Strategic alliances: A firm is able to improve the long term competitive advantage by forming a strategic alliance with its competitors. The objective of a strategic alliance is to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes. Strategic alliance differs according to purpose and structure. On the basis of purpose, strategic alliance can be classified as follows:
i. Technology developed alliances like research consortia, simultaneous engineering agreements, licensing or joint development agreements.
ii. Marketing, sales and services alliances in which a company makes use of the marketing infrastructure of another company in the foreign market for its products.
iii. Multiple activity alliance involves the combining of two or more types of alliances. For instance technology development and operations alliances are generally multi- country alliances.
On the basis of structure, strategic alliance can be equity based or non equity based. Technology transfer agreements, licensing agreements, marketing agreements are non equity based strategic alliances.
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