Many companies in developing countries find it difficult to adapt due to increasing competition and the integration of markets. Mergers and acquisitions is one strategic option, but it may end up being a complex, risky and costly affair.
An alliance is an organic response that can help companies survive. Strategic alliances give access to additional resources while maintaining competitive advantage and increasing market presence.
In strategic alliances, the parties agree to remain independent contractors working towards a common goal as opposed to being stakeholders of a legal entity. Through an alliance, the partners share their surplus or complementary capabilities. Efficiently managed strategic alliances help companies expand their offerings substantially, without additional investment.
There are several benefits to pooling resources, but there are also a number of challenges. Performance failure and incompatibility issues are common and could lead to break-ups or failure of alliances.
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Bhumika Batra is an associate partner and Sachita Shetty is a senior associate at Crawford Bayley & Co.
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