Corporate alliances are increasing every year by about twenty-five percent and those same alliances are responsible for a third of a company’s revenue. Amazingly enough, the failure rate for alliances are extremely high. The figures are staggering, ranging between sixty and seventy percent. (Hughes & Weiss, 2007) Alliances require some less conventional advice and it starts with focusing on how the two companies will interactwith each other. Many failed alliances started with breakdowns in trust and communication. Both companies needto act like a team and work toward common alliance goals and metrics fashioned specifically for the progress of the alliance. Differences between companies need to be embraced and used to create value instead of trying to removethem. Companies should remember that differences are probably what prompted the alliance to form instead ofgoing it alone. Collaborative behavior is paramount to success. Assignment of blame for any failed projects has to be eliminated to build the strong working relationships required. The last key piece of advice is to not forget your own company in the effort to succeed with the alliance. True buy-in from all divisions of each company is crucial or else the pieces will eventually fall apart. (Hughes & Weiss, 2007)
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There are several pros and cons to when it comes to strategic alliances. A strategic alliance is an agreement between two companies that decided to share resources to reach a mutual benefit. Making an alliance work is not easy. Out of 49 international strategic alliances that were studies, it was noted that two-thirds face serious managerial and financial problems within the first two years. Even though many of the problems are solved, still 33 percent of the parties involved rate them as failures. In an effort to make alliances work there are three main factors that must be considered. Partner selection, structure, and how the alliance is managed play key roles in the success or failure of alliances (Hill, 2015, Pp 465-469).When selecting a good partner to ally with there are three characteristics they should have. The partner should help the firm achieve their goals and poses capabilities that that the other firm lacks. The ally must share the vision the firm has, and lastly, the ideal partner will not try and turn against its alliance. The structure of alliances should be built as to where firm’s risks of giving too much to the partner is at a reasonable level. This is done so the partnership stays even and one firm is not benefiting more than the other. The final structure of the alliance will be agreed upon by both firms. The final step in making an alliance work is managing the alliance. Firm managers need to build effective relationships that will help build trust, which will make communicating and problem solving easier (Hill, 2015, Pp 465-469).
