11.5.2 Why establish strategic alliances

The increase in establishing strategic alliances which has been observed in recent years is largely due to the following economic factors and business trends.1

  • Costs are shared in projects where the alliance is involved
  • There exists a reduced financial risk and exposure in R&D projects
  • Technology is becoming increasingly complex and multi-disciplinary, so it is necessary for companies to focus on their own core competence in order to remain “state-of-the-art”
  • Faster access to new knowledge or technology resources via collaborating than via in-house development
  • “Agile manufacturing” concepts (and accelerating rates of innovation) encourage and “demand” networking practices
  • European integration and the availability of funding
  • Improved credibility of alliance bids in international contract opportunities.

There can be a synergy in a strategic alliance; the whole is greater than the sum of the parts. The capability of a strategic alliance for a specific objective might be greater and more easily promoted than that of its member companies. This should not be used as a justification for establishing a strategic alliance but it should be recognised as a spin-off benefit.2

In practice, it is unrealistic for a company to use this type of collaboration as a business or R&D strategy without expecting some changes in organisational structure. A major benefit of collaborating is to be able to change and improve the structure to give extra flexibility and capability. At the very least, individuals and teams will need to work in new ways with individuals and teams in other companies. The improved use of IT and telecommunications to achieve this aim could by itself lead to significant positive change.

Companies can work together in order to benchmark their performance in key business processes (e.g. new product development). They can benefit from collaborating as a method of training, developing or motivating staff. For example, working together with universities could provide access for the research team to a wide range of new ideas, and could help the company to recruit high calibre researchers.

Using this type of collaboration as a strategy for the evolution of the organisation can avoid the pitfalls of business reengineering. At the same time it needs to be recognised that a necessary response to business process engineering is likely to be an increase in collaborating activity. Business process engineering often assumes that resources are available less expensively and more efficiently via networks or via the supply chain.3

Please stop and think:
After reading this part of the component: is there a possibility that your company or one of its departments could form a strategic alliance with other companies?
Could your company share knowledge, expertise and resources with others in order to develop innovative products or services?

2 libid
3 libid