Question

Why do firms use cross-border strategic alliances?

What risks are firms likely to experience as they use cooperative strategies?

Answer 1

1) A cross border alliance is such a strategic alliance where some resources and units of the organizations having their headquarters in different countries are shared . This strategy particularly devised to create competitive advantage . Reasons behind companies using cross-border strategic alliances are enlisted as follows :
a) These types of alliances tend to be less risky as compared to mergers or acquisitions .
b)This type of alliance helps a company to gain competitive advantage in a market outside its home territory or in a foreign market , creating geographic diversification . This also provides unlimited access to growth and expansion of market share .
c)Empirical findings tell us that the survival rate of a company increases with the use of such types of alliances.

2) Cooperative strategies  are the ones that are undertaken by firms on the basis of cooperating on different things such as resources with others . They entail certain risks and may even lead to failure in the young stage . Opportunistic company make take advantage of an alliance for reaping benefits from another , this causes breach of contract . False representation of abilities , tangible assests etc . A partner may hold back some of its initially committed capabilities from another partner, or turf guarding, in order to protect some of its market share or even resources . Risks of the market may not be shared equally among partners .