Alliances versus Acquisitions Debate

Summary of the Debate

Firms that do not want to transfer ownership or responsibilities to others in the market may opt for contractual agreements in the form of alliances. Alliances are temporary because each firm may choose to opt out of the contract once the deal has expired. In the text, (Chapter Twelve, 2017), the author discusses the advantages of alliances over acquisitions. Some benefits of partnerships include the time to learn about the contract partner and the flexibility of managing relationships.There is also little room for the partner to assume the mistakes of the whole entity in the acquisition.

Compared to alliances, acquisitions involve the full transfer of ownership of the business to the other party.The two rivals in the market decide to pool their resources to increase efficiency and competitive power.Acquisitions occur in a whole step and cannot be reversed.This is different from alliances where the partner can be in the contractual agreement while contemplating acquisitions. Acquisitions are also expensive,and the firm is likely to inherit the flaws and weaknesses of the party being acquired.

Reflections on the Reading

            This reading has changed my perception of alliances and acquisitions. I thought that bu acquisitions are better because they reduce competitors in the market. I have, however, learned that partnerships could be the best options of facing competitors. The firm can use a contractual period to learn about the partner. Once the alliance has expired, one can decide whether to sign the new agreement or acquire the other business.I am also impressed with the cost of partnerships versus acquisitions.Alliances allow the company to understand how the other party operates and controls the market. I think that my primary takeaway from this debate is that alliances are moments of learning.


Chapter twelve (2017).Making alliances and acquisitions work.

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