A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon
goals or to meet a critical business need while remaining independent organizations.
Strategic alliances involve exchange, sharing, or co development of products, services,
procedures, and processes.
1. Two or more firms that unite to pursue a set of agreed upon goals, remain independent
subsequent to the formation of an alliance.
2. The partner firms share that benefits of the alliance and control over the performance of
3. The partner firms contribute on a continuing basis in one or more key strategic areas, sector
1. Satisfy customer demands.
2. Share R&D costs.
3. Fill knowledge gaps.
4. Make scale economies.
5. Make scope economies: Alliances can enlarge dramatically the scope of a company
operations. Alliances focusing on scope help counter the ever- shorter product cycle of modern
6. Jump market barriers.
7. Speed in product introduction.
8. Pre-empt competitive threats
9. Use excess capacity.
10. Reduction in costs.
Stages of Alliance Formation:
Strategy Development: involves studying the alliance‟s feasibility, objectives and rationale,
focusing on the major issues and challenges and development of resource strategies.
Involves analyzing a potential partner‟s strengths and weaknesses, creating strategies for
accommodating all partners‟ management styles.
Involves determining whether all parties have realistic objectives, defining each partner‟s
contributions and rewards.
Involves addressing senior management‟s commitment, finding the caliber of resources devoted
to the alliance, linking of budgets and resources with strategic priorities.
Involves winding down the alliance, for instance when its objectives have been met or cannot be
Types of strategic alliances:
1. Joint Venture Strategic Alliances
Joint ventures are distinguished from Equity Strategic Alliances in that the participating
companies usually form a new and separate legal entity in which they contribute equity and other
resources such as brands, technology or intellectual property. The parties agree to share
revenues, expenses and control of the created company for one specific project only or a
continuing business relationship.
2. Equity strategic alliance:
Equity strategic allianceis an alliance in which two or more firms own different percentages of
the company they have formed by combining some of their resources and capabilities.
3. Non-equity strategic alliance:
Non-equity strategic alliance is an alliance in which two or more firms develop a contractual-
relationship to share some of their unique resources and capabilities.
4. Global Strategic Alliances:
Global Strategic alliance working partnerships between companies across national boundaries
and sometimes formed between company and a foreign government, or among companies and
1. Allowing each partner to concentrate on activities that best match their capabilities.
2. Learning from partners & developing competences that may be more widely exploited
3. Adequate suitability of the resources & competencies of an organization for it to survive.
4. Share risk between the companies.
5. Respond more quickly to change.
6. Increase a company market share.
7. Adapt with greater flexibility.
1. Technology – Low Cost Manufacturing.
_US & Japanese Companies
2. Organization Culture.
3. Competition – How to compete in future.
4. Significant differences between the objectives.
5. Loss of control over such important issues as product quality, operating costs, employees,
KEY FACTORS OF STRATEGIC ALLIANCE:
Select the proper partners for the intended goals
Share the right information
Negotiate a deal that includes risk and benefit analysis (not necessarily equal) for all
Come to a realistic agreement on the time to market and corporate expectations
Mutual, flexible commitment on what's appropriate to change, measure and share
within each partner's culture
IMPLEMENTING AND MANAGING THE ALLIANCE:
The success or failure of an alliance is dependent on how the venture is structured, the kind of
managers placed in charge and how the responsibilities and strategic missions are divided among
the partners. The alliance implementation or management plan must thus be formalized jointly
with the partner. The plan is generally a written document, which should inter alia, answer the
following questions. Who will do what?
How will contributions be made?
What communications mechanism will be in place for approvals?
How will the information flow?
Who will be the liaison from each company?
How will be partnership fit in with the existing relationship of both companies?
EXAMPLES OF ALLIANCES:
Toshiba has a long-term strategy bused on the three G‟s – growth, group management and
globalization. Globalization is achieved by forming new joint ventures, research agreements and
cooperative relationships in new business areas. In 1996, Toshiba Corp. started its new US $1
billion chip-making facility at Nagoya, Japan. This was based on strategic alliances with the
companies IBM and Siemens of Germany. Some of the other alliances which Toshiba entered
An agreement with Apple Computers for new technology creation for multimedia
A technology-sharing agreement with IBM to develop new data storage devices using
„NAND-flash‟ memory chips
An alliance with IBM and Siemens to develop advanced semiconductor devices; it has
developed the world‟s smallest 256-Mb D-Ram.
Through and alliance with IBM, Japan, it opened a second large-size then- film-transistor
(TFT) LCD plant.
Alliance with National Semiconductor and Samsung Electronics of Korea to jointly
develop and market flash memory chips.
An alliance with Sun Microsystems Inc. of the US in the areas of rightsizing. Internet and
interactive technology to share product development, marketing and distribution in these
Alliance with MCA and time Warner in the US, Thomson Multimedia in France, and
Hitachi, Matsushita and Pioneer in Japan to develop digital video discs (DVD). These
were attempts to establish an industry-wide unified format.
An alliance with Time Warner, its partner in TITUS communications, which aimed to
work with cable TV operators throughout Japan to form a nationwide multiple system
In July 1991 IBM and Apple agreed to wide-ranging co-operation to develop new generations of
computer technology. According to a financial Times article of October 3, 1991, this partnership
includes a series of specific agreements:
1) Joint development of software to facilitate links between Apple‟s Macintosh personal
computers and IBM‟s personal-computer networks.
2) Development of new System 7 Macintosh software that can run on an IBM- designed reduced
instruction set computing (RISC) microprocessor.
3) Joint development, in conjunction with Motorola, of a new set of microprocessors based on
IBM‟s RISC design.
4) A collaborative project to combine both partners‟ versions of AT&T‟s UNIX system. The
companies plan to create a new UNIX version that both IBM and Apple can use with their
incompatible machines and networks.
5) Creation of a joint venture to develop a radically new approach to software design that will
create software for Apple, IBM and other computers.
6) Establishing a joint venture to formulate industry standards for “multi- media”, the
simultaneous processing of video, graphics, voice and text.
Hitachi formed many strategic business relationships in the areas of computers, electronics and
technology, which include:
An R & D agreement with Texas Instruments to develop a next-generation computer
Providing chip manufacturing technology to Goldstar electron of Korea
Supplying mainframe computers to Germany‟s Comparex and Italy‟s Olivetti
A joint venture with GE to sell lighting products in Japan
Joint development of a new gas turbine with GE.
Joint development of new RISC computer chip with Hewlett Packard.
Joint development of medical equipment with Bushranger-Mannheim of Germany.
Research cooperation between Hitachi Cambridge Laboratory and Cambridge University
of developing a single-electron memory device.
Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-house coffee
shops, benefiting both retailers.
In 1996, Starbucks partnered with PepsiCo to bottle, distribute and sell the popular coffee-based
A Starbucks-United Airlines alliance has resulted in their coffee being offered on flights with the
Starbucks logo on the cups.
Apple partnered recently with Clear well in order to jointly develop Clear well‟s E-Discovery
platform for the Apple iPad. E-Discovery is used by enterprises and legal entities to obtain
documents and information in a "legally defensible".