The importance of alliances in focus
To begin with, the system of global management is versatile in its methods and practice of saving the previous as well as reaching new positions for high-end companies and those which are developing fast or slow. The reason is that the most of global companies tend to increase the boarders of their influence throughout the world. This objective is embodied by means of creating the alliance of several companies. The aim of such structurally complicated formation is to direct all efforts to the volatile processes in this expeditious world of high technologies and constantly appearing new methods of facilitating the work within companies. Why should corporations unite? The answer is too simple. It is like imagining the force of ants or piranhas; they are not strong to do something when being alone.
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The steps to provide joint ventures
“A strategic alliance, broadly defined, is a contractual agreement among firms to cooperate to obtain an objective without regard to the legal or organizational form the alliance takes” (SAM Advanced Management Journal, 1993). How can you follow more customer requirements or achieve new markets? Plenty of corporations and companies provide the policy of forming strategic joint ventures.
It is helpful for small companies to develop their products or services in order to expand the influence of their labels on customers intending to accept respectful attitude from customers and partners as well. Today there are a lot of alliances in different spheres of industries. First, it would be very grave to outline the benefits of such formations. Before making a union some companies should balance the interests in different points, namely:
- Idle capacity and employment are determined in terms of additional business and will support positive impact in annual profitability;
- The essence of advantages in the company’s capacity to provide the supplying company with strong guarantees in further cooperation;
- The existence of modified equipment and its correspondence to modern norms of maintenance;
- The distribution of the partners should evaluate the mutual investment and places of company location;
- The elaboration of the client base in order to align previously gained audience of customers.
Thus one can say that the alliances can support companies in “financial, scientific, and cultural strengths” (SAM Advanced Management Journal, 1993). For example, in aircraft industry it is normal when companies unite to strengthen the whole strategy on obtaining a huge number of potential and real customers, unless speaking about the prevailing desire of any group or alliance to monopolize the market or become dominant in it.
One of such alliances is Star Alliance being one of the world’s first air joint ventures. The head of this corporation Guillaume Bizet does not disguise that profit which the company has since it was united in alliance saying: “For airlines, the value has come from synergies and important economies of scale in key areas such as route planning, yield management, maintenance, sales and marketing” (Air Alliances, 2007).
The alliance has 20 main members including Air Canada, Austrian, Lufthansa, SAS Scandinavian Airlines, Singapore Airlines, Swiss, Thai, United Airlines and US Airways. The subsidiaries of the alliance are placed in 155 countries, 855 destinations, and 16,545 daily departures. The area of network strength encompasses Europe, North America, and Asia. The market share of the company stands at the index of 22.7 per cent. Load factor is similar to 73.7 per cent. Total revenue is $119,286 million; net profit is $3,374 million (Air Alliances, 2007).
Star Alliance and its benefits
The benefits of the alliance consist in several agreements as of coordination of the content proposals. Providing the policy of centralization it made one organ responsible for administration work and the fare of the services they present customers with. In other words Star Alliance has a “centralized fare loading and consolidated reporting” (Air Alliances, 2007). The other benefit is that the company can promote additional savings by forcing total volume in different conversations with alliances. It concerns the matter of lowering prices or providing seasonal discounts throughout the fields of company’s influence. The mutual collaboration with banks, governments and other makeups is easygoing when the matter touches upon the alliances of high-end companies with an outstanding reputation and stable investment frameworks. In this branch of industry for a company wanting to join the alliance the following points should be adhered:
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- A suitable traffic pattern;
- A consolidated travel program;
- A suitable sourcing strategy; (Air Alliances, 2007).
Summing up, it is significant to mention the role of the alliances in formation of strong background in order to support the world economy. It sounds more decisively in nowadays situation with world crisis. Nevertheless, as one good proverb underlines: United we stand, divided we fall.
Chan, PS & Heide, D ‘Strategic Alliances in Technology: Key Competitive Weapon’; SAM Advanced Management Journal, Vol. 58, 1993.
Laarhoven, PV & Sharman, G ‘Logistics Alliances: The European Experience’; The McKinsey Quarterly, No. 1, 1994.
Brown, CM ‘Partnering for Profit: Strategic Alliances and Joint Ventures Are Advancing Revenue Growth of Small Enterprises’; Black Enterprise, Vol. 26, 1996.
Annual report ‘Air Alliances: How to Benefit’. Web.