strategic-alliance

What Is A Strategic Alliance? The Strategic Alliance In A Nutshell

Strategic alliances occur when two or more businesses work together to create a win-win situation.  A strategic alliance describes cooperation between two or more organizations to achieve a result a single party could not achieve alone.

Understanding strategic alliance

In understanding strategic alliances, it can be helpful to differentiate them from more conventional alliances. Strategic alliances are a type of joint venture designed to bolster a core business strategy, create a competitive advantage, or otherwise enable individual companies to achieve more together than they could on their own. The act of forming a strategic alliance is closely aligned with coopetition, or the act of cooperation between two or more competing companies.

Conventional alliances, on the other hand, describe business relationships. These alliances encompass personal networks that complement strengths while supplementing weaknesses. Importantly, each organization in a conventional alliance remains separate and independent as they work toward mutually beneficial goals.

Several more criteria help differentiate a strategic alliance from a conventional alliance. Generally speaking, an arrangement is said to be strategic if:

  • It is critical to the success of a core business goal or objective.
  • It blocks a competitor from entering a market or from gaining a more competitive position.
  • It creates or maintains strategic choices for the organization.
  • It mitigates significant risk, and
  • Is critical to the development of a core competency or indeed any other potential competitive edge.

Strategic alliance types

There are three types of strategic alliance:

  1. Joint venture – where two parent companies come together to form a child company with shared resources and equity in a binding agreement. Joint ventures have a clear objective, with profits split equally between each party. Google announced a joint venture with pharmaceutical company GlaxoSmithKline in 2016 to research the treatment of disease with electrical signals. The child company, Galvani Bioelectronics, is now itself a large company engaged in various partnerships to further its goals.
  2. Equity strategic alliance – this occurs when one company purchases equity in another (partial acquisition), or when each party purchases equity in the other. One notable example of an equity strategic alliance can be seen in the relationship between Panasonic and Tesla. Panasonic invested $30 million in Tesla to accelerate battery technology innovation for electric vehicles, which then progressed to a manufacturing facility in Nevada.
  3. Non-equity strategic alliance – as the name suggests, this alliance is characterized by both parties pooling resources without creating a separate entity or sharing equity. These alliances tend to be less formal than the other types and comprise the majority of strategic alliances around the world. In the first example, we hinted at some of the partnerships Galvani Bioelectronics subsequently made after becoming a child company. These partnerships are non-equity strategic alliances, enabling organizations to share their resources in pursuit of the common goal of creating a comprehensive and precise human health map.

Key takeaways:

  • A strategic alliance describes cooperation between two or more organizations to achieve a result a single party could not achieve alone.
  • A strategic alliance is distinct from a conventional alliance, which is characterized by business relationships and personal networks designed to complement strengths and lessen the impact of weaknesses. Furthermore, both organizations in a conventional alliance remain separate and independent entities.
  • The three types of strategic alliances are joint venture, equity, and non-equity. The vast majority of strategic alliances are of the non-equity type, where organizations share resources but do not create a separate entity.

Marketing Glossary 

Affiliate Marketing

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Affiliate marketing describes the process whereby an affiliate earns a commission for selling the products of another person or company. Here, the affiliate is simply an individual who is motivated to promote a particular product through incentivization. The business whose product is being promoted will gain in terms of sales and marketing from affiliates.

Ambush Marketing

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As the name suggests, ambush marketing raises awareness for brands at events in a covert and unexpected fashion. Ambush marketing takes many forms, one common element, the brand advertising their products or services has not paid for the right to do so. Thus, the business doing the ambushing attempts to capitalize on the efforts made by the business sponsoring the event.

Brand Building

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Brand building is the set of activities that help companies to build an identity that can be recognized by its audience. Thus, it works as a mechanism of identification through core values that signal trust and that help build long-term relationships between the brand and its key stakeholders.

Brand Equity

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The brand equity is the premium that a customer is willing to pay for a product that has all the objective characteristics of existing alternatives, thus, making it different in terms of perception. The premium on seemingly equal products and quality is attributable to its brand equity.

Brand Positioning

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Brand positioning is about creating a mental real estate in the mind of the target market. If successful, brand positioning allows a business to gain a competitive advantage. And it also works as a switching cost in favor of the brand. Consumers recognizing a brand might be less prone to switch to another brand.

Business Storytelling

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Business storytelling is a critical part of developing a business model. Indeed, the way you frame the story of your organization will influence its brand in the long-term. That’s because your brand story is tied to your brand identity, and it enables people to identify with a company.

Content Marketing

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Content marketing is one of the most powerful commercial activities which focuses on leveraging content production (text, audio, video, or other formats) to attract a targeted audience. Content marketing focuses on building a strong brand, but also to convert part of that targeted audience into potential customers.

Digital Marketing

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A digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

Growth Marketing

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Growth marketing is a process of rapid experimentation, which in a way has to be “scientific” by keeping in mind that it is used by startups to grow, quickly. Thus, the “scientific” here is not meant in the academic sense. Growth marketing is expected to unlock growth, quickly and with an often limited budget.

Guerrilla Marketing

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Guerrilla marketing is an advertising strategy that seeks to utilize low-cost and sometimes unconventional tactics that are high impact. First coined by Jay Conrad Levinson in his 1984 book of the same title, guerrilla marketing works best on existing customers who are familiar with a brand or product and its particular characteristics.

Inbound Marketing

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Inbound marketing is a marketing strategy designed to attract customers to a brand with content and experiences that they derive value from. Inbound marketing utilizes blogs, events, SEO, and social media to create brand awareness and attract targeted consumers. By attracting or “drawing in” a targeted audience, inbound marketing differs from outbound marketing which actively pushes a brand onto consumers who may have no interest in what is being offered.

Integrated Marketing

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Integrated marketing describes the process of delivering consistent and relevant content to a target audience across all marketing channels. It is a cohesive, unified, and immersive marketing strategy that is cost-effective and relies on brand identity and storytelling to amplify the brand to a wider and wider audience.

Marketing Mix

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The marketing mix is a term to describe the multi-faceted approach to a complete and effective marketing plan. Traditionally, this plan included the four Ps of marketing: price, product, promotion, and place. But the exact makeup of a marketing mix has undergone various changes in response to new technologies and ways of thinking. Additions to the four Ps include physical evidence, people, process, and even politics.

Marketing Personas

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Marketing personas give businesses a general overview of key segments of their target audience and how these segments interact with their brand. Marketing personas are based on the data of an ideal, fictional customer whose characteristics, needs, and motivations are representative of a broader market segment.

Multi-Channel Marketing

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Multichannel marketing executes a marketing strategy across multiple platforms to reach as many consumers as possible. Here, a platform may refer to product packaging, word-of-mouth advertising, mobile apps, email, websites, or promotional events, and all the other channels that can help amplify the brand to reach as many consumers as possible.

Multi-Level Marketing

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Multi-level marketing (MLM), otherwise known as network or referral marketing, is a strategy in which businesses sell their products through person-to-person sales. When consumers join MLM programs, they act as distributors. Distributors make money by selling the product directly to other consumers. They earn a small percentage of sales from those that they recruit to do the same – often referred to as their “downline”.

Niche Marketing

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A microniche is a subset of potential customers within a niche. In the era of dominating digital super-platforms, identifying a microniche can kick off the strategy of digital businesses to prevent competition against large platforms. As the microniche becomes a niche, then a market, scale becomes an option.

Relationship Marketing

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Relationship marketing involves businesses and their brands forming long-term relationships with customers. The focus of relationship marketing is to increase customer loyalty and engagement through high-quality products and services. It differs from short-term processes focused solely on customer acquisition and individual sales.

Sustainable Marketing

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Sustainable marketing describes how a business will invest in social and environmental initiatives as part of its marketing strategy. Also known as green marketing, it is often used to counteract public criticism around wastage, misleading advertising, and poor quality or unsafe products.

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