What are the advantages and disadvantages of stratigic business alliance?

Answer 1

The economist Michael Porter has criticisms of alliances and I take much the same view.

There is no reason that such alliances should be bad but there are reason they could be bad.

The premise is simple enough. I need something done for my business that I cannot do myself (or I can not do well). I hire someone who is good at this task. I am happy because I get what I want and the alliance partner is happy because they make money.

However, the alliance partner is a profit organization and persons who work for it have a vested interest in maximizing its profit. In reality, sometimes the alliance partner is going to cut corners in order to achieve more gain. Certainly the temptation will be there (perhaps to cover losses on another project).

This should be visible to the other partner but often it won't be because increasingly, companies choose alliance partners who have expertise that they themselves don't. Worse still, some companies divest themselves of skills they believe they can obtain through an alliance. This leaves them exposed to be taken advantage of by people who will exploit their lack of specialized knowledge.

There may even be situations where the alliance partner might take over the other company. A bit like opening the door to invite your assassin inside.

I believe the most exposed groups to the dangers of alliances are government entities who are often completely devoid of any expertise in the field of the alliance epartner.