Strategic alliances allow two companies to share resources for mutually beneficial projects while maintaining autonomy. They are commonly formed as joint ventures through a new subsidiary entity. Strategic alliances not based on joint ventures are typically more narrow in scope and shorter term, like the marketing alliance between United and British Airways. Strategic alliances provide benefits like synergistic effects from shared knowledge, risk-sharing, and competitive advantages.

2. STRATEGIC ALLIANCE
An arrangement between two companies that have decided to share resources to
undertake a specific, mutually beneficial project.
Each company maintains its autonomy while gaining a new opportunity.

3. CHARACTERISTIC
JOINT VENTURE-BASED
The most common kind is the joint venture through a subsidiary. In such an
instance, two entities create a third separate entity with its own legal
existence. For example, American Motors Corp. has formed a joint venture
with government-owned Beijing Automotive Works, creating a third entity
called Beijing Jeep.

4. CHARACTERISTIC
Another is the joint venture by acquisition. It is created when one business
purchases all or part of the shares of another. For example, in the 1990s, the
Lear Corp. acquired interior components producer Masland Corp.

5. STRATEGIC ALLIANCES NOT BASED IN JOINT VENTURES
In general, a strategic alliance that is not in
the form of a joint venture is formed for a
limited purpose and is more narrow in its
operations than the joint venture. Non-
joint venture strategic alliances tend to
be less stable and last for shorter terms
than joint ventures. For example, United
Airlines and British Airlines formed a
strategic alliance for the purpose of
marketing their North American and
European routes in 1988. They did so
because they were losing part of their
market share to Delta and American
Airlines. Within a year, however, the
market shifted and they terminated the
agreement.

6. WHAT ARE NOT STRATEGIC ALLIANCES?
It is important to note that not all
linkages between national or
international businesses are
strategic alliances.
Examples of arrangements
that do not create strategic
alliances include licensing,
exporting, franchising, and
foreign direct investment
agreements.

7. BENEFITS
The Internet, advances in telecommunications, and improved transportation
systems have helped firms enter foreign markets and have contributed to the
globalization of business. Simultaneously, they have facilitated the creation of
strategic alliances.
The decision to form a strategic alliance depends on the needs and goals of
the companies involved and on the laws of the countries in which the
companies are doing business.

8. STRATEGIC ALLIANCES
SYNERGISTIC EFFECTS OF SHARED KNOWLEDGE AND EXPERTISE.
SHARING RISKS AND EXPENSES.
GAINING COMPETITIVE ADVANTAGE.