Establishing Alliances

Essay

ESTABLISHING ALLIANCES

Many organizations are using and designing business strategies with the goal to reach an inferior performance on its competitors, especially today when we can whitens how global markets emerging. By deleting the borders between markets new opportunities are popping up but also some new threats arise by the entry of foreign competitors. In this increasingly global, extremely competitive and fast changing environment companies have found that it is really important to adapt to new circumstances and try to take advantage of potential opportunities that market provides. A company achieves strategic advantage by using strategy to maximize its strengths, resulting in competitive advantage.^[1] Achieving competitive advantage means gaining a market share and achieving increase in profit. The basics of successful strategy lies in constant effort for innovations and attempts to strategically move where no one else did, to try what no one tried before.  

One of the several strategic moves that one company can take is to establish alliance with another company. This strategic move can be a very effective way to build businesses. For executives facing growing competition in global markets, strategic alliances offer a promise on significant improvements in competitive position. Alliances are one of the fastest and most cost-effective way to gain competitive advantage. They enable a company to move quickly to enter new markets or to build, sustain, or enhance a competitive advantage. Alliances can take many different forms, from licensing and cross-marketing agreements, manufacturing arrangements and more complex cooperative development to joint ventures. Taking this kind of strategic move enables achievement of a business objective for companies, mitigates a significant risk, impact the increase in bargaining power over suppliers or buyers and allow firms to gain economies of scale. Those are just some of the outcomes that this approach provides.

The best alliances are highly selective, focusing on particular value chain activities and on obtaining a specific competitive advantage. Successful alliances identify risks and sources of conflict at the outset and work to contain them. It is important to understand objectives and the agreement between partners on objectives and outcomes. These partnership also provide an opportunity to a company to build on its own strengths and to learn along the way. Straightforward, this approach enables lower investment costs and risks for each partner and allow for a more adaptive response to changing conditions.

One of the first famous alliances is between Hewlett-Packard and Walt Disney. Formed in a garage, the HP’s first successful product was an audio oscillator used to certify the Fanta sound system installed in theaters for Disney’s film Fantasia in 1940. HP was supplying a good amount of Disney’s IT infrastructure from than, becoming a core partner to its efforts.

The partnership between coffee house and the bookstore is also one of the alliances that left its mark. It’s between the Starbucks and university library Barnes and Noble. Between the customers of both of these organizations previously existed a historic relationship and an entire culture that was already formed, what enabled this two to become a perfect match. After this partnership started in 1993, university libraries started to open their own internal coffee shops. This example shows us that their growth has been less about aggressive advertising and more about alliances that positioned Starbucks as the worldwide leader in coffee retail.