Strategic Alliances Essay

540 WordsSep 23, 20143 Pages
This essay will compare internal development (organic development) with strategic alliances and look at whether it is better for the organisation to go it alone or partner with other organisations. Internal development is where strategies are developed by building up the organisation’s own resource base and competences, Johnson and Scholes, (1999). Strategic alliances are when two more parties form a collaborative agreement to exchange or combine resources to pursue a development strategy, but remain separate legal entities, Bennett (1996). Joint ventures, licensing, networks are examples of types of alliances. There are many benefits that can be achieved from going it alone that may not be available through an alliance. First of all, when an organisation develops a highly technical product the organisation through the process of development, may begin to understand its organisation better, and thus learn ways of building up or acquiring competences. This type of learning and development may not be as extensive if alliance partners are involved in the development process. Similarly when an organisation enters new markets through direct investment (going it alone) it can gain advantages (e.g. local market knowledge, competences in selling to new markets) that it may not have gained through working through distribution alliance partners. By going it alone – the organisation receives the full benefits of undertaking a development venture – including all the profits, patents, technical know-how and resulting competitive advantages. With alliances, depending on the agreement, any success (profits, patents, know-how) has to be shared between partners. By undertaking internal development the organisations can exercise greater co-ordination and control over the investment and the objectives of development. With an alliance (e.g. JV), however, organisations

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