What are the main problems encountered during the formation of Essay

What are the main problems encountered during the formation of alliances - Essay Example These factors jointly represent a better placed company that is in a position to compete in the overly competitive global market. Unfortunately, global strategic alliances do not always present the envisioned merits. In any case, they present greater resource challenges. This is often the case when a firm selects the wrong partner. The wrong choice of an alliance partner diminishes the chances of an alliance’s success. Besides the choice of the wrong partner, other factors lead to the collapse or failure of strategic alliances. These reasons include opportunism, cultural differences, lack of commitment by one of the partners, lack of trust, relational risk, and lack of clear objectives amongst others. Globally, there has been a wide preference of global alliances; unfortunately, most of these never achieve the envisioned goals and objectives. In fact, statistics indicate that close to two thirds of alliances fail within the first two years of constitution. Even though the case s of productive strategic alliances are scarce, there exist firms that have benefited from these arrangements. The most common benefits are diversification of risk, competitive advantage, synergy, and ease of market entry. Increased globalization and heightening technology application has augmented the importance of strategic alliances. ... Emergence of technology and globalization has rendered the simplistic generic strategies applied in U.S. markets ineffective. Modern day firms must embark on a path of frequent innovation to remain at par with the ever changing market dynamics and preferably, forge ahead of equally effective and innovation conscious rivals. As a result, firms have to alter tradition approaches to market domination they must be flexible in their market approaches. Most of the areas requiring flexibility are technology, marketing, distribution channels, and plant economics and heightening constraints on resources. To effectuate inter-firm partnership and utilize it as a strategy, business heads must alter their traditional thinking regarding competition and realign themselves to mutual ways of running businesses in the global economy, as resources and strengths of organizations are so varied that no particular firm has all the essential ingredients to come up with effective global strategies (Hiriyappa , 2010). Business leaders are converging on the idea that congregating the capabilities of others firms across the globe to compete efficiently is not only sensible but also necessary. It is clear that strategic alliances have attracted widespread attention and are frequently being viewed as one of the few alternatives to withstanding and outwitting widespread competition. In this sense, global alliances are considered as accommodating contracts between firms from dissimilar countries that are real or possible competitors (Hill & Jones, 2010.p.273). Strategic alliances run come in different arrangements; they can either be official joint ventures, where