Reasons for Selecting the Strategy Alliance

The present day competition is called the intelligence intensive competition and knowledge leadership competition. Why is it that the strategic alliance is being selected, while the other methods are found not suitable?

Let us try to understand the reasons for selecting the strategic alliance over other methods through a comparison with M & A or the other means like accomplishing by acquiring the resources from the market or by working on the basis of in-house resources only.

1. Meeting the requirement from in-house resource only
The building of knowledge and information apt to become inactive when the efforts are limited to in-house activity only. The speed of change in environment is so fast that it is difficult to catch up with the changes through in-house activity alone. However, the risk of competition is also very high and it may be more risky to go ahead independently.

2. Sourcing from the market
Large number of important management resources can be acquired from the market. However, any easily transferable information resource, which can be procured from the market (packaged knowledge as available in the design, drawing and manuals, the knowledge accumulated in the human beings or the knowledge fed into the machines) is a package which is extremely easily available and transferable with same ease for anybody. Therefore, this results more often in the “information paradox”, in other words, the information which can be obtained easily does not have much value.
The information resources which are difficult to transfer like the knowledge and information possessed by the skilled persons, teams and organisation etc. And the accumulated knowledge which cannot be transmitted completely to other persons have their own importance. Such type of resources cannot be obtained in the form of simple packages from the market or elsewhere, on payment basis.

3. M & A
As seen from the earlier text, it cannot be denied that the importance of M & A will increase from now onwards. However, the M & A is accompanied by various problems also, such as limitations with regard to objects, restriction to financial management resources and legal hindrances. Besides these problems also, the capability which is specific to a company also depends upon very fine factors like the job customs, feeling of trust, independence and entrepreneurship spirit. There is a fear of losing on these aspects also. Further, the flexibility in enterprise may also be lost.
These are the resources for which enterprises have resorted to strategic alliance.