Business Alliances

Business alliances are basically contracts between commercial enterprises and they are normally propelled by decrease in expenditure and high quality service provided to the clients. Frequently, business alliances are delimited by a distinct contract with opportunity share and equitable risk for all the counterparties that are associated.

Business alliances are usually handled by a structured project team or project unit, for instance code sharing in case of airline alliances. Examples of business alliances are strategic alliances, joint ventures, licensing, network alliances, franchising alliances and equity partnerships. In a number of circumstances, comprehensively planned business alliances are regarded as feasible options in comparison to mergers and acquisitions. At present, business alliances are growing to a substantial extent.

Some of the important business alliances that are worth mentioning are the following:

• Business alliance between Toyota and General Motors
• The R&D (Research and Development) alliances of Merck
• Business alliances of IBM with Dell and Cisco Computers
• Business alliances of Oracle

The different forms of business alliances can be broadly categorized into the following:

• Joint venture alliance
• Sales alliance
• Geographic-specific alliance
• Solution-specific alliance
• Investment alliance
• Strategic alliance
• Licensing
• Network alliances
• Equity partnerships
• Franchising alliance

In a number of instances, the business alliances between firms may include two or more classes or forms of business alliances. A sales alliance takes place in case two firms concur in selling interchangeable goods and services. A solution-specific alliance happens at that time when two firms accord in formulating and selling a particular marketplace solution in a collaborative manner. A geographic-specific alliance is formed in case two firms consent for collectively selling and co-branding their goods and facilities in a particular geographical location.

An investment alliance takes place at the time when two firms concur to combine their finances for the purpose of mutual investment. A joint venture alliance (JV) happens in case two or more firms consent to take on any commercial venture jointly. A strategic alliance is a form of combined alliance similar to the joint venture. Nevertheless, it is not a distinct legal entity like a joint venture. An equity partnership has some features of strategic alliance; nevertheless, an equity partnership includes one party who has the claim of a minority equity share on the other party. In case of licensing, there are two common forms. The first form includes licensing of a particular commodity, technology, or procedure. The second form includes licensing of a copyright or trademark. In a franchising alliance, a company can allow for options of selling commodities and services to a large number of licensees functioning in various geographic areas. A network alliance is basically a network of interlinking alliances among firms those frequently cross industrial and country borders.

For further details, please refer to the following link:

Forms of Business Alliances

Rationale for Business Alliances