A strategic alliance is a relationship between two or more organizations that falls somewhere between the extremes of an arms-lenght sourcing arrangement on the one hand and a full blown acquisition on the other.
In general, there are two types of strategic alliance:a bilateral alliance (between two organizations) and a network alliance ( between several organizations). They have many advantages:they require little immediate financial commitment,they get soaked and they offer a quiet retreat should a venture not work out as the partners had hoped.However,going into something knowing that it is (literally) not a big deal, and that there is a face saving exit route , may not be the best way to make those charged with running it hungry for success.
The most popular use for alliances is a means to try out a foreign market.Not surprisingly there are more alliances in Europe and Asia (where there are more foreign markets nearby) than in the US. In some cases, alliances are used by companies because other means of entering a market are closed to them.
One thing crucial to a successful alliance is a degree of cultural compatibility. Companies are advised for example, to pick on someone their own size. Alliances between very big organizations and very small ones are hard to operate not least because of the different significance that the alliance assumes in each organization's scale things
Strategic alliances grew at a phenomenal rate during the 1990s.Some companies such as General Electric set up several hundred. But aliances have not always been successful. In 1998 BT and AT@T agreed to bundle their international assets into a single joint venture that started off with annual revenue of 11bn dollars, annual operating profits of 1bn dollars and some 5,000 employees. In 2001 the two companies agreed to unwind the alliance-at considerable cost.
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