Strategic Alliance
Strategic alliances especially make sense when two companies have complementary capabilities and contribute equally to the partnership. Strategic alliances with suppliers—that is, long-term collaboration with a particular partner—are often formed when one of the companies is unwilling or unable to maintain certain strategic capabilities in-house, or has no possibility of integrating vertically.
A strategic alliance between companies can be used, for instance, as a means of avoiding supply bottlenecks in times of high capacity utilization.
The core aspect of a strategic alliance is that it is designed for the long term; that is, it is not subject to any project-oriented limits. This does not mean, of course, that strategic alliances are intended to last forever, since they may become obsolete in the event of a change in strategic direction by one of the companies. Nonetheless, a characteristic feature of a strategic alliance is the long-term intention of the partnership.
In forming a strategic alliance, attention has to be paid to certain matters. First, a management model has to be defined. Management models may take the form of ordinary business agreements as in, for example, simple outsourcing contracts. The issue of mutual control also needs to be defined. A strategic alliance needs to be based on mutual trust and openness.
Strategic alliances also call for effective risk management. The more unstable, unpredictable, change-oriented, and dynamic a market is, the greater the risk associated with relying on just one partner. The procurement company needs to be sufficiently flexible to correct the course of the alliance, or even end it, in a timely manner.
Partner selection and assessment is the basis of a strategic alliance. Alongside the assessment phase, the selection process should allow sufficient room for negotiation, giving both sides the opportunity to introduce themselves and to question the concepts of the other side. Only then need the formal aspects be discussed and agreed in writing. Once the alliance is established, managing the relationship (which will not be the only close cooperation in procurement) will be a highly demanding process.
Without a governance model that includes the factors crucial for success or failure, it will be difficult to maintain the relationship over time. Where a partnership already exists, there are various possibilities for making it more stable and productive. In this context, various questions arise : Does my partner fulfill the requirements that help me keep my value promise? What capabilities of the partner can I use as assets on the market? Could other partners contribute just as much? On the other hand, how important and how effective is our own performance for our partner (s)? Could our contribution to the alliance also be provided by other companies?
Is the relationship built on give and take, or does one side contribute more than the other?
In general, all companies seeking new alliances, or wishing to maintain existing ones in the long term, should communicate openly and directly with each other, especially in the event of problems. And in case the ownership of a partner should change, it is always advisable, integration notwithstanding, to maintain market transparency in such a way that outsiders can still clearly see which partner makes which contribution.