A business alliance is an agreement between businesses, usually motivated by cost reduction and improved service for the customer. Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involved and are typically managed by an integrated project team.
Strategic Objectives
A business partnership can help a company to achieve strategic business objectives through the collective objectives of the partners. While conflicting goals, objectives, strategies, ethical standards and business values are some potential threats posed by alliances, opportunities to grow sales can be realized through access to new customers and increased production capabilities.
New Markets
Growth opportunities exist from business alliances by enabling companies to penetrate new business markets. Alliances open access to each partner's network of customers and distribution channels. As an example, airline business alliances related to code-sharing increase efficiency within the airline industry. A code-share agreement is a business arrangement between airlines who cooperate to sell space on the same flight to manage capacity on shared routes.
Knowledge Sharing
A business alliance provides access to the unique know-how of the partner company. For example, a tutoring company might find itself challenged to meet the demand for math tutors within the community it services. By partnering with a computer software manufacturer, the tutoring company can release a software series of math tutoring lessons that assists a larger student population with its math services.
Economies of Scale
Economies of scale might develop from business alliances. Economies of scale relates to the cost advantages that a company gains from expansion. In business alliances, this might include access to wider marketing channels, which a company might not otherwise be able to afford outside the partnership. Costs reductions might also result from joint investments on matters like research and development, or access to a partner's operational facilities.
