A strategic alliance refers to a partnership where two or more organizations decide to work together for mutual benefit. They cooperate by combining their resources such as technology, finances, competitive advantages, as well as the managerial workforce. Although forming strategic alliances can significantly benefit businesses, the process also brings potential challenges and risks.
When independent businesses decide to form a strategic alliance, they lose some degree of control. Businesses in strategic alliances make decisions as one and therefore control of operations is done together. If one partner fails their part, it affects the entire alliance. For example, where a salon gets into a strategic alliance with a massage parlor and it happens that a client’s hair was poorly done, it spoils the reputation of the massage parlor and blames start. Is such situation, there emerges a lack of trust amongst partners in which they start to point fingers at each other and to blame one another for something gone wrong. Building trust has been a challenge to many business alliances, and very few make it to success line where there is trust amongst partners.
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The difference in management style is another challenge that many strategic alliances face. When businesses get into alliances, they leave their initial management styles and adopt new ones under new alliances. However, some partners may fail to adjust to the new style of management thus hindering the success of the alliance. Changing a corporate culture of partnering companies will take time before they adapt to the new management style.
Strategic alliances may incubate rivalry amongst partnering companies later on when the business becomes successful, and each partner can operate on their own in the same market. At some point when alliances become successful, some partners may break the loyalty and decide to move on their own. Operating in the same market and targeting the same customers, there would be rivalry and unhealthy competitions amongst partners.
