Discuss the similarities and differences of vertical and horizontal alliances. Which is most vulnerable to problems, what are these problems, and what are their causes?

Question

What will be an ideal response?

Answer 1

Business level strategic alliances can be either horizontal or vertical. Vertical strategic alliances involve cooperative partnerships across the value chain, whereas horizontal strategic alliances are cooperative partnerships between firms at the same stage in the value chain. Commonly, vertical alliances join suppliers and buyers, whereas horizontal alliances often link competitors. Vertical alliances are easier to manage than horizontal alliances and are more likely to be successful. Firms in horizontal alliances, because they are also competitors, must beware of opportunistic action by their partners. Horizontal alliances are also more vulnerable to the temptation of tacit collusion, especially in concentrated industries where market signaling is easy.