What is a Strategic Alliance Network?
A strategic alliance network is a set of partnerships that firms develop using strategic alliances.
Purposes of Strategic Alliance Network
The main purpose of strategic networks is to facilitate the discovery of opportunities beyond those that can be identified by individual partners.
Advantages of Strategic Alliance Network
One important advantage of a strategic alliance network is that firms can have access to the partners of their partners. Thus, having this extensive collaboration increases the likelihood that firms can maintain and develop competitive advantages. That is, the operations of the strategic network may be able to provide partners with value that is difficult for competitors to imitate.
Firms involved in strategic networks can gain information and knowledge to produce better innovation. As a result, firms involved in networks of alliances tend to be more innovative.
The Core of a Strategic Alliance Network
The core of a strategic network is a strategic center firm. This firm is the foundation for the structure of a network. It plays a critical role in integrating and aligning the cooperative relationships of the network.
Sometimes, determining the strategic center firm of a network is relatively easy (vertical strategic alliance). In a horizontal strategic alliance, it may be difficult to tell which company is the strategic center firm of the network.
The strategic center firm of a network engages in the main following activities: (1) competencies development, (2) technology development, and (3) capabilities development.
Competencies development is about seeking ways to support partners to develop core competencies that may benefit the network.
Technology development is about managing the development and sharing of technology innovation and ideas among partners.
Capabilities development is about guiding participants of the network to have a friendly rivalry, thus seek to develop the skills needed to form new capabilities that create value for the network.
Effective Implementation of Strategic Alliance Network
The strategic center firm should encourage subcontractors to improve their infrastructures and facilities. To do so they can provide them with technical and financial assistance to achieve such goals.
The strategic center firm should reduce its transactions costs. It can do that by promoting long-term contracts with subcontractors.
The strategic center firm should enable suppliers to have better communication with companies that it has contracts for services. Thus, suppliers and the strategic center firm become a lot less independent.
Types of Strategic Alliance Networks
Stable Alliance Network
A stable alliance network is a strategic alliance network formed in a mature industry, where demand is stable, constant, and predictable.
The purpose of this network is mainly to extend the firms’ competitive advantage. They do this by exploiting the economies of scale and economies of scope that exist between partners.
Dynamic Alliance Network
A dynamic alliance network is a strategic alliance network formed in an industry in which there are frequent product innovations and short product life cycles.
The purpose of this network is to create new competitive advantage. Firms joining the alliance do this by exploring possibilities that may lead to product innovations or entries to new markets.
An example of this would be large software firms create a network of partnerships with entrepreneurial startup firms to look for technology innovation. Smaller firms are also benefited from this network because of their associations with big corporations.
Resources
Further Reading
Related Concepts
References
- Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2016). Strategic Management: Concepts: Competitiveness and Globalization (12th ed.). Cengage Learning.
- Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2019). Strategic Management: Concepts and Cases: Competitiveness and Globalization (MindTap Course List) (13th ed.). Cengage Learning.
- Hill, C. W. L., & Jones, G. R. (2011). Essentials of Strategic Management (Available Titles CourseMate) (3rd ed.). Cengage Learning.