Alliances are not new, but of late, the distinguishing features of them are emerging. These are:
i. Extensive Partnerships across the Borders:
Partnerships are extensive on a global scale – Even the giant MNCs can’t sustain market leadership without some form of alliance.
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Competition has increased, different countries excel in different products and services, and firms have to develop presence in these countries. The traditional methods of internationalisation like export arrangements, licensing, and franchising are limited and can’t take them so extensively.
ii. Erstwhile Rivals Increasingly Joining Hands:
In the past few years the trend, joining hands by rivals or potential rivals, is clearly visible, as opposed to the vertically linked firms. According to published figures, of the total alliances, 71% were formed and joined by the rivals. For example, alliance between Bharti Airtel and MTN (had it materialised) would have been unthinkable in the past. Even the case of General Motors and Toyota points out to the same trend.
The earlier often antagonistic relationship between the generics industries and pharma MNCs is being increasingly replaced by a more cooperative relationship as the Ranbaxy-Daiichi Sankyo deal evidences. Though it is not a case of strategic alliance, more such consolidation through partnership arrangements can be expected in near future.
iii. Increasing Cross-Border Partnerships:
Today partnerships are taking place between firms from two different nationalities, an important tool due to their different core competencies, such as the Japanese and Koreans in manufacturing, South Asian firms in lower labour cost, US in research and product design, offer complementary benefits. Up till 1994, a majority of strategic alliances were between European and US firms, being more comfortable with each other. But now the things are changing.
iv. Joining Consortium or Network Arrangement:
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Complex Partnerships – Since no one can ‘work alone’, firms are bound together as consortia or global network. This is making partnerships more complex. A consortium is one wherein buyers, sellers, suppliers, specialised firms, and even competitors join to achieve pre-determined objectives. In the global competitive environment such networks have merged as powerful groups.
An example of consortium is Semiconductor Manufacturing Technology (SEMATECH) consortium was formed in 1986 as a response to the Japanese challenges in semiconductors, 14 US-based companies came together. The European Union has five megaprojects to develop new technologies registered under the names EUREKA, ESPRIT, BRITE, RACE, and COMET.