Potential benefits of strategic alliance

Potential Benefits Of Strategic AllianceQs 1: What is a strategic alliance? When is a strategic alliance beneficial to the organization and when should the administrator be wary of a proposed strategic alliance? The term alliance refers to a collaborative agreement between individuals or parties in order to achieve some common goals, interests or objectives or to produce better results[Jor07]. A strategic alliance is when two or more businesses or parties, which usually are not in direct competition, but have related goods or services directed towards the same target audience join together for a specified period of time. It is one of the fastest growing trends of the business world today. Strategic alliances are spreading through almost all businesses, be they small or large. Alliances vary in scope from simple informal ones to a joint venture agreement involving legal and tax purposes [Vad].In today’s globalized and complex market place, there seems a great need of such strategic alliances in order to gain competitive advantages among the fierce competitors in the market place. Some of the prospective benefits that the organizations can attain through strategic alliances are gaining capabilities wherein a firm wants to explore some resources that it lacks in the technical expertise and knowledge. Therefore, it might have to share those resources with the other firms and hence, might be able to fulfill its objectives with the help of strategic alliance[Inf07]. Introducing a new product into the market is an extremely tedious and costly task due to immense competition, strict government regulations and risks of opportunity costs. Choosing strategic alliance as the entry medium in the market can reduce some of the above mentioned threats and costs. Moreover, penetration into the international markets is also made easier with the help of strategic alliance. Strategic alliance can also help an individual firm reduce its financial risk since failure of a particular project will lead to an equal distribution of the loss among the involved parties. Combination of individual strengths through strategic alliance can help businesses achieve synergy and competitive advantage easily[Inf07]. However, there are certain circumstances under which administrators should be wary of strategic alliance. They should only indulge in strategic alliances that are well-structured, and can provide both operational efficiencies and a low-risk path. Trust is the key element in strategic relationships. Most of the alliances fail due to mistrust and difference of opinion. Therefore, thorough research of the prospective partner and the business’s key strength and market position should be done before entering into an alliance with it. Administrators should study the capabilities, values and actual state of affairs of the other party before entering into a strategic relationship so that the problems can be avoided. Factors such as the type of company’s information to be shared with the other party and to what level should also be kept into consideration before signing the deal of a strategic alliance[Pau10].Qs 2: Define both technical and administrative innovation. Give one observed example of administrative innovation. Describe the effectiveness of the example. Innovation refers to the introduction of any new products, services or ideas with the intention of being successful and useful. It is basically the ability to deliver new value to the customer [Wor] . Innovation is the lifeblood of any organization and can be in any field and can be of various forms.Technical innovations can be described as novel products, services or technological goods pertaining to a particular field introduced with the intention of brining about technologic advancement[Kla99]. Administrative innovation deals with new ideas, or processes concerning the distribution of tasks and responsibilities. Technical and administrative innovations are closely interlinked ideas and are erroneously often used interchangeably. There are several examples of administrative innovation, including redistribution of resources, recruitment of new personnel, etc.An example of innovation in an organization is the introduction of Electronic Data Interchange or EDI, as it is commonly referred to as, in the company GSK. In this case, the introduction of EDI was the administrative innovation while the software and technology required to introduce and implement this innovation was technical innovation. This administrative innovation proved to be beneficial for the company because it resulted in saving time and costs of business transactions and enabled automatic processing of documents. This helped in reducing the workload, decreased the manpower required, reduced the chances of error and enhanced the accuracy of the business processes. Thus, use of EDI proved to be an effective administrative innovation for this organization.ReferencesJor07: , (Lewis, 2007), Vad: , (Kotelnikov, 2001), Inf07: , (InfoSky, 2007), Pau10: , (Matthews, 2010), Wor: , (WordIQ, 2010), Kla99: , (Brockhoff & Chakrabarti, 1999),