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What happens when a digital media organization collaborates with a non-profit animal shelter to generate engaging content? A bunch of adorable critters find a home as content viewership soars. That’s what happened when Buzzfeed formed a strategic alliance with Best Friends Animal Society. A video showing actor Emma Watson playing with cute little kittens from Best Friends Animal Society while answering fan questions became one of the most popular posts on Buzzfeed. Best Friends Animal Society was able to leverage Buzzfeed’s audience to drive adoptions of not only its kittens but also other animals housed at the center.
But what is the meaning of a strategic alliance? Let’s find out. We’ll also explore a few examples of successful strategic alliances and examine various types of strategic alliances.
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Strategic Alliance Definition
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Examples Of Strategic Alliance
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Types Of Strategic Alliance
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Advantages And Disadvantages Of Strategic Alliance
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Build And Sustain Partnerships
Strategic Alliance Definition
A strategic alliance refers to a business agreement where two organizations join forces to accomplish a mutually beneficial goal. Each participating organization preserves its independence and autonomy in a strategic alliance, remaining an individual entity while working toward shared objectives. Organizations may choose to establish a strategic alliance to break into a new market segment, expand their customer base, gain a competitive advantage, improve product offerings and grow business.
Examples Of Strategic Alliance
As evident from the definition of strategic alliance, when organizations come together to achieve a common goal, they benefit from greater market reach, improved brand image and recognition. Let’s look at a few examples of strategic alliances that have defined success:
Spotify And Uber
A prominent strategic alliance example is the partnership between Spotify and Uber. The strategic alliance between the two organizations allows Uber users to connect to Spotify and stream their favorite music while on a ride. Not only does this personalized experience provide Uber with a significant edge over its competitors but it also helps Spotify gain access to a wider customer base. Uber riders are encouraged to subscribe to Spotify Premium for a wider range of music.
MasterCard And Apple Pay
Apple’s collaboration with MasterCard is another strategic alliance example. Apple partnered with MasterCard while launching the Apple Pay system for contactless transactions. MasterCard customers could pair their card with an iPhone to make payments without having to use a physical card. Through this strategic alliance, MasterCard was able to up its brand presence by associating itself with a leading-edge organization such as Apple. MasterCard’s expertise helped Apple refine Apple Pay by addressing bugs and resolving issues for customers promptly and efficiently.
Chevrolet And Disney
Chevrolet and Disney’s partnership to create Test Track at Walt Disney World’s EPCOT theme park is a popular strategic alliance example. Test Track is a theme park attraction that allows people to design their own personalized Chevrolet concept vehicle and then go for a ride that serves as a test drive of the vehicle they designed. Customers can not only step into the shoes of a Chevrolet designer but also experience the thrill of a theme park ride with hairpin turns, sudden drops and turbo launches. As a result of the strategic alliance, Disney can utilize Chevrolet’s expertise to offer their customers a unique and immersive ride while Chevrolet gains tremendous brand exposure.
Vodafone India And ICICI Bank
The partnership between Vodafone India and ICICI Bank is a prominent strategic alliance example. The two organizations joined forces to launch m-pesa, a mobile money transfer and payments service that helps customers access a wide range of offerings, including cash deposit and withdrawal, money transfer and mobile recharge. ICICI Bank gained access to Vodafone India’s extensive market reach. At the same time, Vodafone India utilized ICICI Bank’s technological innovation in banking to deliver a unique offering to its customers in the form of secure financial transactions.
Barnes & Noble And Starbucks
What’s a better combo than books and coffee? In 1993, Starbucks established a strategic alliance with American bookstore chain Barnes & Noble, opening Starbucks outlets within Barnes & Noble stores. People browsing for books at Barnes & Noble began to stop at Starbucks for a coffee break, while Starbucks drew in people wanting their daily dose of coffee into the bookstore. Both organizations benefited from a greater customer base and were able to expand their market reach significantly. The partnership also allowed Barnes & Noble to survive the test of time and keep operating as a brick-and-mortar bookstore even with the surge of digital formats. This is another significant strategic alliance example.
The above examples show how a strategic alliance has the potential to drive significant revenue and growth for the organizations involved. However, organizations must be careful while choosing a partner to ensure their partner brings in complementary skill sets and expertise to the table. This helps avoid conflict of interest.
Types Of Strategic Alliance
Now that we know the meaning of a strategic alliance and have gone through a few examples of successful strategic alliances, let’s look at the different types of strategic alliance:
Equity Strategic Alliance
When an organization buys equity in another organization, the two organizations are said to have formed an equity strategic alliance. Such a transaction is also known as partial acquisition. An equity strategic alliance is also formed when each participating organization purchases equity in each other’s business in a cross-equity transaction.
Non-Equity Strategic Alliance
A non-equity strategic alliance is one of the most common types of strategic alliance. It happens when two organizations sign an agreement to pool resources and expertise to create synergy and work toward a common objective without establishing a separate entity or purchasing equity. Such an alliance is more flexible compared to an equity strategic alliance.
Joint Venture
Among the other prominent types of strategic alliance is a joint venture. In a joint venture, two or more organizations come together to share resources and combine expertise for a specified period of time to execute a specific task, such as a new business initiative or project. The ownership of the new business initiative and the profits and/or losses associated with it are divided among the participating organizations. Often, a joint venture may result in forming a new separate entity, which is known as a child organization of the two-parent organizations.
Selecting the right type of strategic alliance is crucial to the success of the new business undertaking. Organizations need to look at their own unique business needs and objectives to decide which type of strategic alliance would benefit them the most. Irrespective of the type, the essential meaning of a strategic alliance is to help each participating organization share project costs, improve operational processes, overcome threats in the market, mitigate risks and maintain its market position.
Advantages And Disadvantages Of Strategic Alliance
Everything has its pros and cons, and a strategic alliance is no exception. Let’s explore a few advantages and disadvantages of a strategic alliance:
Advantages
- A strategic alliance helps an organization break into new sectors and market segments. For instance, a strategic alliance with a foreign organization opens new doors for a business to access overseas markets and expand their customer base.
- When organizations establish a strategic alliance, they combine their resources and expertise to accomplish a shared goal. The meaning of a strategic alliance is that it allows each participating organization to learn from one another’s skills and experience and enhance their service offerings.
- A strategic alliance helps organizations establish economies of scale by lowering costs and increasing production through shared resources.
Disadvantages
- Each participating organization in a strategic alliance is different with its own unique work culture. When such organizations come together, this may result in a culture clash with arguments arising about preferring one organization’s policies to the other’s.
- A strategic alliance runs the risk of falling prey to unequal participation of the organizations involved. One of the organizations may find itself contributing more time to the venture compared to the other without enjoying greater benefits.
- Lack of trust and communication between participating organizations in a strategic alliance can lead to conflict.
A strategic alliance can significantly boost an organization’s status in a fast-paced business environment by allowing it to innovate and surpass its competitors rapidly. However, it also has the potential to veer off track if all the participating organizations don’t commit fully to the new business idea and fail to sufficiently pull their weight.
Build And Sustain Partnerships
In a world still reeling from the impact of COVID-19, organizations are looking to form strategic alliances more than ever to drive growth and remain a step ahead of the competition. Building, nurturing and sustaining business relationships will be vital in establishing impactful partnerships in the long run. Harappa’s High Performing Leaders program can help the leaders of an organization do just that.
Built on Harappa’s signature 10-on-10 pedagogy, the program offers a carefully curated selection of frameworks such as the Thomas-Kilmann Conflict Mode Instrument, the Skill-Will Matrix and Design Thinking. Senior professionals are not only able to foster diversity in teams across work styles and geographies but also master influencing clients to expand the business footprint. With Thrive Skills such as Prudent Risk-Taking, Instinctive Adaptability and Win-Win Negotiation, they learn to navigate ambiguity, decode the strategic big picture and communicate with impact. Sign up your organization today for Harappa’s High Performing Leaders program and help your leaders redefine the meaning of a strategic alliance.
