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A business alliance is an agreement between businesses, usually motivated by
cost reduction Cost reduction is the process used by companies to reduce their costs and increase their profits. Depending on a company’s services or products, the strategies can vary. Every decision in the product development process affects cost: desig ...
and improved service for the customer. Alliances are often bounded by a single agreement with equitable
risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...
and opportunity share for all parties involved and are typically managed by an integrated project team. An example of this is code sharing in
airline alliance An airline alliance is an aviation industry arrangement between two or more airlines agreeing to cooperate on a substantial level. Alliances may provide marketing branding to facilitate travelers making inter-airline codeshare connections within ...
s.


Types

There are five basic categories or types of alliances: *Sales: A sales alliance occurs when two companies agree to go to market together to sell complementary products and services. *Solution-specific: A solution-specific alliance occurs when two companies agree to jointly develop and sell a specific marketplace solution. *Geographic-specific: A geographic-specific alliance is developed when two companies agree to jointly market or co-brand their products and services in a specific geographic region. *Investment: An investment alliance occurs when two companies agree to join their funds for mutual investment. *Joint venture: A
joint venture A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acce ...
is an alliance that occurs when two or more companies agree to undertake economic activity together. In many cases, alliances between companies can involve two or more categories or types of alliances.


Horizontal alliances

A type of an alliance is a horizontal alliance. For example, a horizontal alliance can occur between logistics service providers, i.e., the cooperation between two or more logistics companies that are potentially competing. In a horizontal alliance, these partners can benefit twofold. On one hand, they can "access tangible resources which are directly exploitable." In this example extending common transportation networks, their warehouse infrastructure and the ability to provide more complex service packages can be achieved by combining resources. On the other hand, partners can "access intangible resources, which are not directly exploitable." This typically includes know-how and information and, in turn, innovation.


Governance

Any alliance is susceptible to failures due to not achieving either cooperation or coordination, or both. Such inefficiencies originate from two well-known limitations in human nature, that are opportunism and bounded rationality. To enhance the success rate of alliances calls for proper levels of governance efforts. Contracts and relational norms are the two most commonly used governance mechanisms by business actors. They can also impact how business actors handle conflicts during the course of the focal collaboration as well as extend the current alliance to future collaborative relationships. Contractual and relational governance mechanisms have complex interactions, with one influencing the other's use and effectiveness in their different dimensions.


See also

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Business group A corporate group or group of companies is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. These types of groups are often managed by an account manager. The concept ...
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Competition regulator A competition regulator is the institution that oversees the functioning of the markets. And the Law in which it takes cognizance of situations having any type of impediments and distortions on the markets and correct them is the competition law ...
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Strategic alliance A strategic alliance (also see strategic partnership) is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. The alliance is a cooperation or collaboration which aim ...


References

;Notes ;Bibliography
Russian-American Business Alliance
* {{Business organizations Business terms