Describe the commonly cited advantages of alliances and joint ventures.
What will be an ideal response?
Alliances and joint ventures (JVs) have become very popular in recent years because of the significant operational benefits they offer to the parties involved. Some of the most commonly cited advantages include the following:
Improvement of efficiency: The creation of an alliance or JV can help the partners achieve economies of scale and scope that would be difficult for one firm operating alone to accomplish. Additionally, the partners can spread the risks among themselves and profit from the synergies that arise from the complementary resources.
Access to knowledge: In alliances and JVs, each partner has access to the knowledge and skills of the others. So one partner may bring financial and technological resources to the venture while another brings knowledge of the customer and market channels.
Mitigating political factors: A local partner can be very helpful in dealing with political risk factors such as a hostile government or restrictive legislation.
Overcoming collusion or restriction in competition: Alliances and JVs can help partners overcome the effects of local collusion or limits being put on foreign competition by becoming part of an "insider" group.
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