Over the past few years, the strategic alliances had been increasingly common. The term “strategic alliance” can mean many different things, but the commonly used meaning entails a joint corporative effort by two or more companies working towards agreed ustrategic alliances, benefits, risk of failure

Bugnar Nicoleta

Mester Liana

Petrica Dana

English

Research Papers in Economics

202 
 
STRATEGIC ALLIANCES: FROM SUCCES TO FAILURE 
 
Bugnar Nicoleta 
Universitatea  din  Oradea,  Facultatea  de   tiin e  Economice,  Str.  Universită ii  Nr.  1,  410087 
Oradea, email: nbugnar@uoradea.ro,  tel:07224744922 
Me ter Liana 
Universitatea  din  Oradea,  Facultatea  de   tiin e  Economice,  Str.  Universită ii  Nr.  1,  410087 
Oradea, email: lmester@uoradea.ro, tel:0745419739 
Petrica Dana Maria 
Universitatea  din  Oradea,  Facultatea  de   tiin e  Economice,  Str.  Universită ii  Nr.  1,  410087 
Oradea, email: danamester@yahoo.com, tel:0726684622 
 
Over  the  past  few  years,  the  strategic  alliances  had  been  increasingly  common.  The  term  “strategic 
alliance” can mean many different things, but the commonly used meaning entails a joint corporative 
effort by two or more companies working towards agreed upon goals.       Despite their undisputed 
advantages, more than half of the alliances that are made during a year are a total failure. As any process, 
it has its advantages and its disadvantages, and it takes a lot of work, from each partner, in order to make 
the alliance complete its goals. There are some principles that must be observed and after all, making a 
strategic alliance is not as easy as it may seem before a complete analyze.    
 
Keywords: strategic alliances, benefits, risk of failure  
 
Cod JEL lucrare: F53 
 
The concept of strategic alliance  
Strategic alliances are agreements between firms in which each commits resources to achieve a 
common  set  of  objectives.  Companies  may  form  strategic  alliances  with  a  wide  variety  of 
players:  customers,  suppliers,  competitors,  universities  or  divisions  of  government.  Through 
strategic alliances, companies can enhance your competitive positioning, are eligible for entry 
into new markets and share major risks or costs of development projects
105. 
International  strategic  alliances  materialize  in  cooperation  agreements  between  companies, 
sometimes competing companies, for the exchange or sharing of activities or economic areas. 
These alliances, known as alliances or global strategic partnerships, means business arrangements 
whereby two or more partners cooperate in mutual benefit, which is designed specifically to 
support and strengthen the competitive advantages of partners.
106  
The purpose of alliances is to minimize risk while maximizing profits. Alliances can be formed in 
the  department  of  marketing,  sales  and  distribution  in  common,  joint  production,  design 
collaboration, technology licensing and research and development. Relationships can be vertical - 
between  a  seller  and  a  customer,  horizontal  -  between  suppliers,  local  or  global.  For  small 
businesses, strategic alliances are a way to work with others toward a common goal while not 
losing their individuality. Alliances are a way to collect rewards of team effort. 
Alliances are often confused with mergers, acquisitions and outsourcing
107. Although there are 
similarities in the conditions under which a business may consider these solutions, they are far 
from being the same. Mergers and acquisitions determine permanent changes in the structural 
mode  in  which  the  company  exists.  Outsourcing  is  simply  a  way  to  acquire  a  functional 
                                                       
105 Steve Steinhilber –  Strategic Alliances: Three Ways to Make Them Work  , 2008, p. 58.   
106  Danciu,  Victor  –  International  Marketing.  From  traditional  to  global,  Economic  Press,  Bucharest, 
2001, p. 244. 
107 Stephen I. Glover, Craig M. Wasserman – Partnerships, Joint Ventures & Strategic Alliances  , 2003, p. 
1127. 203 
 
company. An alliance is a business-to-business collaboration. Another term that is commonly 
used in conjunction with the alliance is establishing a business network. 
Rosabeth Moss Kanter, a professor at Harvard University, having an experience of over 20 years 
in  various  companies  participating  in  strategic  alliances  and  partnerships,  compares  these 
alliances with different couples’s marriages. Such alliances are seen as equivalent of corporate 
"friends with benefits"
108. The partners combine their forces to achieve their strategic objectives 
without a marriage or engagement. Commitment is a little over a chum to share the rent, but not 
much. For example, some alliances between airlines allow links - loyalty programs to customers - 
but also the continuation of competition; for example, American Airlines and British Airways 
compete across the Atlantic, while OneWorld Alliance partners globally. The smart ones can take 
advantage of the chance to peek inside the operations of a partner to learn new skills. This was a 
goal of NUMMI, the former alliance between General Motors and Toyota to make small cars, 
Toyota has received many skills learned through this alliance. 
 
The methodology for establishing a strategic alliance  
Strategic alliances are becoming increasingly more and are a common tool for expanding the 
company. Businesses use strategic alliances to: 
- obtain advantages of scale;  
- increasing competitiveness of domestic and global markets;  
- products development; 
- developing new business opportunities through new products and services;  
- expansion and market development; 
- increasing exports; 
- diversification and creation of new business; 
- reducing costs.  
Literature presents mostly as motivations: entering new markets, develop business in a particular 
area, sharing risks, reducing costs of research – development, partners' experience, etc. 
To fully understand how they operate and expand these strategic alliances, we should explain 
why they appeared on the market. Earnings that such alliances generate are determined, in most 
cases, by the access to a particular technology or a management system. Companies can reach a 
market  without  the  need  to  form  their  own  distribution  channels  or  can  run  an  efficient 
production without further investment in a factory, etc. 
However, because of the risk of loss of control over the know-how, we can ask what alternative 
forms of organization - the license, its subsidiaries, mergers - have proved to be insufficient. 
Reasons given by companies were: the size of investments required, the time needed by the 
company to make its presence felt on the market and less exposure to risk.
109         
There are two important factors in the expansion of these alliances, factors brought into question 
more often in recent years:  
- first factor go to the grind control
110: the technology and implicit know-how is spreading faster 
than  ever  and  production  processes  involving  a  particular  technology  is  copied  through 
benchmarking; under these conditions the companies have access to existing technology on the 
market in question simply by their presence here; 
                                                       
108 *** - Harvard Business Review on Strategic Alliances    by Harvard Business School Press - 2003 – p. 
124. 
109 Hamel, Gary; Yves, Doz; Prahalad, C. K. – Collaborate with Your Competitors and Win, Harvard 
Business Review, January – February 1989, p. 139. 
110  Johansson,  Johny  –  International  Alliances:  Why  Now  ?,  Journal  of  the  Academy  of  Marketing 
Science, Fall, 1985, p. 56. 204 
 
- the second factor goes to the urgent need to compete in several markets simultaneously; this 
presence is necessary to analyze customers and competitors monitoring, in these circumstances 
strategic alliances allow firms to expand resources management. 
Once taken the decision to form an alliance is needed to determine the factors that led to the 
decision, what do you look through this alliance? Typical business objectives can be either: the 
production capacity or the technological expertise. Some criteria to be considered are: corporate 
culture, hidden agendas, and internal commitment. 
For businesses seeking ways more complex there are many companies specialized in arranging 
strategic alliances. Association of Strategic Alliances is a non-profit organization dedicated to 
managing  resources,  exchange  of  best  practices,  and  supporting  professional development  of 
those involved in strategic alliances. They provide information on strategic alliances and links to 
members who are professionals in the organization of alliances. 
In essence, to form a strategic alliance, the companies should: 
- define their business vision and strategy to understand how an alliance fits their objectives;  
- evaluate and select potential partners, process based on the level of synergy and capacity of 
businesses to work together; 
- develop a working relationship and mutual recognition of potential opportunities to partner;  
-  negotiate  and  implement  a  formal  agreement,  which  includes  systems  for  monitoring 
performance.  
Alliances must be part of any plan as the recession continues. For new companies and smaller 
organizations, alliances can reduce costs with dual activities, while enabling the parties to pursue 
their own paths. Smaller organizations can reach through a network, in places where they were 
never able to reach on their own. Non-profit organizations can form strategic alliances to share 
potential donors or the offices’ costs. 
It looks so tempting. But alliances are fragile and difficult to make to last. 
Chrysler has received an ultimatum from the Obama’s administration: to complete a strategic 
alliance with Fiat or otherwise is threatened to leave the business. Indeed, they lost an alliance 
with Nissan, which was part of the bail proposal presented by the Chrysler in November. So 
Chrysler could find a partnership with Fiat its last hope for sustainability. Expected benefits 
include scale economies by using common platforms for uncompetitive products, access to new 
global markets for Chrysler, and other brands for Chrysler dealers in the U.S. To achieve all this 
without selling Chrysler back from a foreign owner, it’s recommended an alliance rather than a 
merger.  
The “8 I’s” concept, of  professor Rosabeth Moss Kanter
111 identifies factors that make alliances 
and partnerships to succeed, bringing benefits to all parties: 
1. Individual excellence. Both parties must be strong, because weak partners can’t raise each 
other.   
2. Importance. The relationship must have strategic importance. If it is occasionally it does not 
worth the trouble. 
3. Interdependence. The most powerful and lasting alliances arise between the parties that are 
different in some respects and need each other to carry out an activity that would not carry 
otherwise.  
4. Investment. A sign of commitment is the willingness to invest in the partner’s success. 
5. Information. Transparency helps to build a solid relationship. If you do not want your partner 
to know too much about you, why walk into an alliance? 
6. Integration. There must be many points of contact between organizations that link them in 
common activities.  
                                                       
111 *** - Harvard Business Review on Strategic Alliances    by Harvard Business School Press - 2002 – p. 
86. 205 
 
7. Institutionalization. A formal structure and the governing board shall ensure objectivity, and 
that there are considered also the alliance’s interests, not only of each company separately.  
8. Integrity. Trust is essential. Alliance tears through processes and conflict when partners do not 
act ethically towards one another or not endeavor to contribute to the success of others.  
Therefore Chrysler has a long way to go to profit from a relationship with Fiat. 
Alliances seem a way out for organizations that wish to remain independent but need to reduce 
costs, to enable larger scale or to obtain rapid a largest segment of the market. Seems easy, but 
still is difficult to do.  
 
Benefits of strategic alliances vs. disadvantages their  
Strategic alliances are tool for implementing corporate goals. Although no alliance can provide 
all the objectives of a company, when achieved, alliances may result in the following benefits
112:  
- access to new distribution channels: an alliance can be structured so as to give a company 
access  to  new  channels  of  distribution,  which  otherwise  would  be  difficult  or  costly  for 
penetrated; 
- access to new technologies: many alliances are being made to give it to companies to new 
technologies through licensing or other contractual types: 
- access to capital: one of the main reasons why small businesses turn to alliances is just that, so 
they have access to new sources of funding for growth and development of new products or 
services;  
- access to international markets: in a global economy, multinational alliances that allow the 
penetration of international markets present real benefits; alliance with a company that has assets 
already on the foreign market, who knows the culture and the competition on the market, offers 
much more security and opportunity for success than trying to penetrate that market individually;   
- reducing costs and uncertainty: alliance with a partner can lead to sharing the costs and risks 
caused by a new product, entering a new market, etc. 
- increase competitive ability;  
- increase the credibility: for a newly established company can be beneficial the alliance with a 
partner already known, which enjoys market recognition; 
- access to new or existing products. 
All these indisputable advantages of strategic alliances have increased their number in a very 
dynamic rhythm. In order to create benefits for their members is necessary that the 8 written 
principles to be respected just by all members. Otherwise, we are dealing with "reverse of the 
medal”, namely instead of the benefits members will feel the disadvantages of strategic alliances: 
-  lack  of  total  control:  by  definition,  alliances  involve  the  sharing  of  control  of  common 
objectives and implementation strategy for achieving them; lack of control over the business can 
create significant problem if there are misunderstandings or differences between the alliance 
partners;  
- high rate of failure: if it does not start with good intentions from both sides, there is a high rate 
of failure in these transactions; failure is often due to differences in organizational culture, non 
realistic expectations, inability to agree on the direction or decisions, or the inability of a party to 
bring the expected benefits (e.g. new technology, customers, distribution channels);  
-  adverse  impact  on  the  flexibility  of  the  participants:  alliances  may  limit  the  flexibility  of 
participants,  not  letting  them  to  take  part  in  other  alliance,  acquisitions,  mergers  or  other 
transactions; the absolute key in this is the commitments made by the parties of the alliance by 
signing the contract; the contract may be set to ban the competition to the partner or to ally; 
                                                       
112 ***  - How to Form and Manage Successful Strategic Alliances    de Canada Industry, Science and 
Technology Canada, Strategic Business Research Group – 1990, p. 42. 206 
 
- depending on partner: alliances may cause dependence against the other partner; this affects 
performance and affects the dependent partner’s performance, leading ultimately to the failure of 
the weak partner;  
- commitment of time and resources: successful alliances require a strong commitment to staff 
and management and a significant amount of capital and other resources; sometimes it becomes 
difficult for partners to invest time in league resources, and also can distract managers from 
activities outside the alliance.  
Given  the  many  disadvantages  of  strategic  alliances,  and  especially  an  increased  risk  of 
irreversibly  damaging  the  company  by  any  small  distraction,  a  very  detailed analysis  of  the 
partner and contract goals appears to be more than necessary. 
Regardless  of  the  view  formulated  should  be  noted  that  these  strategic  alliances  with  any 
company can achieve goals that before were not possible to achieve on an individual basis. In 
these circumstances we can say that the strategic alliance is an effective response to changing 
conditions on the world market. 
Regardless  of  how  to  implement  the  market,  an  international  strategic  alliance  is  usually  a 
collaboration between companies, even between potential competitors, cooperation which can 
include  any  part  of  the  value  chain,  although  the  focus  is  limited  to  production,  research  - 
development and distribution. 
 
Bibliography 
1. Edwin Richard Rigsbee - Developing strategic alliances   , Harvard Business School Press - 
1999  
2. Hamel, Gary; Yves, Doz; Prahalad, C. K. - Collaborate with Your Competitors and Win, 
Harvard Business Review, January – February 1989 
3. Johansson, Johny – International Alliances: Why Now ?, Journal of the Academy of Marketing 
Science, Fall, 1985 
4. Michael Y. Yoshino - Strategic alliances: an entrepreneurial approach to globalization   , U. 
Srinivasa Rangan - 1995  
5. Stephen I. Glover, Craig M. Wasserman - Partnerships, Joint Ventures & Strategic Alliances  , 
Harvard Business School Press - 2003  
6. Steve Steinhilber - Strategic Alliances: Three Ways to Make Them Work, Harvard Business 
School Press 2008 
7. *** - Harvard Business Review on Strategic Alliances    by Harvard Business School Press - 
2003  
8. *** - Harvard Business Review on Strategic Alliances    by Harvard Business School Press - 
2002  
9. *** - How to Form and Manage Successful Strategic Alliances   from Canada Industry, Science 
and Technology Canada, Strategic Business Research Group – 1990. 
   

Business Review on Strategic Alliances by

How to Form and Manage Successful Strategic Alliances from Canada Industry,

International Alliances: Why Now ?,

Rigsbee - Developing strategic alliances ,

Strategic Alliances: Three Ways to Make Them Work,

Yoshino - Strategic alliances: an entrepreneurial approach to globalization , U. Srinivasa Rangan -

STRATEGIC ALLIANCES: FROM SUCCES TO FAILURE

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STRATEGIC ALLIANCES: FROM SUCCES TO FAILURE

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