Student Question

What are four benefits of a business forming a strategic alliance as a means of expanding a business?

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A firm that wants to expand its business through strategic alliance(s) will benefit through access to increased resources and capabilities and through broadening market channels and brand recognition. There are many individually identified benefits included in this broad outline, some of which are:

  • resources: technological and human resources
  • capabilities: new target markets and the global market
  • market channels: supply chain, distribution, and marketing channels
  • branding: consumer recognition of strong/ stronger brands

The U.S. Small Business Administration identifies alliances as one means through which business expansion can be achieved quickly, especially since the strategy of alliance encompasses other expansion strategies, like global and e-commerce expansion, market area expansion, and diversification expansion.

Strategic alliance facilitates business expansion because such resources as capitalization, production capabilities, products, and intellectual property can be shared within the alliance. With enhanced resources, capabilities, channels, and branding, business growth is less time- and cost-demanding.

To illustrate, consider, as an example, when an alliance includes geographic resources, e.g. store locations, then expanding geographical market area requires less time and cost than if a business were to expand store locations on its own without the benefit of a geographically strong alliance.

Bear in mind that a strategic alliance is "strategic" when it is formed for mutual benefit and for the purpose of helping alliance members achieve specified goals that would remain out of reach if acting alone while independent of an alliance. Consequently not all business alliances are strategic alliances.

Jason Wakeam, "The Five Factors of a Strategic Alliance." Ivey Business Journal.

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