Human life has two levels: individual and collective. The individual’s standard of living is evaluated on two bases: mentality or pattern of thought and behavior or pattern of work. A stable existence of positive mindset and correct behavior shapes wise individuals. On the other hand, the collective aspect of life is evaluated based on the interactive behavior of individuals. Collective life has three aspects: social, economic and political. An individual plays multiple roles in their collective / interactive life. The interactive roles of an individual can be grouped into two categories: natural and voluntary. A relationship between parents and children is natural, while a relationship between husband and wife or employer and worker or politician and follower is voluntary. A voluntary relationship is not permanent and can be broken at any time. A voluntary relationship can take three forms: cooperative, competitive, and independent. Ideally, a relationship between husband and wife is cooperative; however, it can take on a hostile form due to certain social, economic or psychological reasons. A link between two opposing support teams is competitive; the very purpose of the link is to defeat the other team. And a relationship between the participants who walk on a jogging track is independent or autonomous.
The economic aspect of life is made up of economic agents, that is, entrepreneurs, investors, professionals, workers and consumers. The mutual interaction of economic agents can take three forms: competitive, cooperative and autonomous. A voluntary cooperative attitude of economic agents configures multiple economic alliances. Frequent cooperation in business life occurs at the strategic level, it is called a strategic alliance. The less frequent phenomena of organizational cooperation are mergers / acquisitions. A strategic alliance is made to create / achieve something that neither party could do / achieve independently.
The ultimate motive of the Strategic Alliance is to improve the efficiency and effectiveness of the company. The economic rationale for the strategic alliance is to reap economies of scale. An alliance avoids useless duplication of resources / efforts and provides rapid business growth due to the benefits of synergy. A synergy benefit means that the economic addition of two institutions would create / generate more than double the benefits.
A strategy is a rational and stable movement to materialize the business mission / vision with the available resources. An entrepreneur performs countless strategies in his business life to give his business a boost. A strategy is based on multiple factors, that is, innovations, customer tastes and needs, market structure, available human resources, availability of capital, and government policies. A company cannot prosper or sustain itself without strategy or strategic management.
The ultimate motive for a strategy is materialized through the establishment of certain economic goals and objectives. Goals make the system effective, while objectives are necessary to improve the efficiency level of a system. The twin results of a successful business strategy, that is, efficiency and effectiveness maximize the profits of a company. Also, a direct strategy towards the correct start of a business venture.
A strategy can be grouped into three categories: – Individualist, Cooperative and Competitive. In the individualistic strategy, the institution is indifferent towards other institutions (eg, 5-S, 6-Sigma). In cooperative strategy, the institution develops cooperation with other institutions; cooperation would be fruitful if it is based on some common values (eg Benchmarking, Strategic Alliance and Fusion). In competitive strategy, the institution competes with other institutions (for example, Media War and Price War). On different occasions, an institution may adopt a different strategy; it can be a composition of two or three (mixed strategy approach) or it can be a separate strategy (dominant strategy approach).
Ingredients of a fruitful strategic alliance
It is a hard fact of economic life that most alliances fail. Alliances usually start with high-sounding words but end with low-pitched excuses. The very basis of failure are misconceptions, lack of communication, micromanagement, and mismanagement. Furthermore, an irrational-unstable collaboration can create some mutational features in the institutional struggle and, consequently, the entire structure of the institutions can damage. There are three ingredients for a stable or successful strategic alliance.
Business harmony – A conceptual understanding and sincere / honest / fair cooperation between interested entrepreneurs is vital for a successful strategic alliance. A worthless approach to an alliance generates rapid but skewed growth that eventually breaks down. Furthermore, a value-driven alliance is convergent to any external-internal shock or threat.
Institutional harmony – A positive correlation of the success factors / performance indicators of the institutions involved is essential for a successful partnership. For example, the growth pattern of the software company and management consulting are mutually reinforcing, an institutional harmony can develop between these two entities. Institutional harmony can develop at the conceptual, structural, or operational level. Institutional harmony is achieved slowly, gradually and painfully.
Natural harmony – It is Natural Law that a correct effort produces results slowly, while an incorrect effort produces results quickly. Bad human nature pursues quick results, but these are not ingrained or sustainable. An alliance based on natural rules / scientific methods would be entrenched, sustainable and fruitful. Quality Management is based on scientific rules. Shapes / develops natural harmony between individuals / institutions.
It is noteworthy that correct cooperative effort is fruitful than correct individual effort, but wrong cooperative effort is more disastrous compared to wrong individual effort.
Critical areas of the strategic alliance
A strategic alliance is generally evaluated on two bases: rationality and morality. Rationality is a necessary condition for a fruitful alliance but it is not enough, morality towards sharing is also essential for a stable alliance. An unfair attitude or approach is the critical obstacle that may arise in the course of future tense and one or both parties may be enslaved by greedy / lustful behavior. Anyway, in the strategic alliance, we judge several things to assess the strength / weakness of the institutions. The vital concerns are: Economic justification of the alliance, Financial analysis, Ownership and control, Legal bottlenecks, Marketing and operational issues, Structural constraints, Areas of possible risks / uncertainties, Areas of conflict / cooperation, Insurance coverage, Definition of a conciliatory body to avoid possible conflicts, and Termination of the alliance.
Another critical area of the strategic alliance is its social dimension. A strategic alliance with a social dimension is very fruitful and beneficial for stakeholders. For example, a strategic alliance of economic and social entrepreneurs can generate multiple benefits for both. Notably, social values, economic viability, and profitability are mutually reinforcing, but maturity takes a bit longer compared to a non-social, worthless strategic business alliance.