Question

Some of the key elements of business-to-business alliances include:​

Answer 1

Solution

1.Decision should lead to a win-win situation to all the parties involved in the business alliance,then only the alliance make sense.

Example : Recent merger between IDFC Bank Ltd. (A bank) and Capital First Ltd.( a non-banking financial institution) to form IDFC First Bank.

Capital First benefited out of the banking license held by IDFC Bank and IDFC bank benefited out of the access to the retail customer base / book / portfolio held by Capital First. So,it is a win-win for both the entities.

So both of them choose each other for achieving their specific goals.

2.Choosing a reliable / trust-worthy partner having some good reputation - Entering into the alliance in order to increase their brand value in the market by combining their brands in the market

3.Removing / mitigating / reducing the risk being faced by the partners individually.If their partnership results in reducing their risks on individual basis,they enter into a alliance.

4.Competition : Alliances between the companies also happen to counter the competition.2 (or) more companies can form an alliance to tackle competition (or) also to control the market (Ex: the OPEC cartel in world oil market)

Ex: Idea and Vodafone have gone for merger in the Indian market owing to difficult situation in the Indian Telecom Market owing to profitability constraint and to mitigate the financial risk and also to tackle the competition from the new entrant in the market.

5.Synergy benefits for the parties entering into an alliance - Ex: Idea and Vodafone Mobile companies after their merger will be able to use each other's mobile towers.This leads reduction in demand for newer investment cost in the form of building new mobile towers.So both the companies will benefit.They can also use some assets together which will improve their efficiency and cost reduction.

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