Exam 4: Strategy Fundamentals and Corporate Strategy

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The major challenges facing strategic alliances can be summarized as
1. Finding the proper partner.
2. Ensuring that there is a shared vision.
3. Getting the timing right.
4. Communicating effectively and efficiently.
5. Protecting intellectual property.
6. Measuring real costs and profits from the alliance.
Before a firm can identify the proper partner or understand the costs of what it is attempting to do, it needs to have a realistic set of goals for the alliance, and an understanding of what the partner firm will bring to the alliance. Once these issues have been dealt with, the firm can develop an understanding of the costs and the best potential partner. Once an alliance is entered into, the firm must be proactive in managing its relationship with the partner firm. Understanding each other's needs and ensuring they are met takes time and effort by both parties. There will be ambiguities but an active effort must be made, typically built on effective and efficient communication among the parties. Occasionally, alliance partners may have seemed to share the same goal(s) for the alliance, but in fact, there is no shared vision. In those cases, the firm must act quickly to build a shared vision or it should leave the alliance. Without common goals, building a successful alliance is difficult. Finally, the firm must ensure that, while it partners with another firm in an alliance, it does not eliminate its own competitive advantages. Often international firms enter an alliance to learn about the other firm's technology or customers. That firm can then leave the alliance and become a competitor once it has gained the knowledge it wants. A firm must also understand the true costs and profits accruing from the alliance. Without such information, sound judgment on the effectiveness of the alliance is not possible.