Strategic alliances are agreements made between two or more organization to collaborate in manufacturing, development of products or sale of commodities. For instance, in a strategic alliance, company X and company Z may combine their core competencies, capabilities, and respective resources to generate mutual interests in designing, manufacturing or distribution of commodities. There are three major types of strategic alliances; equity, non-equity and joint venture strategic alliance. This review, therefore, discusses some areas of the value chain where companies try to gain benefits from strategic alliances, the benefit gained and the conditions in which a firm can choose one of the various management structures available for a strategic alliance.
Some of the areas of the value chain where companies try to gain benefit from strategic alliances include; Inbound logistics, this area is made up of activities such as inventory management and receiving and storing of raw materials. Operations; this is the other area of the value chain that can gain the benefit of the strategic alliance; it consists of activities that convert raw materials to final goods (Mol, 2015). Outbound logistics; this is the other area that may gain from the strategic alliance, it involves activities that send the final product to the retailer or the distributor. Sales and marketing; this sector can also benefit from strategic partnerships; the activities here are the promotion of products to potential partners and customers.
Strategic alliances have multiple benefits to the areas of the value chain named above. Shared risks; the collaboration allows various organizations to offset their market exposure. The strategic alliance mostly works best in the case where the companies are not competing. Knowledge sharing; the coalition also provides an opportunity to share market knowledge, brands and skills (distribution, marketing, and management). Growth opportunities; this is the other benefit of alliances, taking advantage of the excellent brand image makes a company grow faster than it would on its own (Išoraitė, 2014). Market speed; the strategic alliance also helps the companies to get into the market more quickly, hence, conquering market competitions. Innovation; when various organizations are linked together, they can be able to craft a collaboration outcome and examine their mutually desired result that features incentives which promote innovation. Costs; this is the other benefit, strategic alliances in the organizations lowers the costs, and especially in nonprofit areas like research and development.
The conditions in which a firm can choose one of the various management structures available for a strategic alliance include the following. Slow business cycles; when the sequence of the business is delayed owing to various external and internal factors, the competitive advantage of an organization can be shielded for some time. Here, the strategic alliances can be created to restrict and explore the markets, and finally gain stability. The other condition is when the business has a standard cycle; when an organization has a standard cycle, it launches products at regular intervals, but it is not able to stay at the top as the leader in the market. The strategic alliance is, therefore, created in this case to help that particular organization gain access to complementary resources and achieve a higher market share hence beating the other competitive markets. The other condition is when the business has a fast cycle; when the company has a fast cycle, it needs to create a new range of commodities to survive in the market because its competitive advantages are not secure (Meyer, 2010). The strategic alliances, in this case, helps in speeding up the development of the new product, sharing the expenses and overcoming the uncertainties, this in return streamline the process of market penetration.
Mol, A. P. (2015). Transparency and value chain sustainability. Journal of Cleaner Production, 107, 154-161.
Išoraitė, M. (2014). Importance of strategic alliances in the company’s activity.
Meyer, C. (2010). Fast Cycle Time: How to Align Purpose, Strategy, and Structure for. Simon and Schuster.