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"What are the main problems encountered during the formation of alliances? Assess the importance of effective partner selection in this process. - Essay Example

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"What are the main problems encountered during the formation of alliances? Assess the importance of effective partner selection in this process.

Besides the choice of the wrong partner, other factors lead to the collapse or failure of strategic alliances. These reasons include opportunism, cultural differences, lack of commitment by one of the partners, lack of trust, relational risk, and lack of clear objectives amongst others.
Globally, there has been a wide preference of global alliances; unfortunately, most of these never achieve the envisioned goals and objectives. In fact, statistics indicate that close to two thirds of alliances fail within the first two years of constitution.
Even though the cases of productive strategic alliances are scarce, there exist firms that have benefited from these arrangements. The most common benefits are diversification of risk, competitive advantage, synergy, and ease of market entry.
Increased globalization and heightening technology application has augmented the importance of strategic alliances. When firms are faced with market uncertainties and have set up wide resources and capabilities, alliances have been a preferable and momentous option (Culpan, 2002.p.65). In an international context, alliances play an even greater role because they frequently might be the only option for entering a foreign market, especially emerging markets such as China, where major companies have yet to establish wide networks. Yoshino and Rangan, as cited by Culpan (2002) argue that strategic alliances have been born out of an increasing need for businesses to withstand and overcome competition (Culpan, 2002.p.65). Emergence of technology and globalization has rendered the simplistic generic strategies applied in U.S. markets ineffective. Modern day firms must embark on a path of frequent innovation to remain at par with the ever changing market dynamics and preferably, forge ahead of equally effective and innovation conscious rivals. As a result, firms have to alter tradition approaches to market domination they must be flexible in their ...Show more

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Strategic alliances have been viewed as an effective way of withstanding competition as they improve a firm’s technical capacity, financial position and help diversify risk. These factors jointly represent a better placed company that is in a position to compete in the overly…
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