World of Strategic Alliances

In almost all the fields these days, we see companies/units forming strategic alliances in order to be viewed as more global by the customers, to increase their capabilities, to build the brand and for various other reasons. While it is difficult to trace back, the first strategic alliance in the world but if we go for a "Non-Business" alliance for a common cause then I will vote for the strategic partnership with Sri Ramachandra and Vanar-Raj Sugriv. It surely worked big time and the objectives of the alliance were achieved perfectly.
In the new age, this process of forging alliances is still going strong and in the process, have added much more dimensions to it. The alliances between a service provider and a product company, between a re-seller and a product company, between companies having similar customer base, joint ventures in fields of research, manufacturing etc. and companies that co-brand their products are few examples . Talking about India, we have seen few partnerships going in a way where the major partner eats into minor partner or a partnership ends after having conflict of interest or having rock solid continuous partnerships that have been tested by times but have grown stronger everytime. I found some interesting websites that help us assess our strategies and find a partner in right areas with right strengths and these can be really useful in most cases. In fact one of the all time great books on developing strategic alliances is available on googlebooks.
I often wonder, what should be the criteria of selecting a strategic alliance for a company so that it bears fruit in short term, long term and more importantly the "longer term". For a manufacturing & distribution company, the choices are much easier than the service providers in my view and the most popular criteria are:
  • Partner's strength in targeted geographic area
  • Product line synchronization with overall strategy of company
  • Credit rating and size of company
  • Partner strengths complimenting other companies strengths and plugging weaknesses
  • Brand value of partner
  • Presence in targeted product range
  • Corporate governance
The above list is obviously not the full list but the most looked upon criteria while selecting an alliance. While the partnerships in Mfg industry bore fruits in past and are looked upon as a useful tool for surging ahead in business, it has remained a challenge in service industry to get tangible benefits from strategic partnerships. Though, the number of partnerships we see in service industry outscore Mfg industry by many times but do they get the same advantage, is still a point that is debated in industry circles frequently. There are currently a big number of forums and conferences across the world that evaluate this and devise more and more ways of forging tie-ups so that all parties like both the partners, customers and investors get similar benefits and it is a win win situation for everybody. I remember attending one such conference on supply chain where we were showcasing certain newly acquired capabilities in the area and obviously few companies which were working in similar areas, got interested to know more. More than those companies, the conference management started presenting us the business sense of forging partnerships with one or some of them. Our team was amazed at this and found that while companies look for partnerships for different reasons, the conferences have a different agenda <> that more and more business decisions should take place during the conference, which helps them in building their brand also. So, one might think that is it just hype or we have some substance also in this?
Well....well, the substance is there certainly and not only for the partners but also for customers and investors. The companies that bond together can use each other's infrastructure, market presence, brand value, product range, research and design expertise & facilities and experience for thier benefit. The customers get things like easy and better access to products and services, price reduction, value added benefits, more options from same company etc. and the investors get better return on their money as the sales increases and brand value jumps to higher levels. Overall, as I said earlier, it is a win win situation for all parties involved.

Talking about the different steps in forming an alliance, the major steps will be 1. Strategy Design 2. Partner Assessment 3. Negotiation of contract 4. Alliance operation and nurturing and 5. Alliance Termination. More than forging alliances, my area of interest is point 4. i.e. Nurturing and Operating alliances and would like to talk more on this point in my next article.

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