Posted in Marketing and Strategy Terms, Total Reads: 5103
Definition: Cross Border Strategic Alliance
With the acceleration of globalization, cross-border mergers and acquisitions (M&A) or to form cross- border strategic alliances has become a potent tool nowadays for multinationals to use in order to extend their businesses internationally.
The primary reason why executives go for alliance is to boost the company’s performance through holding a premium position or cutting the cost. The second reason which is not so famous is companies go for alliances to reinvent their business models and redirect the company. Most M&A fail because most companies fail to think systematically what they are buying and what it might do for them. Some of the key questions that an organization should answer before going for an alliance are:
a) Can the alliance help the organization to command premium prices?
b) Can the alliance help in lowering of cost for the company by leveraging assets?
c) Will the alliance change the growth trajectory for the company?
Example: A satellite radio service provider entering into an alliance with automakers to provide radio in their cars. Radio service station gets new listeners everyday and automakers provide something unique to their customers that can help them charge the premium.