Developing the Current Operations
One way to develop a current operation is to realize economies of scale, to be able to realize the company must have a large production volume or have sufficient production volume so that cost savings can be realized.
The Industrial are sometimes able to implement and sometimes not capable to implement, when enterprise is not able to make cost saving from economies of sale by itself, then allowed joining a strategic alliance with another company until the company has enough volume to be able to increase the cost advantages from economies of scale.
To realize economies of scale, the company may merge with another company as its partner. This is because to achieve the necessary economies of scale large volume production, so that large volumes of Company Production then the company should dominate the industry.
Generally one company is not able to dominate the industry, one of which is caused by the presence of anti-government regulation of monopoly. Although technology is a special section for the company in general, no single company is able to generate sufficient demand in realizing economies of scale, so that in such circumstances that the company should work together to form an alliance that is useful to realize economies of scale.
Another way in developing the current operations is learn from competitors. Each company has different resources and capabilities, from resources owned can become competitive advantages for companies compared with other companies.
The last way in developing the current operations is the sharing of costs and risks if the company produces its own product, not only will the cost is great but will also bear the risk. So with the alliance, then the cost of these can be shared with other companies, as well as the risk of failure.
Creating a Good Competitive environment
Companies can use strategic alliances to create a competitive environment is more conducive to performance leader.
Ease develop technology standards
Companies can use the alliance to help set the technology standard in the industry. By this standard, technology-based products can be developed and consumers can trust that the products they buy will be useful for some time to come.
The company formed strategic alliances with the aim of evaluating and selecting a technology standard. By setting this standard, the technology can be run on products that consumers like to buy these products, because consumers will know that they will conform to industry standards at the time. This alliance strategy can be used to create a better competitive environment (favorable).
Facilitating tacit collusion
Collusion occurs when two or more firms within an industry to coordinate their strategy choices to reduce competition in the industry. Reduction of competition makes it easier to improve company performance.
Collusion occurs when firms coordinate their production and pricing with no direct communication with the others, but with the exchange of signals with other companies regarding their intent to work together.
Organizing to Implement Strategic Alliance
Explicit contracts and legal sanction
One way to prevent cheating in strategic alliances is the presence of an explicit contract that determines the legal liability if a fraud occurs.
Equity investments
Effectiveness of the contract can be improved by having a partner in the alliance and mutual investment with each other.
Firm reputations
A third limitation of stimulant fraud in a strategic alliance that is the effect that the reputation of fraud will result in a company’s future opportunities. Even so, it is relatively difficult to anticipate all the differences between the alliance partners who might commit fraud. Fraud in an alliance can close the opportunity or the opportunity to develop the partnership. For this reason, the company may decide not to commit fraud in their community today.
Reputation for fraud control in strategic alliances has several limitations.
- Fraud difficult to be separated in strategic alliances and relatively less impact on the reputation of the company or the company’s ability to establish alliances in the future.
- Even if one partner in a partnership may betray the relationship openly, one or two companies may not be simply connected to a network with other companies to make information public.
- Finally, the effect of a reputation of being eliminated, as long as fraud in an alliance is blatant and known to the public, may be able to close the opportunity or chance company in the future, but it’s only a small fraction showing the losses at this time by the company who cheated.