Strategic Alliance between two companies Essay Example | Topics and Well Written Essays - 2000 words - 2

Strategic Alliance between two companies - Essay Example Consequently, the company sets up a strategic alliance with the latter that already has an established distribution network in the desired country of trade. This is a beneficial arrangement for both as the former company is able to expand its distribution network and the latter can improvise its existing product lines (Papageorgiou, Rotstein and Shah, 2001). The benefits that a company derives from a strategic alliance are the ability to hedge against uncertain and unprofitable situations, tap the potential of a new market, increase the knowledge base and obtain access to exclusive and critical information, which in turn strengthens its competitive position in the international market. A company is able to minimise on the transaction and distribution costs by way of engaging in strategic alliance. A strategic alliance also enables a company to be prompt and effective in pursuing an opportunity and to obtain resources that are absent. A company stabilises its resource base by leveragi ng the knowledge and resource base of the other. As a result, the company is able to gain easier access in the new markets and face lesser barriers to entry during an expansion plan. Strategic alliances, however, has to be formed in a very careful manner as these often fall through owing to mistrust between the two partners, especially when a large amount of competitive or exclusive information is involved. The benefits that a company derives from a strategic alliance are the ability to hedge against uncertain and unprofitable situations.