Strategic Alliances and Small Business

By Hoffman, D. Lynn; Viswanathan, R. | Journal of Business and Entrepreneurship, March 1997 | Go to article overview

Strategic Alliances and Small Business


Hoffman, D. Lynn, Viswanathan, R., Journal of Business and Entrepreneurship


ABSTRACT

Strategic alliance concept is the development of long term relationships that meet the mutual needs of the strategic partners. The number of strategic alliances has increased steadily over the past two decades. The six distinguishing ingredients that have been identified in this regard are: intent to maintain a long term partnership; regular, ongoing communications about long term objectives and strategic decisions; open communication at all levels of the organization; shared individual and mutual objectives; trust and openness; and long term commitments to manage and nurture the alliance. The driving forces behind the drive toward strategic alliances are globalization of markets, increasing rate of technological change, increased market fragmentation, need to serve current markets better and create new markets, and increased customer demands for quality, service and timeliness. In order for a strategic alliance to be successfull, each potential partner should clarify its expectations and define its commitment levels, analyze its distinctive competencies, perform a comprehensive search for partners, and develop a high level of mutual trust and communication.

INTRODUCTION

Small businesses are initiating strategic alliances to gain access to capital, enter new markets, seek technology, and compete internationally. These alliances allow them to pursue markets, customers, or ventures they could not do themselves, sometimes with capital from the alliance. Many large companies are initiating alliances for similar reasons, while some are reducing the number of business partners and forming alliances with the elite remainder. They are also creating strategic alliances with those small businesses who can bring some critical expertise, product or service, technology, and/or market access that is outside the larger company's core competencies.

These trends will positively impact those small businesses willing and able to change and work with other businesses and will negatively impact those who do not understand the rules of the game. Small businesses unaware of these new trends will be losers in this new environment of competition via strategic alliances.

BACKGROUND TO STRATEGIC ALLIANCES

Historically, businesses have developed partnerships, joint ventures, contractual, and other relationships with each other to assure a necessary flow of resources and access to markets, technology, and clear distribution channels (Collins & Doorley, 1991; Lewis, 1990a; Goldenberg, 1988). The distinction between these relationships and strategic alliances is the development of long-term relationships that meet the mutual needs of the new strategic partners. No single form for strategic alliances exists because they encompass a myriad of different cooperative relationships (Chan & Heide, 1993; Lewis, 1990a). The researchers have identified six distinguishing ingredients of alliances, which are: (a) the intent to maintain a long term partnership, (b) regular ongoing communication about long term objectives and strategic direction (Sinderman, 1994; Lewis, 1990b), (c) open communications at all levels (Sinderman, 1994), (d) shared individual and mutual objectives, (e) trust and openness (Sinderman, 1994), and (f) long term commitments to manage and nurture the alliance (Waters, Peters, & Dess, 1994; Partow, 1994). An example of a successful alliance encompassing all these ingredients is the Ford-Mazda alliance that enjoys top to bottom organizational support and is actively managed (Waters, et al., 1994). Instead of a single objective such as a new joint product being the purpose of their alliance, Ford and Mazda believe that an actively nurtured alliance will discover new areas for future collaboration.

The number of strategic alliances between firms has increased steadily with the largest increase in computer hardware and software and consumer related industries (Henricks, 1992). …

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