Introduction
Human life has two levels: individual and collective. The individual standard of living is evaluated in two areas: mentality or thought pattern and behavior or work pattern. A stable existence of positive mindset and correct behavior shapes wise individuals. On the other hand, the collective aspect of life is evaluated in the interactive behavior of individuals. Collective life has three aspects: social, economic and political. An individual plays multiple roles in their collective/interactive life. The interactive roles of an individual can be grouped into two categories: natural and voluntary. A relationship between parents and children is natural, while a relationship between husband and wife or businessman and worker or politician and supporter is voluntary. A voluntary relationship is not permanent and can be broken at any time. A voluntary relationship can take three forms: cooperative, competitive, and independent. Ideally, a relationship between husband and wife is cooperative; however, it can take a hostile form due to certain social, economic, or psychological reasons. A bond between two opposing support teams is competitive; the very purpose of the link is to defeat the other team. And, a relationship between participants walking on a jogging track is independent or autonomous.
The economic aspect of life is made up of economic agents, that is, businessmen, investors, professionals, workers and consumers. The mutual interaction of economic agents can take three forms: competitive, cooperative and autonomous. A voluntary cooperative attitude of economic agents forms multiple economic alliances. Frequent cooperation in business life occurs at the strategic level, it is called a strategic alliance. The less frequent phenomena of organizational cooperation are mergers/acquisitions. A strategic alliance is made to create/achieve something that neither party could do/achieve on its own, independently.
The ultimate motive of the Strategic Alliance is to improve the efficiency and effectiveness of the company. The economic reason for the strategic alliance is to reap economies of scale. An alliance avoids useless duplication of resources/efforts and provides rapid business growth due to the benefits of synergy. A synergy benefit means that the economic sum of two institutions would create/provide more than twice the benefits.
Strategy
A strategy is a rational and stable move to realize the business mission/vision with the available resources. An entrepreneur makes innumerable strategies in his business life in order to give his business a boost. A strategy is based on multiple factors, that is, innovations, customer tastes and needs, market structure, available human resources, capital availability, and government policies. A business cannot flourish or sustain itself without strategy or strategic management.
The ultimate reason for a strategy is materialized through the establishment of certain economic goals and objectives. Goals make the system effective while goals are necessary to improve the efficiency level of a system. The twin results of a successful business strategy, that is, efficiency and effectiveness, maximize the profits of a company. Also, a strategy is directed towards the right start of a business venture.
A strategy can be grouped into three categories: – Individualistic, Cooperative and Competitive. In the individualist strategy, the institution is indifferent towards other institutions (eg, 5-S, 6-Sigma). In the cooperative strategy, the institution develops cooperation with other institutions; cooperation would be fruitful if it is based on some common values (eg Benchmarking, Strategic Alliance and Fusion). In the competitive strategy, the institution competes with other institutions (eg, media warfare and price warfare). At different times, an institution may adopt different strategies; it can be a composition of two or three (mixed strategy approach) or it can be a separate strategy (dominant strategy approach).
Ingredients of the Fruitful Strategic Alliance
It is a hard fact of economic life that most alliances fail. Alliances usually start with big words but end with low-pitched excuses. The very foundation of failure is misconception, miscommunication, micromanagement, and mismanagement. In addition, an irrational and unstable collaboration can create some mutational features in the institutional struggle, consequently, the entire structure of the institutions can be damaged. There are three ingredients for a stable or fruitful strategic alliance.
Business Harmony – A conceptual understanding and sincere/honest/fair cooperation between the interested businessmen is vital for a fruitful strategic alliance. A worthless approach to an alliance yields rapid but skewed growth that ultimately shatters. Furthermore, a value-driven alliance is convergent to any external or internal shock or threat.
Institutional Harmony- A positive correlation of the success factors/performance indicators of the institutions involved is essential for a fruitful alliance. For example, the growth pattern of the software house and management consulting reinforce each other, an institutional harmony can develop between these two entities. Institutional harmony can develop at the conceptual level or at the structural level or at the operational level. Institutional harmony is achieved slowly, gradually and painfully.
Natural Harmony – It is Natural Law that a correct effort produces results slowly, while an incorrect effort produces results quickly. Bad human nature chases quick results, but these are not deeply ingrained or sustainable. An alliance based on Natural Rules/Scientific Methods would be entrenched, sustainable and fruitful. Quality management is based on scientific rules. It shapes/develops natural harmony between individuals/institutions.
It should be noted that a correct cooperative effort is fruitful than a correct individual effort, but an incorrect cooperative effort is more disastrous compared to an incorrect individual effort.
Critical Areas of Strategic Alliance
A strategic alliance is generally evaluated on two aspects: rationality and morality. Rationality is a necessary condition for a fruitful alliance but it is not enough, morality towards sharing is also essential for a stable alliance. An unfair attitude or approach is the critical obstacle that may arise in the future and one or both parties may be enslaved by greedy/lustful behavior. In any case, in a strategic alliance, we judge multiple things to assess the strength/weakness of the institutions. The vital concerns are: Economic justification of the alliance, Financial analysis, Ownership and Control, Legal bottlenecks, Operational and marketing issues, structural restrictions, Areas of potential risks/uncertainties, Areas of conflict/cooperation, Insurance coverage, Definition of a conciliatory body to avoid possible conflictsand covenant termination.
Another critical area of the strategic alliance is its social dimension. A strategic alliance with a social dimension is very fruitful and beneficial for the parties involved. For example, a strategic alliance of economic and social entrepreneurs can generate multiple benefits for both. It should be noted that social values, economic viability and profitability are mutually reinforcing, but maturity takes a bit longer compared to a valueless, non-social strategic business alliance.