strategic alliance (courtney)
write a 2 paragraph response with one refernce all in APA format to the following essay:
Entering into an alliance with another organization poses a plethora of advantages as well as disadvantages. The risks associated with alliances typically focus on meeting organizational goals, inter-organizational cooperation, and cost requirements for establishing and strengthening the alliance. Even with these associated risks, there are still many motivators to join an alliance, of which the motivators are compatible with each other. Examples of these motivators include power enhancement and uncertainty reduction.
Although there are no exact stages developed and outlined, there are specific stages commonly considered pertinent to the formation of strategic alliance developments. Not every alliance is required to follow the same process from stage to stage, however, certain stages to prove to be more beneficial to complete rather than be remiss and skip over such a stage. These stages include emergence, transition, maturity, and critical crossroads.
Risk Associated with Alliances
There are numerous risks that can be found when developing an analysis for whether or not to enter into an alliance. It may seem practical to form an alliance between two or more parties based on a variety of reason; however, keeping the associated risks in mind may help establish a balanced decision. There will be risk that is present regardless of the possible scenarios of addressing the present issues and economy as an organization alone, taking no action to change or mitigate the current situation, or forming an alliance with another organization or organizations.
One such risk to consider involves the organization’s goals not being met. Accepting or entering into alliance may mean a shift in the goals that were once held by either of the alliance counterparts. There is one goal in particular that becomes unable to being able to be carried out – that is the goal of ultimate destruction of other organizations that are identified as competitors in the same market. Eliminating this goal may not serve as an improvement to the organization, but rather hinder the overall productivity through a decrease in quality by getting rid of the motivation to be better (Das & Teng, 2001).
Two other possible risks associated with engaging in an alliance include the potential power struggles that arise among inter-organizational cooperation and the potentially costly requirements for managing fragile relations along with the initial set-up hassles. During the set-up phase of an alliance, many financial difficulties may upsurge and put additional strains on the forming work relationships. This fragile association would feasibly require large sums of money to be spent in order to mitigate problems, especially in regards to the power held by the individual organizations as they attempt to merge together.
Compatibilities among Alliance Motivations
There are many motivations for entering into an alliance. If the rationales are not only strong, but also compatible, much of the uncertainty and risk may be alleviated. Burns, Bradley, and Weiner (2012) address cost reduction, revenue enhancement, power enhancement, uncertainty reduction, risk sharing, quality, innovation, and learning as potential alliance development motivations. Of these, power enhancement and uncertainty reduction may be the most compatible. The main consideration for whether or not to enter into an alliance centers around the risk involved. Most managers attempt to rationalize the levels of risk that may be created by either joining an alliance or maintaining independence. If there is a decrease in the uncertainty in that most of the ambiguity pertaining to the future of the organizations can be reduced, the decision to enter an alliance may become very clear. Further, if it is known that a shift in the power of the organizations from independence to codependence involves an enhancement in the organizations’ power levels, the motivation to enter an alliance would be noticeably expounded. With these to motivators combined, managers may not consider potential downsides to an alliance as equal arguments (Eisenhardt & Schoonhoven, 1996).
Strategic Alliance Development Stages
Burns, Bradley, and Weiner (2012) outline the likely stages of strategic alliance development to be emergence, transition, maturity, and critical crossroads. With these projected stages, alliance developments commence with the emergence stage when organizations which share ideologies have respective gains to be made. The subsequent stage would be the transition stage. When motivations for achieving the gains that have been proposed are established, the transition stage allows for an increase in dependence on the counterpart organizations and the corresponding resources. The next stage, maturity, is marked by the key factor of an agreement between the organizations entering the alliance being drafted which outlines a disposition to place the interests of the alliance ahead of the individual organizations’ securities. Lastly, the critical crossroads stage of developing an alliance comes takes place. After the organizations have received the stated objectives, the critical crossroads stage delineates the pathway the organizations will proceed to take. The alliance members may either continue on with the alliance, further establishing and hardening the hierarchy and increased centralization; or, the alliance members may withdraw from the alliance and continue on as individual organizations, or create sub-alliances if the original alliance was multiple organizations.
It is not mandatory for each alliance to proceed through each of the four stages proposed by Burns, Bradley, and Weiner (2012). There are no established stages that are required to be completed in a specific order to legitimatize the alliance; however, if these stages are followed in the suggested order, the alliance that is formed is most likely going to be more successful than an alliance that skips ahead from the emergence stage straight to the maturity and critical crossroads stages. Bypassing a stage, such as the transition stage, could result in a weakened alliance that has not yet gained an understanding or appreciation for all of the benefits that are to be obtained by the alliance existence (Devlin & Bleackley, 1988).
Although there are many strategies that can be implemented while establishing an alliance, specific strategies have been accepted as successful. Processing through the stages of emergence, transition, maturity, and critical crossroads may increase the likelihood of the alliance functionality.
Using strong motivations, such as power enhancement and uncertainty reduction, together may help to form an alliance and may mitigate risk along the way. Risk is not completely unavoidable, for example meeting organizational goals, inter-organizational cooperation, and cost requirements for establishing and strengthening the alliance, will almost always be considerations. However, if an organization determines that an alliance would provide less risk than continuing on as an individual organization, then an alliance may be a paramount conclusion.