Strategy Library

Strategic alliances

Strategic alliances are formal, long-term partnerships between companies that are entered into with the aim of bundling individual strengths or compensating for individual weaknesses in order to secure competitive advantages and share risks.

Description of strategic alliances

Strategic alliances are formal, long-term partnerships between companies, with the aim of bringing together individual strengths and compensating for individual weaknesses in order to secure competitive advantages and share risks. As part of the strategic alliance, the companies retain their legal and, in principle, economic independence, but contractually agree to co-ordinate their activities in some areas.

In addition to horizontal cooperation between competitors, which relates to specific business areas (e.g. purchasing, production, distribution, research), there may also be vertical mergers between suppliers and customers. In addition, so-called "dialogue" or "lateral" alliances between companies from different industries can be concluded.

Strategic alliances are closed for many reasons. The most common motifs include:

  • Access to markets
    Strategic alliances provide companies with fast and direct access to markets. By working with experienced partners who have the necessary market knowledge, customer contacts and distribution systems, investment costs can be significantly reduced. In the case of international alliances, trade barriers can be overcome by acting as a domestic provider in cooperation with local partners.
  • Access to resources
    Often, strategic alliances are entered into to compensate for the lack of financial and human resources within the company. Particularly in innovative research and development projects, companies often find it difficult to attract banks as lenders or to find the necessary specialist personnel. A merger with a larger partner can help.
  • Access to know-how
    Against the background of ever-changing competition, knowledge transfer is a key motive for forming strategic alliances. In addition to access to information (formalized in the form of patents or unstructured in the minds of employees), knowledge and skills also include access to technology. Ideally, knowledge transfer should not be confined to sharing existing knowledge, but should also pursue the goal of creating new knowledge together.
  • Time advantages
    Due to the knowledge transfer just mentioned, development times can be significantly shortened. In this way, companies can bring their products to market faster and exploit market potential more efficiently.
  • Cost reduction
    Collaboration in areas such as purchasing, sales, production or research and development significantly reduces fixed costs. In addition, access to new technologies and markets can provide economies of scale and learning that enable more efficient economies. Distributing costs over multiple shoulders spreads entrepreneurial risk, which also makes strategic alliances very attractive.

Strategic alliances not only offer great opportunities, but also involve significant risks. In practice, strategic alliances fail again and again. Reasons for this are often unrealistic expectations, lack of commitment, cultural differences, divergent strategic goals and lack of trust. The potential risks include, in particular, a deterioration of one's own competitive position due to the loss of know-how and core competencies, high coordination costs, the loss of operational control and the emergence of an unfavorable negotiation position.

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