Asset Based Lending | Asset Management | Asset Sell-offs | Business Reengineering | Business Valuation | Cash Flow Management | Corporate Finance | Corporate Restructuring | Equipment Finance | Feasibility Studies | Foreign Subsidiaries | Franchising | Holding Companies | Joint Ventures | Leveraged Buyouts | Licensing | Mergers & Acquistions | Project Finance | Strategic Alliance
|  | | An alternative to a joint venture is a strategic alliance. A strategic alliance is a more flexible concept than a joint venture and refers to a myriad of arrangements between firms whereby they work together for varying periods of time to accomplish a specific goal. Through such alliances links can be readily established and easily disbanded. An organizational entity usually is not created with a strategic alliance, whereas it often is in a joint venture. This may be an advantage because the potential agency costs associated with the managers of the joint venture are not incurred. The added flexibility of strategic alliances may be of special benefit to growing firms because it allows them to quickly establish links when they are needed. These links can often accomplish goals that may require a significant investment and financial resources. This is another reason growing firms, such as high technology companies, may find this alternative of particular benefit.
The downside of alliances is the greater potential for opportunistic behavior by the partners. Companies that share business strategy and business secrets may put these valuable intangible assets at greater risks than what might occur in a more integrated organizational structure.
Given the usual loose nature of alliances, there is a tendency to have posturing by the partners so that they create a need for each other. This may involve sharing only essential information when necessary. The partners will continue to cooperate only as long as there is a benefit from the association. If the partners can show each other that there are benefits from a continued association into the future, there is an incentive for greater cooperation. |
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