Creating Value Through a Strategic Alliance

When two 0r more independent companies agree to work together to accomplish a shared objective, the parties are included in a strategic alliance.  It involves the pooling of resources, capabilities, technology, knowledge, or core competencies in undertaking a specific, mutually beneficial project.

A strategic alliance differs from a joint venture in that in the former, the companies are less involved and less binding.  It is not necessary for either company to yield ownership stakes, which can consume a large amount of time and be complicated to go through.  Pursuing opportunities can be done at faster and cheaper rates.

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The purpose of a strategic alliance is to create or contribute value to all the organizations involved through the following:

• Improved operations:  By combining different expertise, economies of scale can be achieved, and partners can learn from one another.  Through these, revenues can be maximized, and costs minimized.

• Blocking a competitive threat:  Whenever competition arises, and a company is ill-equipped to address it on its own, a strategic alliance may provide a solution.  For example, a firm that produces and distributes premium goods is vulnerable to low-priced entries in the market.  To remain competitive and flexible, it can partner with another company in an adjacent market to be able to block the threat.

• Ease of entry and exit:  Companies looking to enter or exit an industry can do so more easily by forming a strategic partnership with another firm.

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Steven Scansaroli is an award-winning entrepreneur and executive whose myriad of expertise includes identifying and building strategic alliances and partnerships for implementation of new technologies. Visit this website for more information about Mr. Scansaroli.