"Change, it is said, is the only constant in life; and business, it seems, is no exception to this rule."
Despite of the economic changes constantly taking place on the global platform, business organizations are striving for sustainability with the help of various strategies. As companies continue the trend towards becoming not only international but transnational companies, strategic alliances are becoming more critical to business operations.
According to Wikipedia, a strategic alliance is defined as "a mutually beneficial long-term formal relationship formed between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations". In the business sense, it is "a synergistic arrangement whereby two or more organizations agree to cooperate in the carrying out of a business activity where each brings different strengths and capabilities to the arrangement."
There are several reasons a company should create a strategic alliance. Businesses use strategic alliances to achieve advantages of scale, increase market penetration, enhance competitiveness in domestic and/or global markets, and enhance product development. The main reasons why most companies create an alliance are to have the ability to access new capital for growth, for development of new products or services, or for entry into new lines of business. Another important reason to form a strategic alliance is the access to international markets.
When the last decade has witnessed mergers and acquisitions, now-a-days strategic alliance is the need of time. With the rapidly increasing global competition, organizations find strategic alliance a tool for sustainability in the global market. After the saturation in the national market, the organizations focus on expansion in different countries and strategic alliance can be a good option for the same.