Strategic alliances between companies

Strategic alliances is a specific form of cooperation between two or more legally and economically independent companies to connect and compensate for individual strengths and weaknesses, whereby economic independence is partially given up in the areas of cooperation.

Strategic alliances are characterized by certain characteristics. The cooperating companies are legally independent, but the decision-making autonomy is given up in favor of a collective decision-making body, which creates mutual dependencies. The cooperation between the companies involved is usually not designed to be permanent, but rather limited in time, whereby the length of the cooperation does not necessarily have to be determined in advance.
In contrast to other forms of cooperation, strategic alliances in the context of strategic management represent a path to corporate development and the implementation of specific corporate strategies. Alliances are given a further strategic reference in that the partners grant each other access to competition-relevant potential for success. Another characteristic of this form of cooperation between companies is that the partners are often current or potential competitors.

Some authors speak of strategic alliances only when current or potential competitors align their cooperation with specific, identical business areas (horizontal cooperation). Others also understand this to mean supplier-buyer cooperation (vertical cooperation) or non-branch (diagonal) cooperation. All of the aforementioned forms of cooperation can significantly change competitive and industry structures. Furthermore, strategic alliances are characterized by their internationality or even globality, as well as their industry reference. Most strategic alliances can be found in technology-oriented industries such as automotive, telecommunications, chemicals, electrical engineering / electronics and aviation.

Different goals are pursued with the formation of strategic alliances. The focus is on access to new product and process technologies, entry into new markets, the achievement of economies of scale and cost degression potential, the division of business risks and costs as well as the avoidance of protectionist measures.

Wesentliche Gründe für die Bildung Strategischer Allianzen liegen in der Veränderung der wirtschaftlichen Rahmenbedingungen. Kürzere Produktlebenszyklen (Product life cycle-Konzept) führen zu Zeit-Wettbewerb und zur Notwendigkeit schnellere Formen der Vermarktung zu finden. Veränderungen der Strukturen in den Produktionsbereichen und ein verschärfter Technologie-Wettbewerb erzwingen sehr hohe Investitionsvolumina für Produktion und F&E. Die daraus folgenden Risiken und der Kostendruck können gemeinschaftlich leichter getragen werden. Außerdem ist eine globalization der Märkte, was die Homogenität der Nachfrage und die Zugangsmöglichkeit zu nationalen Märkten betrifft, festzustellen. Hier können Allianzen ein Instrument zur Erreichung von mehr Kundennähe darstellen.

The formation of strategic alliances can focus on one or more activities in the value chain or affect the entire value chain. From this point of view, one can differentiate between R&D, procurement, logistics, production, marketing and sales, service alliances and combinations thereof. Depending on the specific objectives pursued with strategic alliances, the initial situation of the companies involved and the specific environmental conditions with regard to the intensity of the ties, different forms of cooperation are chosen.

Mutual declarations about cooperation in certain fields represent the lowest form of binding intensity. Contractual agreements bind the partners more closely to one another. A distinction can be made here between license, delivery, marketing and sales as well as management contracts. The next strongest level of ties is formed by mutual minority holdings of the alliance partners, in which the equity stake, however, has a more symbolic character and is not the essential characteristic of the cooperation.

The strongest bond intensity is given in the case of the realization of a strategic alliance through an equity joint venture. It is about the establishment of a joint venture that represents a legal entity. Majority, minority and parity shareholdings are possible. Contractual joint ventures, on the other hand, are agreements on a contractual basis in which no separate company is established.
In contrast to the established permanent structures of companies, strategic alliances represent unstable relationships that are constantly developing in an evolutionary process. Environmental conditions, strengths and weaknesses as well as goals of the partners can change in the course of the cooperation. This places special demands on the management of strategic alliances.
At the beginning of the process there is the identification of strategic problems and the decision to solve the problems independently or in cooperation. Once the decision for a strategic alliance has been made, an initial alliance concept must be drawn up, which includes objectives, determination of value chain activities, ownership structure, organization and management. In the next step, suitable partners are to be found and selected, whereby when choosing a partner, attention must be paid to being “fit” in terms of corporate policy and “fit” in terms of corporate culture.

The former is mainly about the partners' objectives, strategies, performance and negotiating positions. The corporate culture “fit” relates to the “soft factors” such as values, norms, social behavior and management style. In the course of the contract negotiations that follow the choice of partners, goals, ownership and legal structures, decision-making mechanisms, and the way in which the joint activities are organized and functioning are defined. During the ongoing collaboration, the cooperation must be constantly checked, coordination and adaptation are permanently necessary.

There are two basic forms of organization for managing strategic alliances. On the one hand, a permanent position set up exclusively for the management of the alliance can take on the management tasks; on the other hand, these tasks can be transferred to "decentralized" units of the companies that meet in committees that meet sporadically.

The management of strategic alliances also has the task of ensuring the effectiveness and efficiency of the alliance. For this purpose and to support the management in making decisions, certain controlling functions are to be performed, which relate, among other things, to target setting, quantification of goals, planning of partnership activities, information supply to management and assessment of the success of the alliance.

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