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Strategic Alliance

The document outlines the concept of strategic alliances, which are arrangements between companies to collaborate on mutually beneficial projects while maintaining independence. It details three types of strategic alliances: joint ventures, equity strategic alliances, and non-equity strategic alliances, each varying in financial investment and structure. Additionally, the document discusses the value created through strategic alliances, including improved finances, reduced barriers to entry, shared risks, and enhanced innovation.

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Pankaj Sardana
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12 views12 pages

Strategic Alliance

The document outlines the concept of strategic alliances, which are arrangements between companies to collaborate on mutually beneficial projects while maintaining independence. It details three types of strategic alliances: joint ventures, equity strategic alliances, and non-equity strategic alliances, each varying in financial investment and structure. Additionally, the document discusses the value created through strategic alliances, including improved finances, reduced barriers to entry, shared risks, and enhanced innovation.

Uploaded by

Pankaj Sardana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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University School of Business

BBA
Bachelor of Business Administration
STRATEGIC MANAGEMNET 22BAT-332

Dr. Neba Bhalla DISCOVER . LEARN . EMPOWER


Strategic Alliance

Course Outcome
CO Title Level
Number
CO3 To analyze real world corporate problems related Application
to strategic decision making.

CO4 To assess company’s business environment using Application


environmental scanning tools.

CO5 To formulate creative solutions using a strategic Application


management perspective for contemporary issues
in business.
2
What Is a Strategic Alliance?

• A strategic alliance is an arrangement between two companies to undertake


a mutually beneficial project while each retains its independence. The
agreement is less complex and less binding than a joint venture, in which
two businesses pool resources to create a separate business entity.

• A company may enter into a strategic alliance to expand into a new market,
improve its product line, or develop an edge over a competitor. The
arrangement allows two businesses to work toward a common goal that
will benefit both. The relationship may be short-term or long-term .
3
Types of Strategic Alliances
• There are three primary forms of strategic alliances. These three types of strategic alliances vary
in the degree of financial investment each company makes into the agreed-upon joint effort.

1. Joint Venture

• A joint venture occurs when two companies agree to come together to create an entirely new,
separate company that each of the existing companies become a parent to.

• In 2012, Microsoft and General Electric Healthcare signed a joint agreement to create a new
third company called Caradigm.2 Caradigm was created to develop and market an open
healthcare intelligence platform. The idea behind the joint venture was Microsoft had the
technical capability of making such a platform work, while GE's healthcare IT division had the
expertise on the healthcare side.
4
Contd..
2. Equity Strategic Alliance
• An equity strategic alliance may have similar outcome goals as a joint venture; however, it

is funded differently in that one company makes an equity investment into another.

• In 2010, Panasonic invested $30 million into Tesla.3 The investment was intended to help

build a stronger alliance between the two companies and to rapidly advance the electric

vehicle market expansion. As one of the world's leading battery cell manufacturers,

Panasonic's skillset blended strongly with Tesla's ambition of incorporating proprietary

packing using cells from multiple battery suppliers.


5
Contd..
3. Non-Equity Strategic Alliance

• A non-equity strategic alliance forms when two entities realize mutual benefit

exists and no equity transfusion is necessary. As discussed below regarding

Barnes & Noble and Starbucks, each member of the alliance simply brings their

resources to the alliance for the other party to capitalize upon. A more simple

contractual obligation is agreed upon for the two entities to pool resources and

capabilities together.
6
How Do Strategic Alliances Create Value?
• There's many reasons why a company may choose to enter into a
strategic alliance. These reasons may include but are not limited to:

1. Improving short-term finances. Companies wanting to make


immediate financial impacts may find it easiest to leverage another
company's resources to improve its short-term position in the market.

2. Eliminating barriers to entry. Companies may not have the capital


on hand to enter certain markets. Instead, they can use companies that
have already made those investments to gain access cheaper and faster. 7
Contd..
3. Gaining better business insights. Companies may have no idea how a certain business model
may perform. Instead of having to build out an entire model and self-fund an experiment,
companies can leverage strategic alliances to "test run" how certain situations may go and use
that information for future decision-making.

4. Sharing financial risk. Should a business venture fail, both parties in a strategic alliance are
likely to contribute to paying for those losses. Instead of single-handedly being responsible for
the failure, both parties may receive assistance from the other as part of the alliance agreement.

5. Innovating beyond current capabilities. In the Panasonic/Tesla alliance mentioned above,


that partnership created a cutting-edge, innovative agreement that put some of the smartest
experts for electric vehicles batteries on the same team. 8
Pros of a Strategic Alliance
1. A strategic alliance allows a company to embark on opportunities it may otherwise not
have been able to embark upon.

2. Strategic alliances are also a way to diversify a company's revenue stream and generate
different opportunities to mitigate company-wide financial risk.

3. Risk is also mitigated with the help of the alliance members as each entity may have
resources that can be used to solve unique challenges or navigate unfamiliar business
scenarios.

4. Last, strategic alliances allow a company to operate differently than it normally would.
This means using resources it doesn't have. This might be physical goods, access to
markets, or labor with specific expertise. 9
References

• http://www.businessnewsdaily.com/3882-vision-statement.html
• http://iveybusinessjournal.com/publication/what-is-corporate-strategy-really
/

• http://www.quickmba.com/strategy/levels/
• http://smallbusiness.chron.com/advantages-disadvantages-corporate-strat
egy-diversification-62119.html

• https://www.linkedin.com/pulse/defining-terms-vision-mission-goals-objecti
ves-fareed
ASSESSMENT MODEL

11
THANK YOU

For queries
Email: neba.e14239@cumail.in

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