Introduction
Strategic alliances between companies are usually short-term and aimed at resolving local problems. Competitiveness is one of the crucial components for each business, and they all plan their activities to increase it. Alliances are successful only when they increase the competitiveness of each of their members, not when they are long-term and stable. Thus, the company should terminate its participation rather than suffer losses. It means that strategic alliances are temporary by nature, as there are no motivations for the company to realize any goals other than its own.
The Temporary Nature of Strategic Alliances: Understanding the Reasons
Coopetition
The business environment is competitive, and all firms aim to create value. The term coopetition, coined by researchers in the late 20th century, is suitable for describing these specific strategic connections between firms (Gnyawali & Charleton, 2018). They compete and cooperate simultaneously to realize their goals and learn something from their partners’ practices.
Companies mostly see alliances as opportunities to increase their competitiveness rather than help other companies achieve something (O’Dwyer & Gilmore, 2018). No common goals or ideas can be the core of the alliance; the only mutual benefit is usually short-term. If one company is larger than the other, it can acquire it or build a joint venture if the latter is unwilling to sell the company (Wheelen et al., 2018). If both companies are similar in size, they can cooperate to improve their competitiveness, learn something new, and increase their market shares while continuing to compete (Cui et al., 2018). In that way, it is natural for business alliances to be short-term and local.
Possibility of Long-Term Cooperation
Long-term alliances are also possible, but they are stable only when both organizations operate in different areas. For example, a technology company can cooperate with a scientific facility to test its projects and increase its value in research and development (Wheelen et al., 2018). In turn, they provide the facility with better equipment and invest money in it; thus, such an alliance has long-term benefits and can be stable and last for years.
Alliance capability and value can be evaluated to see whether it would be suitable for companies to cooperate, and they mostly do this to compete with more significant market players successfully (O’Dwyer & Gilmore, 2018). During the cooperation, both firms will likely try to understand each other’s practices and learn something from each other for their benefit (Cui et al., 2018). The alliance will probably break as soon as at least one company realizes it can accomplish its goals by itself.
Conclusion
Therefore, corporate strategic alliances can only be long-term when they mutually benefit clearly. In other cases, they will be short and local, aimed at expanding the companies’ capabilities and increasing their values, but not helping each other directly. Competition is an excellent term for such relationships: companies can collectively use some of their facilities and knowledge to increase their competitiveness. However, they always aim to realize their strategic goals, and the company leaves the alliance as soon as it stops generating value.
References
Cui, V., Yang, H., & Vertinsky, I. (2018). Attacking your partners: Strategic alliances and competition between partners in product markets. Strategic Management Journal, 39(12), 3116–3139. Web.
Gnyawali, D. R., & Charleton, T. R. (2018). Nuances in the interplay of competition and cooperation: Towards a theory of coopetition. Journal of Management, 44(7), 2511–2534. Web.
O’Dwyer, M., & Gilmore, A. (2018). Value and alliance capability and the formation of strategic alliances in SMEs: The impact of customer orientation and resource optimisation. Journal of Business Research, 87, 58–68. Web.
Wheelen, T. L., Hunger, D. J., Hoffman, A. N., & Bamford, C. E. (2018). Strategic management and business policy: Globalization, innovation and sustainability (15th ed.). Pearson.