Alliance Helps Companies to Improve Business and Widen the Customer Base

Alliance is not a new terminology in the business world. It is an arrangement between two or more business organizations to collaborate with each other on the basis of a common understanding to carry on with the business. In other words alliance can be defined as voluntary collaboration between the parties to do business. The purpose of alliance is to integrate the resources of participating organization to gain greater market share, venturing in the new business horizons, and increasing efficiency to serve the customers better.

Need for alliance

Globalization is the trend in business. Companies are keen to expand their business and go to other counties crossing the boundary of the home country. Dell, Whirpool, Toyota, RHI, KHD, General Motors, ATS, Airtel, Vodafone, Addidas, HP, and Microsoft are the companies which operate internationally. There are number of risks in doing business in other countries as the company in one country may not be aware of the conditions of business in other countries. Political system of the other country, statutory requirements for carrying on the business in the country, directions of the regulatory authorities, demand for the product or service in that market, market condition, social system in the country, technological status, environmental conditions, infrastructural support and most importantly the attitude of people are some of the factors which directly influence the business plans. In view of the complexities of the business in the international scenario, there is a need for third-party alliances. The alliance with the many service providers is common in domestic business but in case of international business the alliance with the third party logistics is essential. The third party alliance provide support in maintaining the contacts with other business enterprises, government agencies and customers. The international alliance reduces the risks in international market and provide expertise in the areas specific to the local conditions.

Advantages of alliance

Alliance partners contribute in creating new business opportunities to each other by complementing in the weak areas of the partners and also improving their own areas of activities. Some of the advantages of the alliance are:

  • The voluntary agreement helps in optimization of the human, financial, and operational resources.
  • Sharing of the expertise of each other.
  • Increasing the boundaries of their business in new geographical areas as well as in areas which were not tapped earlier.
  • Make joint policies and procedures, which can change the shape of the business in the market.
  • Improves the operational efficiency of each partner.
  • Reduction of expenses on marketing by converting the competition into collaboration and cooperation.
  • Results in lean organizations by integration of some of the functions such as forecasting, procurement, recruitment and administrative activities.
  • The shortcomings and the weaknesses of the participating organizations are under a cover without getting exposed.
  • Customer satisfaction can be improved by enhancing the services.
  • Enables joint planning and operational controls resulting in higher productivity.
  • Higher profits for the participating organizations.

Potential disadvantages  

  • Due to larger control over the market, the care to the customer may suffer in terms of pricing of the products and services.
  • Reduced competition may create complacence in the employees, who may not care for the quality of services as they would have done while in competition.
  • Poor image of one partner may adversely affect the good image of the other partner.

More and more companies are going for alliance.

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