Explain the advantages of Strategic Alliances and Joint Ventures A strategic alliance is a cooperative relationship among two or more firms to pursue a specific endeavor or set of objectives while remaining separate entities. These alliances may be either formal or informal which may involve a written contract. A joint venture is cooperative endeavor entered into by two or more business entities contributing equal equity to form a new legal entity. Some advantages are: to gain capabilities, easier access to target markets, sharing the financial risk, achieving synergy, and competitive advantage. Strategic alliances and joint ventures are two commonly used business partnership structures that are becoming well known in the strategy of leading firms, both large and small. Such cooperative relationships have many potential advantages like the ability to enter new markets, reductions in manufacturing or other costs in the value chain, and developing and diffusing new technologies. An example of entering new markets is provided by the book with Zara, a Spanish clothing company that operates in 70 countries.
Zara expanded into India in 2010 and it was able to do this through a strategic alliance with Tata, an Indian conglomerate. When entering new markets far from its home market, Zara uses local alliance partners to assist in the talks with the different cultural and regulatory environments. With strategic alliances and joint ventures, firms are able to combine capital, value creating activities, or facilities in a means to reduce their costs. SAB Miller and Molson Coors, two brewers in the U.S. illustrate an example of this by creating a joint venture to combine their U.S. brewing operations. The integration of operations gives both the benefit of economies of scale and superior utilization of their facilities. The joint venture, to be known as MillerCoors, will be a much stronger competitor in U.S. brewery than either company can be on its own. Verizon Wireless, a global communications and technology leader, and ILS Technology announced an association where Verizon would combine technology developed by ILS to better its machine to machine data transmission systems.
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