strategic alliance


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Strategic alliance

Collaboration between two or more companies designed to achieve some corporate objective. May include international licensing agreements, management contracts, or joint ventures.

Strategic Alliance

Any agreement where two or more companies agree to cooperate with each other to achieve a certain, mutually beneficial goal. However, a strategic alliance is not a merger, and the involved companies remain separate. A common strategic alliance is a joint venture, where the involved companies partner together to conduct a certain project. Other strategic alliances include management contracts and licensing agreements.

strategic alliance

the combining together of the resources and competencies of two or more firms in a particular activity (but who continue to function separately in all other respects). Strategic alliances can be contractually based or ownership based (with each partner putting equity into the business) and can take a number of formats, for example, co-marketing (with one firm undertaking to market the product supplied by the other firm); co-production (with one firm undertaking to manufacture a product using components supplied by the other firm); and joint research and development (cross fertilization of ideas).

Strategic alliances can enable firms to obtain access to technologies, know-how, capital and markets to augment their own resources and capabilities. Pooling resources and capabilities in this way enables firms to achieve synergistic effects otherwise unobtainable on an individual basis. International alliances in particular can assist MULTINATIONAL ENTERPRISES to ensure that products reach the market place more quickly and more effectively, especially where products need to be modified to meet local regulations covering product standards and packaging, and the preferences of local customers.

While strategic alliances can yield positive benefits to partners there are some potential drawbacks. Arm's length cooperation agreements need careful planning and nurturing and involve ‘agency’ costs in negotiating, securing and monitoring CONTRACTS; they also require the establishment of mutual trust and commitment. Joint ventures go some way to implementing a stronger link between partners, but problems of joint control of operations may again limit the effectiveness of alliance. See JOINT VENTURE, FOREIGN MARKET SERVICING STRATEGY, EXTERNAL GROWTH, LICENCE.

strategic alliance

a partnership between two or more companies who combine their efforts in a particular business activity while retaining their independence as separate companies. Strategic alliances take two main forms:
  1. contractual agreements in which partners, for example, agree to cooperate to make components or complete products (coproduction), to distribute and market each other's products (co-marketing) and to develop new products (joint research and development). These are referred to as ‘nonequity ventures’;
  2. JOINT VENTURES involving the formation of a subsidiary company that is owned by the ‘parent’ firms, each of which provides a capital investment in the business. These are referred to as ‘equity ventures’.

Strategic alliances can enable firms to obtain access to technologies, know-how, capital and markets to augment their own resources and capabilities. Pooling resources and capabilities in this way enables firms to achieve synergistic effects otherwise unobtainable on an individual basis. International alliances in particular can assist MULTINATIONAL COMPANIES to ensure that products reach the market place more quickly and more effectively, especially where products need to be modified to meet local regulations covering product standards and packaging and the preferences of local customers.

While strategic alliances can yield positive benefits to partners, there are some potential drawbacks. Arm‘s-length cooperation agreements need careful planning and nurturing and involve ‘agency’ costs in negotiating, securing and monitoring CONTRACTS; they also require the establishment of mutual trust and commitment. Joint ventures go some way to implementing a stronger link between partners, but problems of joint control of operations may again limit the effectiveness of the alliance. See EXTERNAL GROWTH, LICENCE, FOREIGN MARKET SERVICE STRATEGY.

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Square Enix announced that the company and Tencent Holdings have signed a letter of intent to create a strategic alliance between the high-quality content provider and the mega internet service provider.
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State or Country: MA Category: Strategic Alliance Consultants Listing #:55521 (B) [To receive the contact name for this listing, reference the five-digit number which follows each listing and e-mail to FirstList, mergers@firstlist.com.
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