Definition, Alliance Forms, Advantages, Disadvantages

1. Written by
Mahmoud Zaki

2. Strategic alliances developed and propagated as formalized
interorganizational relationships. These cooperative
arrangements represent new organizational formation that
seeks to achieve organizational objectives better through
collaboration than through competition.
Strategic alliances are not only trading partnerships that
enhance the effectiveness of the participating firms’
competitive strategies by providing for mutual resource
exchanges (technologies, skills, or products). They are
also new business forms that enable the partners to
enhance and control their business relationships in various
ways.
“ Theory Of Co-operation and Development“

3. Yes, because different alliances forms expose different
thoughts of partner firms to control their dependence
on the alliance and other partners

4. Alliance Form Definition Example
HIERARCHICAL RELATIONS /
HYBRID FORM
One firm takes full control of another’s assets and coordinates
actions by the ownership rights mechanism China Shipping + COSCO Line
JOINT VENTURES (SHARED PROJET)
Two or more firms create a new Entity that serves a limited
purpose for its partner like R&D , marketing Seago Line
EQUITY INVESTMENTS
Money that is invested in a firm by its owner(s) or holder(s) of
common stock (ordinary shares) but which is not returned in
the normal course of the business. Investors recover it only
when they sell their shareholdings to other investors
COOPERATIVES
A gathering of small projects / companies that combine,
coordinate, and manage their collective resources
R&D CONSORTIA
Inter-firm agreements for research and development
collaboration
CARTELS
Large firms co-operate to restrict competition from others by
control production and/ or prices within a specific industry
Shipping lines Meeting in
Singapore
FRANCHISING
Ability to use of a brand-name identity within a geographic
area, but retains control over pricing, marketing, and
standardized service norms
Buffalo Burger , Prego, Wild
Burger, Shell
LICENSING
One company allow to others to use its owned technologies or
production processes against fees Microsoft – Windows
SUBCONTRACTOR
NETWORKS
Inter-linked firms where a subcontractor negotiates its
suppliers’ long-term prices, production runs, and delivery
schedules
Egyptian Truckers, customs
Brokers
INDUSTRY STANDARDS GROUPS
Committees that seek the member organizations’ agreements
on the
adoption of technical standards for manufacturing and trade
ISO
Varieties of Inter-organizational Relations

5. The motives to engage in strategic can be grouped in
4 different categories:
I. Organizational - Learning / Competence Building
II. Economic – Market- Cost- & Risk related
III. Strategic - Competition Shaping / pre-emption /
Product &Technology related
IV. Political - Market development

6. Opportunities for a firm to engage in alliance activities
may be broadened by increasing the firm’s own
awareness of possible deals and partners and by
making the firm appear a more attractive potential
partner to other firms seeking fast, flexible access to
particular capital resources.
A firm may also conclude from looking at its own capital
resources that pursuing an alliance may be in its own
best interest.

7. Three types of investment in intangible assets
Knowledge capital: intangible assets which improve the human
understanding of the market and the profit opportunities
Capacity capital: intangible assets which raise the maximum level
of production through employment of new organization and
labor technologies
Control capital: intangible assets that enable firms to control their
input markets, the quality and quantity of work efforts, and the
output markets.
 Shared risk
 Shared knowledge
 Opportunities for growth
 Cost share
 Quality improvement
 Access to target markets

8. Strategic alliance may affect negatively on accounting due to
expenses of modern technologies, human power practice,
designs, and marketing plans ….ETC
 Secrets Sharing
 Creating a Competitor
 Missing Opportunity Cost
 Risk of losing control
 Coordination difficulties

9. Strategic alliances are not only trading partnerships that
enhance the effectiveness of the Participating firms’
competitive strategies by providing for mutual resource
exchanges (Technologies, skills, or products). They are
also new business forms that enable the partners to
enhance and control their business relationships in various
ways.
Bensimon’s executive guidelines
1. Assimilate the competencies of your partner
2. Think of your partner as today’s ally and tomorrow’s
competitor
3. Share power and resources, but share information wisely
4. Structure your alliance carefully

10. Thanks