Need to learn about strategic alliances and why it is important for business. It is said that two hands is always better than one and the same rule is also followed in the business world where you alone can’t achieve your goals against a tough competition, you can do so by making some strategic alliances.
Most of the times, alliances are supposed to contribute more to your success than most of other strategies that your brand is using. So, one must take extreme care while going through the list of alliances that are under consideration. Because just one wrong alliance is sufficient to weaken up your brand’s success base and so does yours. That’s why we are putting up a list of five most important criterion points that can help you in formulating a powerful alliance which can turn your dreams of success into reality.
Criteria for Strategic Alliances
- Vitality to brand’s goals
The most important point to keep in your mind before you steps ahead in an alliance pact with any other brand, you just need to make sure that it serves your objectives. Well! That objective can either be revenue generation by joint “go-to-market approach” or gaining huge recognition in the international market or it can also be looking for a partnership that accelerates the progress towards devising that ultimate product that is able to get the required the results.
The idea of the alliance is limited to not just one brand at a time, in fact different brands can get interconnected in the form of a complex web where one’s objectives are other’s necessities. This complex interconnection of brands is also known by the name of “constellation”. The best example of such a network is “Sun Microsystems” consisting of numerous alliances that generate enormous revenues to the business of corporation by acting as an extremely effective marketing channel.
Partnering up with a high potential brand can pace up the progress that’s made by your brand immensely. Think of the recognition brought to your brand by a unique solution which is the outcome of your strategic alliances and that solution can be anything ranging from the latest kitchen product that can prove to be handy to customers or any electrical gadget that has the ability to change the lifestyle of customers.
- Gaining Competitive Advantage
Getting your brand an upper hand in the competitive market and then, keeping that lead at the place for the long is what most of the brands seek. Let’s say you partner up with a company that’s better in providing quality resources and there is another which is able to maximize your earnings because of its enormous customer base, while your competitor does not have access at least to one of them, then that puts you at a greater competitive advantage than your competitor.
This goal is often on the hit list of learning alliances. In this kind of alliance, the brand takes help of its ally partner, greater in experience, to increase the skill set of its labor force. This objective is better achieved if you openly discuss this goal before finalizing up your strategic alliances since the conditions can get bad if your partner feels it offensive afterward. Moreover, if brands are related to an adjacent field, then the chances for the future competition are slain down. Furthermore, the learning speed is boosted up similar governance structures whereas overlapping cultures in both of the brands speed up the process.
- Tackling with threats
Even if the purpose of establishing a competitive advantage in the market is not fulfilled by the strategic alliances, there’s still another way to at it and that’s to tackle a competitive threat and putting that to rest. For the purpose of understanding, think of a competition in the market in which you need to set a price lower than the product’s quality and its usage level. Such kind of situation exposes the business to low-price entry vulnerability. But this vulnerability is blocked by the partner who is better at the production of a huge volume of the product.
The same goes for alliances that take place between airlines for sharing routes among carriers mutually. This makes a perfect base of competitive differentiation in the market by ensuring competitive parity in terms of routing as well as timely departures of the customers.
- Long term Benefits
It is also of the extreme importance of looking beyond for what is present today, might not be there in the future. In words of practicality, even though a brand that is unable to be a partner of your company because you don’t need it today, can become your greatest need in the future. This can better be understood by the strategy of a US company, in 1984, that was inclined towards spreading its influence in the outer world, especially Europe. As a matter of fact, the company could have invested to grow up its influence in the Europe but due to the huge possibility of confronting a tough competition in the future, the company became an ally with a distributional company which, already, had built a strong recognition in Europe. This saved the company from the loss that the brand could have suffered in the battle against its competition.
- Risk Moderation
One of the main criterion points that should look over and over again is to choose a partner that relieves you of the risk in the hostile market. Risk reduction becomes the main point of focus for dual sourcing strategies. The main advantage of such strategic alliances is that it ensures the product manufacturers that their product is no longer away from potential customers. Moreover, it also keeps a barricade at higher costs so you are already at a potential advantage that your competition. This makes the business run as smooth as butter.
Well! There do come such situations in which supplier’s product vitality for the brand increases and the ally starts to mischief. To overcome such situations, make sure that you have more than one ally belonging to the same field which is surely going to help you stabilize sudden price fluctuations or quality degradation.