WHAT KIND OF COMPANIES STAND TO GAIN THE MOST FROM ENTERING INTO Essay

WHAT KIND OF COMPANIES STAND TO GAIN THE MOST FROM ENTERING INTO STRATEGIC ALLIANCE WITH POTENTIAL COMPETITORS WHY - Essay Example Strategic alliance refers to the joint decision of two firms to share a part of their resources and abilities mutually among them to acquire competitive strength in the market. In the business world, strategic alliance between firms is an increasing trend. Sometimes through these strategic alliances, firms may get monopolistic competitive position, which is not beneficial for the economy. The strategic alliance option is highly adoptive in technology based industries for which there involve huge cost for research and development and high risk of failure. Thus sharing of the technological resources facilitated through strategic alliance will helps firms to share the risk also. In industries, where cost of doing business are high, also adopt strategic alliance as a tool for reducing the operating cost by economies of scale in operation. In the period of global competition, the industries realize that through sharing of valuable resources between their competitors would contribute to th eir better market performance. The successful industries use higher level strategic alliance to improve their operational efficiency. (Strategic Alliance 2009). â€Å"Strategic alliances are agreements between companies (partners) to reach objectives of a common interest. Alliances are among the various options which companies can use to achieve their goals; they are based on cooperation between companies. The description â€Å"strategic† limits the field to alliances that are important to the partners and have broad horizons.† (Pellicelli 2003). Strategic alliance provides capability to access the technologies and other facilities of competitors. It allows the business firms to progress rapidly by using the valuable resources of competitors. Through the alliance, new ideas about advanced products can be generated as it supports innovation. It helps to diminish the impact of risk of failure of the project by sharing it with