Business Strategy Report: Strategic Alliances in the Global Market

This research paper delves into the dynamic landscape of strategic alliances within the global market, examining their current scenario and critical factors for success. It critically analyzes existing literature, identifying gaps and diverse perspectives from various authors. The paper explores the utility of strategic alliances in fostering competitive advantages, managing risks, and accessing resources, while also addressing potential risks and challenges, such as high failure rates and managerial complexities. The research employs secondary data analysis to evaluate the approaches to strategic alliances, including cost leadership and outsourcing strategies. The report highlights the importance of considering innovation and market dynamics, emphasizing the need for businesses to balance cooperation and competition. The findings underscore the significance of strategic alliances in achieving long-term sustainability, while also acknowledging the limitations of relying solely on secondary data.

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Abstract
The major objectives of this research paper are to discuss about the current scenario and relevant
factors in strategic alliances in the global market and identifying the major gaps in the literature
in critically analyzing the current scenario of strategic alliances. In this paper, various authors
along with their views are being used to have a critical approach in the discussion. In doing the
research, different quality and authentic journals are being used, which denotes the usage of
secondary data. In addition, qualitative data analysis method is followed to have the penetrated
view based on the opinions given by the authors. In addition, initiation of the qualitative research
analysis method also helped in identifying the differences in the approaches of the authors. It is
identified that majority of the authors have given narrow and one sided view against the given
topic. In this paper, there is number of factors being discussed, which should be considered in
having a successful strategic alliance. In addition, it is also being identified that majority of the
articles have given an overview rather discussing on a single and specific element. This caused
difficulty in aligning the views of the authors with that of the research objectives. However, it is
also identified that strategic alliances are having a number of utilities for the business
organizations along with having the potentiality for long term sustainability considering all the
required factors being determined effectively. A few limitations are also there in doing this
research paper with the major limitation is the usage of only secondary data. This is due to the
reason that primary data will have more authenticity for the research paper, which is not used in
this paper. In addition, it is assumed that current business scenario is constant and based on that,
views of the authors are analyzed. It is expected that the research done in this paper will help in
having a critical view about the utilities of the strategic alliances and the important factors to be
considered by the business organizations prior to the initiation of the alliances.

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Table of Contents
Introduction......................................................................................................................................3
Current scenario of strategic alliances.........................................................................................3
Literature review..............................................................................................................................5
Utility of the strategic alliance.....................................................................................................5
Approaches to the strategic alliances...........................................................................................7
Factors consideration in initiating strategic alliances..................................................................9
Probable risks in initiating strategic alliance.............................................................................11
Research methodology...................................................................................................................13
Findings.........................................................................................................................................15
Conclusion.....................................................................................................................................18
Reference.......................................................................................................................................19
Appendix........................................................................................................................................23

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Introduction
The importance of strategic alliance has increased significantly over the past decade, and
it has been used as a response to the globalisation in the market. Alliance play a vital role in the
sustainability of different organisations as it facilitates in providing access to crucial resources
and gaining competitive advantage in the market. The economic environment in the global
scenario is turbulent, and market trends keep on changing rapidly. The companies are forced to
adapt to these changes by incorporating new strategies such as alliances due to the lack of
internal resources in the external market and the need of maintaining a strategic position in the
market. The changes in the market scenarios have made the competition intense at such a level
that the competition is no more between the individual companies but between the strategic
alliances. Collaborative agreements allow different firms to mitigate their shortcomings, bridge
the gap and effectively manage the complexities in the market. A strategic partnership has been
used by the companies for fortifying their resource endowments, managing the uncertainty in the
external environment and improves their competitiveness.
Current scenario of strategic alliances
Firms use strategic alliance as a means of improving the knowledge and availability of
complementary resources. There is a wide range of cooperative strategies both equity-based and
non-equity implemented by the companies based on their current needs. A strategic alliance can
be defined as the international relationship between two or more firms which involves sharing of
resources or exchange of resources to gain competencies in the market. As per the current
scenario in the global market, a strategic alliance is a critical factor in achieving a competitive
advantage in the market. The enhancement of the competitive position, transaction costs and new

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knowledge development are the key benefits of getting into an alliance (Brouthers, Nakos and
Dimitratos 2015). There are different reasons due to which firms can use the strategicalliance to
create competitive advantages such as effective management of risk, economies of scale and
cost-effective entries to the new market (Garg 2016). In addition, in the current business
scenario, it should also be noted that gaining competitive advantages is the one of the major
factor considerations for the contemporary business organizations. This is due to the reason that
current business scenario is highly competitive in nature with the presence of good number of
competitors in each of the business sectors. Thus, the more will be the competitive advantages
for the business organizations, the more will be their effectiveness in staying ahead in the
competition. With the help of the strategic alliance, business organizations gains competitive
advantages by leveraging on each other’s resources. In addition, initiation of the strategic
alliances also helps in reducing the intensity of the competition in the market. This is due to the
reason that if the competitors went for strategic alliance, then number of operating players in the
market will get reduced and average profitability will get enhanced.
However, even though strategic alliance has been a common phenomenon, the success
rates of alliances are quite a low due, and research statistics show that 50% of the alliances fail
(Albers, Wohlgezogen and Zajac 2016). The high failure rates indicate that it is challenging to
develop productive and successful partnerships which mean that the majority of the firms do not
have the capabilities of maximising their potential value creation. The dynamic nature of the
collaboration is one of the main reasons for the failure of alliances of different firms where the
firms are unable to balance between cooperation and competition simultaneously effectively.
This instance depicts that even though strategic alliances are one of the most effective strategies
for gaining competitive advantage in the current market, the chances of success are half. The

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competition between the firms and managerial complexity are two major reasons that firms fail
to form successful partnerships (Russo and Cesarani 2017). This literature review has identified
the current scenario of strategic alliances in the market to provide an in-depth understanding of
the positives and the negatives of the market scenario. The main objectives of the research are as
follows:
 Critical evaluation of the current scenario of strategic alliance in the global market
 Determining the literature gap from the existing research to examine the scope of
future research
Literature review
Utility of the strategic alliance
Prior to the further discussion regarding different aspects of the strategic alliance, it is
important to have the understanding about the overview and basic utility of the strategic alliance
for the business organizations. According to Lew and Sinkovics (2013), one of the major utilities
for the initiation of the strategic alliance is gaining competitive advantages. This is due to the
reason that initiation of the strategic alliance will help the business organizations to leverage the
competitiveness of their partnered firm and enhance the value proposition in the market.
However, on the other hand, it is also stated by the authors that innovation also plays an
important role in enhancing the effectiveness of the strategic alliance. This is due to the reason
that there are number of instances where it is seen that strategic alliance is failed due to the lack
of innovation among the involved entities. For instance, the strategic alliance between Nokia and
Microsoft got failed due to the lack of vision and innovation. It was reported that the major
objective of the merger between Nokia and Microsoft is leverage the brand recall of Nokia in the

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mobile handsets market and technological superiority of Microsoft (Kolk and Rungi 2013).
However, without having the portfolio of innovative and radical products, the merger got
dissolved.
In this case, Li, Qian and Qian (2013) reviewed the effectiveness of the strategic alliance
from the perspective of resource based view. According to the authors, as per the resource based
view, access to larger resources will help the business organizations in gaining competitive
advantages and initiation of the strategic alliance helps in increasing the access to the resources.
This is due to the reason that in the case of strategic alliance, the resources of both the entities
will sum up and help in gaining competitive advantages. Thus, it can be concluded that one of
the major utilities for the initiation of the strategic alliance is gaining competitive advantages. On
the other hand, there are number of factors also to be noted in initiation of strategic alliances.
One of the major factors is determination of the accessible resources with the help of the
alliances. This is important due to the reason that if one entity in the alliance is not having the
enough financial abilities or any other resources, then it will not be profitable for another one in
entering in the alliance. In addition, it is also being stated by the authors that the business
organizations should also have the fair understanding about the effectiveness and utility of the
gained resources in the development of the market. If the resources being gained are not get
matched to what are required for the market development, then also competitive advantages
cannot be gained from the initiation of the strategic alliances.
However, it should also be noted that in both the articles, it is identified that the authors
have reviewed the effectiveness of the concept of strategic alliance from the perspective of
gaining more access to resources. Thus, the discussion got more one sided and narrow. It should
also be considered about the potential loss of competitiveness and resources that may cause due

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to the strategic alliances. This is due to the reason that in various failed attempt of strategic
alliance, it is identified that involved entities lost their resources just like in the case of merger
between Nokia and Microsoft. Nokia lost their existing market share due to the partnership and
Microsoft lost their market potentiality in the mobile operating system business (Basole et al.
2015). Thus, it should be noted that strategic alliance should be well adhered to the current
market requirements and should also have the provision for innovation.
Approaches to the strategic alliances
There are various approaches of strategic alliances being practiced in the current time. In
addition, the approaches are getting evolved with time and newer practices are being introduced
in accordance to the current business scenario. According to Hohberger, Almeida and Parada
(2015), the approaches of strategic alliances are different to that of what they are in the past. This
is due to the reason that the business scenario is different in the current time and the level of
competition is also high. However, the approaches of strategic alliances being discussed by the
authors are also vulnerable towards the changing business scenario. This is identified as one of
the major gaps in this article. The authors have mainly discussed about the relationship between
the firm innovation and strategic alliances and stated that any of the approaches of strategic
alliance will help the business organizations in gaining competitive edge in the market.
According to the porter generic strategies, one of the major ways of gaining competitive
advantages is the cost leadership. This refers to the process of offering the end products or
services in lowest cost possible to the customers along with reducing the average cost of
production. According to Hohberger, Almeida and Parada (2015), initiation of the strategic
alliance will help the particular business entity in reducing their cost of operation. In this case,

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the contemporary business organizations initiate outsourcing strategy as the preferred choice of
strategic alliance. Outsourcing refers to the process of transferring the partial operational job to
the third party vendors in order to reduce their operational cost. For instance, it is reported that
Global rating firm Nielsen outsourced their operational activities to the Tata Consultancy
Services of India. This is helping Nielsen in having lower cost of operation and enabling them to
provide end services to their customers in more competitive prices. Thus, it is meeting the cost
leadership element of porter generic strategy.
On the other hand, it is stated by Jiang et al. (2016) that initiation of the strategic alliance
can also help the business organizations in gaining competitive advantages by means of product
or service differentiation. This is due to the reason that leveraging the distinctive expertise of the
partnered entity will help in initiating the differentiation approach. One of the major examples of
gaining competitive advantages by means of differentiation is the strategic alliance between Ford
and Eddie Bauer. This helped Ford in adding luxury upholstery of Eddie Bauer in their Explorer
vehicle and created a niche product among the competition. Thus, it can be concluded that
strategic alliance between Ford and Eddie Bauer helped in initiating the product differentiation
approach (Lee, Lee and Lee 2013).
Therefore, initiation of different approaches of strategic alliance can help the
contemporary business organizations in gaining competitive advantages as per the porter generic
strategies. However, it should also be noted that there are number of limitations also evident in
initiating the differentiation approach by means of strategic alliance. One of the major limitations
of the strategic alliance in this case will be complexity in the operational purposes. This is due to
the reason that outsourcing the internal jobs will involve the third party vendors in the internal
management, which will only increase the complexities. These factors are not being discussed by

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the authors. In addition, the cost involved in jointly developing the products is also not being
considered by the authors. As discussed in the above about the alliance between Ford and Eddie
Bauer, this involved a certain cost for both the entities. This is important in reviewing the
effectiveness of their alliance. Thus, it will be more effective if both the involved entities in the
strategic alliance can have mutual benefits. This will ensure that cost involvement will be lower
and the partnership can be carried over by having mutual benefits from the alliance.
Factors consideration in initiating strategic alliances
In the current business scenario, there are number of factors to be considered in initiating
strategic alliances. This is due to the reason that in the current business scenario, market
competitiveness is high than ever along with the frequent change in taste and preference patterns
of the customers. According to Jiang et al. (2016), one of the major factors to be considered in
initiating strategic alliance is business opportunities. This is due to the reason that profit
maximization is the core objective for any strategic alliances and thus favorable business
opportunities are important for the successful implementation. In this case, blue ocean strategy
will be effective for the business organizations for determining the market potentiality. Blue
ocean theory revolves around the concept of entering in the business with low intensity of
competition and largely untapped and market. Thus, it is important for the business organizations
to initiate the blue ocean strategy prior to the initiation of the strategic alliance.
For instance, Pizza Hut and Coca Cola went for the strategic alliance in co-creating new
food items. They came with the idea of offering Coca Cola with each of the items of Pizza Hut.
This strategy is being initiated only after determining the fact that customers are having the
preferences for combo packs of both drinks and food items. Thus, the strategic alliance between

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Coca Cola and Pizza Hut helped them to start a new trend in the market, which justifies the blue
ocean theory. Therefore, it can be concluded that market opportunity should be identified by the
business organizations prior to the initiation of the strategic alliance process. However, on the
other hand, it is also being identified that even if the market potentiality can be identified, then
also the strategic alliance will not be immune enough towards the changing market trend
(Besharat and Langan 2014). For instance, Nokia and Microsoft went in to strategic alliance for
providing the Windows powered phones in the market. However, even though they have offered
enough updated features with the phones but cannot able to cope up with the rapid change in the
customer expectations and trends. This led to the failure of the strategic alliance between Nokia
and Microsoft. These factors are not being discussed by the authors in these articles.
Another important factor being considered prior to the initiation of the strategic alliance
is the market access in the global scenario. According to Owen and Yawson (2013), it is
important for the business organizations to determine the global access they are going to gain
from the strategic alliance. This is due to the reason that in the current global business scenario,
business organizations are initiating strategic alliance for gaining more global access. For
instance, Google buys HTC smartphones in order to increase their presence in the rapidly
increasing global smartphone market. This acquisition strategy of HTC is being taken by Google
only after confirming the market potentiality. Klossek, Meyer and Nippa (2015) stated that
Google is one of the most used operating systems in mobile across the world but they are not
having their presence among the original equipment manufacturers (OEM). Thus, with the
acquisitions of HTC, Google gained the access in the global smartphone market, which further
helps them to enhance their profitability. However, Klossek, Meyer and Nippa (2015) also stated
that confirming the market potentiality and access prior to the initiation of the strategic alliance

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is also having limitations with the major limitation being the change in the market. This is due to
the reason that market potentiality will get changed with the change in the market trends. These
are not being discussed by Owen and Yawson (2013). It can be concluded that the approach of
product and business strategy should be rapidly changing in accordance to the market trend only
to keep up with scenario.
Probable risks in initiating strategic alliance
Apart from the advantages and disadvantages of initiating strategic alliance, there are
number of risks also being associated with it. In addition, these risks are increasing in the current
business scenario. According to Brouthers, Nakos and Dimitratos (2015), in the current business
scenario, there are as many risks being associated with the strategic alliances as their
possibilities. One of the major risks being identified is the adverse impact on the reputation of
the organization. This is due to the reason that if the partnered entity is having negative market
reputation, then it will also affect the market potentiality of another. Thus, it is important for the
business organizations to have the fair understanding about the firm to be partnered with in order
to avoid the future negative consequences. However, on the other hand, it is stated by Albers and
Wohlgezogen and Zajac (2016) that it is difficult for the business organizations to understand the
future consequences due to the reason that negative reputation can get emerged in the further
stage also. It is stated by the authors that even in the further stage of the strategic alliance, the
emergence of negative reputation of one partner entity will affect the potentiality of another.
However, in this case, it should also be noted that risk of negative reputation can also be
mitigated more effectively with the help of the strategic alliance. This is due to the reason that in
the case of strategic alliance, risks will be equally distributed between both the entities. Thus, the