However, a strategic alliance can carry its own risks. While the agreement is generally clear to both companies, there may be differences in the way companies do business. Differences can lead to conflict. If the alliance requires the parties to share proprietary information, there must be trust between the two allies. Partnership involves sharing each partner`s free resources for the overall benefit of the alliance. How can partners take action against this? The people who are supposed to lead the day-to-day operations of the partnership, whether they are business unit leaders or alliance managers, should be part of the negotiations from the beginning. This happens less often than you might think, as business development teams and lawyers are typically tasked with crafting the terms of the business – the objectives, scope, and governance structure – while the operational part is often clarified retrospectively. Partnerships never go out of style. Companies regularly seek partners with complementary capabilities to access new markets and channels, exchange intellectual property or infrastructure, or reduce risk.
The more complex the business environment becomes – for example, when new technologies emerge or innovation cycles accelerate – the more meaningful these relationships become. And the better companies get in managing individual relationships, the more likely they are to become «partners of choice» and be able to build entire portfolios of practical, value-added partnerships. One of the most common mistakes companies make when looking for potential partners is to consider only a few options instead of looking at the entire ecosystem of strategic partnerships. As a result, the search, selection and selection processes remain decentralized and ad hoc (with the exception of companies with developed skills and a history of successful strategic partnerships). At this stage in the life of a strategic alliance, an internal structure emerges under which its functions develop. During its operation, the alliance itself becomes its own new organization with members of the original companies with the aim of achieving all the previously defined objectives and improving the overall performance of the alliance, which requires effective structures and processes as well as good, strong and reliable leadership. The budgies must be linked, as well as the most strategically important resources, and the performance of the Alliance must be measured and evaluated. [9] [26] Due to language barriers, alliance company employees find it difficult to communicate with each other and effectively convey what they want to convey.
For this reason, a strategic alliance is rejected by employees. Every business will experience constant change and change, and initiatives that have already been successful may not be right in two or three years. To ensure that a business alliance continues to benefit both parties, it is important to know when the alliance needs to be revalued and the foundations changed. Both companies need to understand that change is inevitable and need to be able to work together to reach new agreements over time. Sometimes the need for restructuring will be clear, while at other times the initiative of one or both parties to the partnership will be taken to actively try to see if the partnership is still working or not. It`s a good idea to re-evaluate a business alliance at regular intervals. The best example of explaining pre-competitive strategic alliances is the alliance between an advertising company and a company that uses its services to develop its products. Seventy-nine participants from 50 companies attended an IMD discovery event focused on the challenges associated with the operation of strategic partnerships. Once the franchise has identified a company with which it can build a mutually beneficial partnership, it is ready to establish a relationship with representatives and solidify a healthy alliance. Strategic business alliances can be extremely beneficial for the growth of your franchise and offer opportunities to increase your brand presence through partner channels, as well as the opportunity to offer complementary services to existing ones. However, partnerships should be approached with caution.
It is human nature to be motivated by self-interest, and both parties must overcome these emotions in order to build a beneficial partnership for both. There is always a certain percentage of a company`s default risk, no matter how much you prepare, and in strategic alliances, the risk of failure increases because your company`s reputation is also affected by the actions of the alliance company. Various terms have been used to describe forms of strategic partnership. These include «international coalitions» (Porter and Fuller, 1986), «strategic networks» (Jarillo, 1988) and, most often, «strategic alliances.» The definitions are equally diverse. An alliance can be seen as the «pooling of forces and resources for a specific or indefinite period of time in order to achieve a common goal». These types of strategic alliances take place between companies that operate in the same sector but in different countries. Typically, companies enter into a competitive alliance with local companies to establish their operations in a new country. In the 1970s, strategic alliances focused on product performance. The partners wanted to obtain raw materials of the best quality at the lowest possible price, the best technology and better market penetration, always focusing on the product. Even though the strategic alliance is an informal alliance between the companies involved, the responsibilities and work of each party involved are clearly defined. A strategic alliance is an effective way to enter a new market.
Companies can easily reach customers and avoid the initial difficulties of new business by partnering with existing companies in the market. According to a 2014 pwC CEO survey, more than 80 percent of U.S. CEOs are currently looking for strategic partnerships or intend to do so in the near future.1 Yet only about 65 percent of those seeking new strategic alliances have been successful in the past three years. Of course, the constant problems related to the management of business partnerships do not disappear either, especially as companies establish more and more relationships with partners from different sectors and regions. The last time we asked executives about their perceived risks to strategic partnerships, 1 1. Insights from the 2015 McKinsey survey of more than 1,250 executives. Sixty-eight percent said they expect their organizations to increase the number of joint ventures or large partnerships they participate in over the next five years. A separate follow-up survey conducted in 2018 found that 73% of respondents expect their business to increase the number of large partnerships they enter into. The most important were: disagreements between partners over the central objectives of the relationship, poor communication practices between partners, poor governance processes and, when the market or other circumstances change, the partners` inability to quickly recognize and make the changes necessary for the success of the relationship (figure).
Before entering into a business partnership, franchisors should identify companies that offer services that are different but complementary to their own franchise system, but that serve a similar market. A strategic alliance is an agreement between two companies to carry out a mutually beneficial project while maintaining each its independence. The agreement is less complex and less burdensome than a joint venture in which two companies pool their resources to create a separate business unit. The alliance between Spotify and Uber is an example of a strategic alliance between two companies. .