The Strategic Logic of Alliances

The Strategic Logic of Alliances

          
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The Strategic Logic of Alliances

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    • Alliances can be useful in situations of uncertainty and in markets with growth opportunities that a company cannot or does not want to pursue alone.
    • However, advantages of shared risk are often offset by unclear governance and lack of genuine commitment.
    • For this reason, alliances must be managed carefully.
     

    Alliances have become an increasingly important— and complex—part of corporate strategy. According to one estimate, approximately 30 percent of global corporate revenues in 2005 were a direct result of alliances—up from only 2 percent in 1980. And despite a sharp falloff in recent years due to the economic downturn that followed the Internet boom, corporate alliances are poised for a comeback. In 2005 the total number of new deals surpassed that in 2004 by about 15 percent. As more and more companies shift their attention to growth after a period of consolidation and restructuring, it’s likely that the upward swing in alliances will continue.

    To create successful alliances, however, a company must understand when alliances make strategic sense—and how to manage them for business results. Alliances can be extremely useful in situations of great uncertainty and in markets with growth opportunities that a company either cannot or does not want to pursue on its own. But the advantages of shared risk are often offset by unclear governance and lack of genuine commitment; for that reason, alliances must be managed carefully.

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