Page 105 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes 3. If the firm’s process technology is a source of competitive advantage, then selling this
technology through a turnkey project is also selling competitive advantage to potential
and/or actual competitors.

Task Is it important to keep a maximum significant interaction between the parties
to alliance? Why?

6.3 strategic alliances

A strategic alliance is a formal relationship between two or more parties to pursue a set of agreed
upon goals or to meet a critical business need while remaining independent organizations.
Strategic alliances are agreements between companies (partners) to reach objectives of a common
interest. Alliances are among the various options, which companies can use to achieve their goals;
they are based on co-operation between companies.

Generally, strategic alliances are arrangements between two or more entities that are created
to achieve mutual goals through collaboration. Strategic alliances take many forms, including
contractual arrangements (such as license agreements, marketing agreements, and development
agreements), minority equity investments, and joint ventures that are operated as separate legal
entities (such as corporations, limited liability companies, or partnerships). Regardless of the
form, strategic alliances share common features such as:
1. Defined scope and strategic objectives;
2. Interdependent contractual arrangements within the defined scope and to achieve the
strategic goals;
3. Specifically defined responsibilities and commitments for each party;
4. Independence of the parties outside of the defined scope of the alliance;
5. A fixed time period in which to achieve the strategic goals.

The simplest form of strategic alliance is a contractual arrangement. Contractual-based strategic
alliances generally are short-term arrangements that are appropriate when a formal management
structure is not required. While the specific provisions of the contract will depend upon the
business arrangement, the contract should address:
1. The duties and responsibilities of each party,

2. Confidentiality and non-competition,
3. Payment terms,
4. Scientific or technical milestones,
5. Ownership of intellectual property,
6. Remedies for breach, and
7. Termination.

Example: Contractual strategic alliances are license agreements, marketing, promotion,
and distribution agreements, development agreements, and service agreements.

The most complex form of strategic alliance is a joint venture. A joint venture involves creating a
separate legal entity (generally a corporation, limited liability company, or partnership) through
which the business of the alliance is conducted. A joint venture may be appropriate if:

100 lovely Professional university