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Explain the issues, challenges, or disadvantages to forming a strategic alliance.

Please answer the following questions after reviewing the reading and lessons for Week 5.

Explain the issues, challenges, or disadvantages to forming a strategic alliance.  Give an example to provide a context to your discussion.

Please respond to each:

Alan

Strategic alliances can be an extremely useful tool for businesses to use in their supply chains and logistics operations. However, there are many risks and disadvantages that can be faced when forming a strategic alliance.  Strategic alliances must be based on trust and commitment in order to be successful. When a strategic alliance has complete commitment and trust with excellent information flow, the alliance will benefit both firms. However, there are risks associated with this. Some of the risks associated with forming a strategic alliance are the loss of competitive advantage, differing objectives, sharing of confidential information, knowledge sharing, and lack of oversight.  When a company forms a strategic alliance with another logistics company it is important to make sure both companies are on the same page. If one company has certain goals in mind that don’t mesh with the other company’s goals then the strategic alliance won’t be very strategic at and wont benefit either company.  Also, information sharing is the most important part of a strategic alliance. If one company shares all pertinent information, but the other company fails to share, then there is a break down in total communication and the trust aspect of the relationship will be lost.  The potential for information leaks are also present. Both companies must agree on discretion when forming a strategic alliance. Allowing confidential information to leak into the hands of competing companies will further decrease the competitive advantage. As long as both companies within a strategic alliance take care of their own responsibilities, have common goals that are understood and agreed upon, and maintain a trustworthy and committed relationship, the strategic alliance will be successful.

Fred

Forming a strategic alliance can be difficult at times, depending on what market you are in. When looking for and forming this alliance, businesses have to find something that will complement each company, and be financially positive. One of the primary benefits to an alliance is being able to use and leverage a product or service you do not own, that is in demand within the public sector. Reducing costs is another advantage, due to cost being shared across the alliance and among the various partners. Some alliances can be formed with competitors reducing money spent on having to one up the competition. Forming a partnership or alliance in another country or overseas market, can be very advantageous, for growth and expansion.

The of the bigger disadvantages is that you are relying on another company to handle some of the business practices and processes. This creates a lack of control of how some of the aspects are handled and managed. This can also create unequal benefits, depended on what company does what, and how much they expect to be compensated in the agreement. One of the larger problems that can arise is the liability issues. Creating a dynamic of who is more liable in case anything goes wrong, or if they venter fails. In doing so, you have to monitor this closely to ensure they keep things on track and keep both business goal in mind.

Today many people are on the go and living busy lives, the internet and mobile devices seem to be where you can find an alliance much easier. One of the biggest alliances I see today is companies like Netflix and HULU are partnering with mobile phone companies. This could increase phone sales and increase viewing within an online market.

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