Introduction
Globalization has resulted in high competition hence; businesses are finding it necessary to put together their resources to ensure the achievement of the companies’ goals and objectives. The following paper indulges in the advantages and disadvantages of mergers and the central issues surrounding strategic alliances.
Organizations form strategic alliances due to various factors such as, to increase their resource base, reducing competition, or diversifying their market. For a joint venture to be a successful business, managers ought to be sure that both companies’ goals and objectives are similar (Kuglin & Hook, 2002). In case the merger is only for a particular goal, then both companies have to ensure that they have a similar implementation plan. After the merger, the manager should streamline any differences between the two companies (Sargent, 2004). For instance, the human resource manager should ensure that there is an efficient cultural integration program to reduce conflict between employees.
Advantages of Strategic Alliances
Business alliances have enormous benefits for all the parties involved in the merger. First, it increases the available financial resources to carry out a specific objective. All the parties in the alliance pull their financial resources together to facilitate the implementation process of their goals (Kuglin & Hook, 2002). Mergers and joint ventures have a large pool of resources since; both parties commit to a similar objective. Some organization goal requires huge initial capital, which in some instances, organizations could not manage on their own. However, after the merger businesses can direct their resources toward a similar objective.
The second advantage of alliances is that it increases the level of technical experience. Each organization before the merger had its business skills and problem-solving techniques (Kuglin & Hook, 2002). After the alliance, managers share their knowledge and expertise, hence, improving decision-making in the organization. For instance, one of the business managers may be experienced in ways of dealing with the competition; this manager will share his or her experiences with other managers in the merger. The third advantage of alliances is that it increases the competitive edge of the firms. Most of the market leaders in the global market are mergers since; they can cover a broad market (Sargent, 2004). Strategic alliances would reduce the level of competition, especially if both parties were market rivals.
Disadvantages of Strategic Alliances
Despite the many advantages, alliances have limitations. First, it may result in conflict between workers. Due to organizational cultural differences, employees may fail to integrate hence, limiting the organization, success (Kuglin & Hook, 2002). Each organization has a unique culture due to the difference in leadership style and employees’ policy. The second disadvantage is lack of control. After a strategic alliance, organizations may lose some aspects of independence in their internal affairs (Sargent, 2004). For instance, an organization cannot make a significant decision without consulting its partner. Finally, mergers may result in an unequal benefit (Kuglin & Hook, 2002). If the contractual agreements were not elaborate enough, one of the partners might end up benefiting more than the other benefits.
Conclusion
In conclusion, strategic alliances have changed business approaches in the global market. For an alliance to be successful, business managers must plan on practical methods of implementing their goals. Contractual agreements should be clear to ensure that all parties involved understand their roles and the expected return.
References
Kuglin, F., & Hook, J. (2002). Building, leading, and managing strategic alliances. New York: AMACOM.
Sargent, D. (2004). Strategic Alliances and Cooperative Efforts. Naval Engineers Journal, 116(4), 5-6.