What are the three types of Strategic Alliances? What are the advantages/disadvantages of each?

What are the three types of Strategic Alliances?

What are the advantages/disadvantages of each?

Expert Solution

What are the three types of Strategic Alliances?

1. Joint venture: A joint venture is formed by coming together of two firms. Both the firms have equal say in matters of decision making.

2. Equity strategic alliance: Equity strategic alliance is formed when a company buys certain proportion of equity from another firm and both the firms work as a joint unit.

3. Non-equity strategic alliance: This type of strategic alliance comes into existence when two firms come together and pool their resources.

What are the advantages/disadvantages of each?

Joint venture: Its advantage is that it creates synergistic effect with the joining of two companies. Its disadvantage is that companies have little control.

Equity strategic alliance: It keeps competition in check. The disadvantage is that it is a risky proposition because investment in share may not plough back profits.

Non-equity strategic alliance: It brings two companies that can pool their unique competencies and create competitive advantage. Its disadvantage is there is clash of working cultures because both of them remain independent.

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