Question

What are the advantages of forming a strategic alliance to enter a foreign market?

Answer 1

Strategic Alliance:

It is a kind of business agreement between two or more companies or firms, to work for their mutual benefits

They combine their efforts for different purposes like sharing knowledge, to gain expertise as well as to enter in to the new markets

Using strategic alliance is a major change in the business sector that are internationalizing their operations

Entering in to foreign Market:

There are wide ways in which a company can enter a foreign market, one among them is forming a strategic alliance

partner companies can provide established marketing and distribution systems as well as knowledge of the markets

These alliances is more useful when market conditions or government policies present market entry barriers. Forming alliance with a local company can help to overcome these barriers.

Advances in tele communications and technologies used, as well as enhanced transport systems helped most of the firms in entering the foreign markets and contributed for the globalization of the business

Strategic alliance has very high and easy chances of entering in to the foreign markets

First, the local firm can provide knowledge of markets, customer preferences, distribution networks, and suppliers

Advantages of Strategic Alliance:

• Risk & Knowledge can be shared
• Achieving complexity
• Chance for more innovation
• Access to resources
• Targets can be achieved easily
• Always works on new technologies to overcome difficulties
• Concentrate more on R & D
• Reducing political risk

Ex: strategic alliance between British Airways and American Airlines formed in 1993 and designed to give the two airlines increased access to North American and European markets.