An oil and natural gas company might form a strategic alliance with a research l
ID: 2819831 • Letter: A
Question
An oil and natural gas company might form a strategic alliance with a research laboratory to develop more commercially viable recovery processes. A clothing retailer might form a strategic alliance with a single clothing manufacturer to ensure consistent quality and sizing. A major website could form a strategic alliance with an analytics company to improve its marketing efforts. Now,
What is Strategic Alliance?
An alliance becomes “strategic,” as opposed to just a convenient business arrangement, when it serves which purposes?
Explanation / Answer
A strategic alliance is an agreement between two business entitites that lead them to work towards achieving a common goal. The arrangement is formal and the enitites work collaboratively to achieve the particular goal. The goal is startegic and may serve a purpose to a relevant objective. Usually this includes sharing of financial liabilities and income, pooling in of the resources, Sharing of risk and control and a symbiotic relationship between the entities. This is how an alliance becomes strategic as opposed to conventional arrangements whre there is no sharing of risks and rewards.
Now this alliance can be in sales, distribution, production, or a collaboration in research and development of a product or a technology. For example a softdrinks company may enter into an alliance with a major sugar producing company to provide high quality sugar and gurantee its production upto a level. This way both the companies can benefit. The softdrink company can have wasy access to raw material and the sugar company will have a guranteed amount of sale.