The Strategic Alliance Boom
In the new
global environment, with greater competition from more and more products and
choices, alliances are not just a planning option but a strategic necessity. Strategic
alliances are booming across the entire spectrum of industries and services and
for a wide variety of purposes. According to Booz, Allen & Hamilton, the number
of U.S. firms with partners in Europe, Asia, and Latin America is growing at a
rate of 25 percent annually.
Why the boom? Here are several strategic reasons companies enter into
alliances:
§
Fill gaps in current market
and technology
§
Turn excess manufacturing
capacity into profits
§
Reduce risk and entry costs
into new markets
§
Accelerate product
introductions
§
Achieve economies of scale
§
Overcome legal and trade barriers
§
Extend the scope of
existing operations
§
Cut exit costs when
divesting operations
Despite the many good reasons for pursuing alliances, a high percentage
end in failure. A study by McKinsey & Company revealed that roughly
one-third of 49 alliances failed to live up to the partners’ expectations. Yet
such painful lessons are teaching companies how to craft a winning alliance.
Three keys seem to be:
1.
Strategic fit: Before
even considering an alliance, companies need assess their own competencies. Then
they need to find a partner that will complement them in business lines,
geographic positions, or competencies. A good example of strategic fit is
AT&T and Sovintel, a Russian telephone company. The two joined forces to
offer high-speed ISDN service for digitized voice, data, and video communication
between the two countries. By joining together, the two telecommunications
companies can offer new services for more business customers than either could
do alone.
2.
A focus on the long
term: Rather than joining forces to save a few dollars, strategic partners
should focus more on gains that can be harvested for years to come. Corning,
the $5-bilion-a-year glass and ceramics maker, is renowned for making
partnerships. It has derived half of its products from joint ventures and even
defines itself as a “network of organizations.” That network includes German
and Korean electronics giants, and Mexico’s biggest glassmaker.
3.
Flexibility:
Alliances can last only if they’re flexible. On example of a flexible partnership
is Merck’s alliance with AB Astra of Sweden. Merck started out simply with U.S.
rights to its partner’s new drugs. For the next phase, Merck set up a new
corporation to handle the partnership’s $500-million-a-year business and sold
half the equity to Astra.
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