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Life Cycle of a Strategic Alliance



Formation of an alliance


Forming a strategic alliance is a process which usually implies some major steps that are mentioned below:

  • 'Strategy Development': In this stage the possibility of a strategic alliance is examined with respect to objectives, major issues, resource strategies for production, technology and people. It is necessary that objectives of the company and of the alliance are compatible.
  • 'Partner Assessment': In this phase potential partners for the strategic alliance are analysed, in order to find an appropriate company to cooperate with. A company must know the weaknesses and strengths and the motivation for joining an alliance of another company. Besides that appropriate criteria for the partner selection are defined and strategies are developed how to accommodate the partner´s management style.
  • 'Contract Negotiations': After having selected the right partner for a strategic alliance the contract negotiations start. At first all parties involved discuss if their goals and objectives are realistic and feasible. Dedicated negotiation teams are formed which determine each partner´s role in the alliance like contribution and reward, penalties and retaining companies´ interests.


Operation of an alliance

In this phase in the life of a strategic alliance, an internal structure occurs under which it´s functions develop. While operating it, the alliance becomes an own new organization itself with members from the origin companies with the aim of meeting all previously set objectives and improving the overall performance of the alliance which requires effective structures and processes and a good, strong and reliable leadership. Budges have to be linked, as well as resources which are strategically most important and the performance of the alliance has to be measured and assessed.



End of an alliance

There are several ways how a strategic alliance can come to an end:

  • 'Natural End': When the objectives, the strategic alliance was founded for have been achieved, and no further cooperation is necessary or beneficial for the involved enterprises the alliance can come to a natural end. An example for such a natural end is the alliance between 'Dassault' and 'British Aerospace' which was founded to manufacture the 'Jaguar' fighter aircraft. After the end of the program no further jets were ordered so the involved companies ended their cooperation.
  • 'Extension': After the end of the actual reason for the strategic alliance, the cooperating enterprises decide to extend the cooperation for following generations of a respective product or expand the alliance to new products or projects. 'Renault' for example worked together with 'Matra' on three successive generations of their 'Espace' minivan, whereas 'Airbus' expanded its cooperation to include a complete family of airplanes.
  • 'Premature Termination': In this case the strategic alliance is ended before the actual objectives of its existence have been achieved. In 1987 'Matra-Harris' and Intel broke up their 'Cimatel' partnership before one of the planned 'VLSI' chips was manufactured.
  • 'Exclusive Continuation': If one partner decides to get out of the strategic alliance before the common goals have been achieved, the other partner can decide to continue the project on its own. This happened when 'Saab' decided to continue with the designing of a commuter aircraft ('SF-340'), after the partner 'Fairchild' had to cancel the alliance because of internal problems. After 'Fairchild' left the project it was named 'Saab 340'.
  • 'Takeover of Partner': Strong companies sometimes have the opportunity to take over smaller partners. If one firm acquires another the strategic alliance comes to an end. After almost ten years of cooperation in the field of mainframe computers with 'Nokia' the last independent British computer manufacturer 'ICL' was taken over by 'Fujitsu' in 2002.
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