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What is a Strategic Alliance?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 27 August 2016
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A strategic alliance is an agreement between two separate business entities to pool resources in order to achieve a common goal. In strategic alliances, the participants remain separate and do not form a new entity as with joint ventures and some other types of partnerships. They retain autonomy and usually embark on finite projects, rather than an ongoing business relationship. Strategic alliances can be powerful and useful business tools when they are structured well and the participants take the time to work out a functional agreement with one another.

In a strategic alliance, the participants can pool knowledge, equipment, and expertise. Companies may co-invent or co-produce a product by combining their strengths. Likewise, companies can share orders from suppliers, share shipping containers, and otherwise pool available resources. Working together cuts down on costs for the participants and may provide people with access to new business opportunities. Combining resources can allow individual companies in an alliance to become stronger than competitors outside the alliance.

Strategic alliances are increasingly used by companies that want to find a way to become more competitive. Working strategically, even with a competitor, provides a company with an access to more of the market share. As companies compete in a global business environment, smaller entities may have difficulty thriving unless they are willing to work strategically. Forming strategic alliances also provides people with access to new expertise and technology that might not otherwise be available.

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This style of collaboration starts with an approach from one company to another to discuss the possibilities of a strategic alliance. The two companies outline goals they would like to achieve and the terms of the alliance. The discussions can include working out the details of licensing intellectual property, allowing employees from one company into secured areas of another, and so forth. Once the goals are established, the companies can work together until the goals have been achieved or the companies feel that the alliance is not working.

Companies can be involved in strategic alliances with multiple companies and other entities at the same time. It is also possible for an alliance to include more than two companies. A well-designed strategic alliance will be mutually beneficial to all parties. The members have more to gain by working together in a strategic alliance than they do by working alone or in opposition, whether they are developing pharmaceutical products or working on the next generation of mobile telephone.

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