People believe that all the alliances on international level work efficiently and effectively. However, that's not the case because if certain factors like legal, political, social, customer preferences are not focused efficiently then alliance of any nature might not work effectively.
Organizations are getting bigger and stronger day by day and their area of operations is expanding. Organizations are changing their methodology of working and newer terms like employee empowerment, mergers, acquisitions, motivation and business alliances are changing the conventional methods of working. The span of control is widening up and they are enhancing their profits and entering into newer contracts with the diversified approach. Organizations besides achieving short term targets are stressing on long term objectives too. Since they are expanding therefore they are merging other companies into their own horizon and forming new strategies in order to achieve the overall goal.
An agreement of mutual consent between businesses that initiated for cost reduction, improved service or for any other strategic factor is known as a business alliance. In the current century alliances are considered as a sign of victory and they are treated as an element of growth. Business alliance is actually working with your competitors and this strategy is favorable when two or more organizations view the bigger picture and thinks in terms of favoring the industry and their our profits too. In today's world fierce competitors are becoming business partners just to earn more profit and reduce their costs. Usually alliances are mostly on 50-50 basis and mutuality is considered to be the important factor besides the ratio. Besides bigger organizations smaller organizations are also benefiting a lot from this strategy and they are combining with other small organizations and enlarging their vision and objectives (Daft, 2008).
There are numerous alliances on national and international basis in order to earn strategic advantage. Dell computers are considered to be the largest sellers of Pc's world wide and they firmly believe their customer-centric approach and their alliances are the main reason of this success. Dell computers are extensively in touch with their suppliers and they some times follow the acquisition strategy and buy out the supplier. Same is the case with retail giants Wall mart and K-mart that they either buy out their suppliers or some times outsource certain areas to them in order to obtain better results.
Managers and decision makers are facing a paradoxical situation that whether to opt for international business alliance or not. Some mangers believe that sharing the resources might be a dangerous strategy on international basis. This is a definite challenge because managers have to risk their resources and a huge amount of dollars are at stake when an international business alliance is formed (Phatak, 2008).
Managers can form alliances in different forms and the examples of business alliances can be joint ventures, licensing, equity partnerships, etc. In certain scenarios mergers and acquisitions also come under this category.