Global Strategic Alliences

Many MNEs in response to globalization are becoming increasingly engaged in international business beyond their countries boundaries to achieve and maintain competitive advantages over competitors. This entry into international market is facilitated by foreign firms working together in joint venture relationships referred to as Global Strategic Alliances (GSAs). GSAs are formed by firms to gain new technology, gain access to specific markets, reduce financial risks, reduce political risks, to ensure or achieve competitive advantages (Wheelen and Hungar, 2000 as cited by Elmuti and Kathawala, 2001). Shenkar and Luo, (2008, pp.332) stated that “Global strategic alliances are cross-border partnerships between two or more firms from different countries with an attempt to pursue mutual interests through sharing their resources and capabilities”.

Global strategic alliances have not always lived up to the expectations of the initiators. 60% of strategic alliances fail (Kalmbach and Roussel, 1999 as cited by Elmuti and Kathawala, 2001). Certain factors have been implicated in making global strategic alliances prone to failure. Parkhe (2001) listed these factors as societal cultures, national context, corporate culture, strategic directions and management practices and organisation.

The GSAs are formed by two or more firms from different nationalities, diverse backgrounds and cultures. These multiple inter organizational relationships create difficulties which affects the longevity of the alliances. Cultural differences such as languages, attitudinal behaviours, societal norms and corporate business ethics might be so divergent and incongruous leading to the failure of the GSAs. Parkhe (2001) however argued that these negative tenden...

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...ning its goals and objectives has little chance of survival. Feasibility studies and researches on cooperation principles and methods must be carried out by managers before concretizing GSAs formation.

Coordination among the management teams must be encouraged to avoid a situation where partners could still pursue their different business interests which will fuel competition among the alliance partners.

Reference:

1. Elmuti, D. and Kathawala, Y., (2001), An Overview of Strategic Alliances, Management Decision, Volume 39, No. 3, pp. 205 – 217.

2. Shenkar, O. and Luo, Y., (2008), International Business, 2nd Edition, Thousand Oaks, CA: Sage Publications, Chap. 12, pp. 331-337.

3. Parkhe, A., (1991), Interfirm Diversity, Organizational Learning, and Longevity in Global Strategic Alliances, Journal of International Business Studies, Fourth Quarter, pp. 579 – 601