_Centres/hightech/reports/studies/Overview_09.pdf