Frequent failures

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Nowadays, it is difficult for companies to achieve its own competitive advantages and maintain its market position caused by increasing globalization, the creation of larger markets (EU, EFTA, NAFTA) and the progressive technological development.[1] Increasingly strategic alliances are formed to unite with the aim of current strengths and to realize economies of scale. In the literature alliances are mostly defined as agreements of two or more firms to share capabilities for competitive advantages without losing their respective autonomy.[2] Generally, three broad types can be distinguished: coalitions, co-specialisations, and learning alliances.[3] An alliance becomes strategic when the sharing of capabilities (e.g. R&D, knowledge) holds over a long time. However, research indicates that the failure rate for alliances is as high as 60% and only very few are very successful.[4] The reason for that is rather complex and multidimensional. However, according to Duysters et al. (1999) the main reasons for failures can be split into two broad categories: strategic and financial as well as behavioural[5] which will be discussed in more detail in this assignment.

Frequent failures

The reasons for the success or failure of strategic alliances can state a number of strategically important factors. In each of the four stages of development there are specific problems that can lead to failure of the alliance. Often the cause is already in organisational adaptation measures of the partners in conflicts between the partners due to different prioritization or different management systems.[6]

While these factors largely represent implementation problems, Porter defines the high failure rates due to the fact that the transaction does not clear or a false corporate policy and strategic approach was used. This is confirmed by the study of Coopers and Lybrand. According to their study, 50% of executives use their time for negotiating the strategic alliance, 23% for the development of a plan, 19% for the development of contract document, and yet only 8% for the establishment of the management system.[7]

Based on the research of Duysters et al. (1999), and Bleeke and Ernst (1991) are reasons for failures strategic and financial aspects as well as other behavioural issues related to trust and commitment. Based on this division may be cited numerous reasons for the failure of alliances (Figure 1).[8]

Factors of failure according to Bleeke and Ernst (1991)


In the literature mentioned factors Strategic, Financial strategy, objectives, expectations, partner asymmetry, economic incentives, goals, financial aspects, process complexity, geographical and operational differences Behaviour trust, commitment, organisational culture, aspects of community learning, staff / employee

Many of these reasons apply to the same extent for other forms of strategic cooperation.

With a continually changing environment a strategic alliance needs inevitably to change behaviour and the strategies of the partners. Furthermore, a crucial fact is the number of partners involved in the alliance. So it may be advisable to limit the number of participants, since with increasing number of partners, the focus on common goals will be difficult.[9]

Although the search for an alliance partner is usually based at a significant deficit of strategic success and thus cannot be done from a position of strength, should always be kept to a successful, excellent companies out for when choosing the partner. These international strategic alliances often create complex management problems.[10] The focus is mainly the task of handling the emerging enterprises through the cooperation of target and behaviour conflicts. The most important requirement is that the two partners harmonize at a fundamental, strategic, and cultural level, what is known as "Fit".

Management of strategic alliances

The management of the strategic alliance is of great importance, because here the survival or failure will be determined with time.

First, the shared objectives could be included. The own goal must be constantly reviewed and if necessary, redefined. When the initial euphoria subsides, it is important to anticipate possible conflicts between the partners and eliminate them. In conflict situations the powers should be conferred and linked to the appropriate contact person.[11]

Another problem, which is adjusted frequently in the management process, is the unwillingness of the alliance partners to give up some of their economic independence. Each partner in a strategic alliance has not its own resources, but shares those with its alliance partner, so the risk that one of the two exploits his knowledge in an opportunistic manner. By non-cooperative behaviour could work in a short term profit, long term, the desired result was inevitable. However, it is questionable whether the partner has acquired the skills necessary to displace the former partner from the market in a short time.[12] Nevertheless, the joint use of resources leads to a certain degree of dependence. At the same time generating new resources and capabilities through collaboration as well as shared. To overcome these problems, it is necessary that both partners always have their original motives and the common goals of the strategic alliance in mind. Success depends on how successful managers of the alliance are to coordinate the resources of the participating companies and integrate them.[13] A good example of this is "Volvo's attempt to merge with Renault in 1993 temporarily destroying shareholders wealth in Volvo".[14]

Another important aspect of management is to maintain the flexibility and dynamics of the strategic alliance. The management team of the alliance must be able to drive with full enthusiasm to pursue common goals. This problem arises particularly in light of the uncertainty of future developments in the environment.[15] This makes necessary that there is a significant benefit to subsequent adjustments.

The more time-sensitive decisions are the more important are efficient management structures. An independent alliance management here has the greatest effectiveness.[16] This way represents a necessary and time-consuming voting procedure between the partners. Efficiency is ensured in turn, only if the alliance management can draw on relevant expertise to enforce its decisions. It also reduced by an autonomous management, the risk that the lack of a partner's activities and decisions within the alliance, bringing the strategic alliance to success. To produce such an independent alliance management, the partner must provide sufficient staff and resources.

Many alliances also fail to cultural conflicts resulted in different organisational or national cultures.[17] The differences in corporate cultures manifest themselves in differing management styles, or an employee versus task orientation. While e.g. Western companies often complain that their negotiations with Japanese partners take a long time, the Japanese feel that the Western companies exert too much pressure on them. [18] Why must "cultural encounter" to be handled with the utmost caution and respect from a partner, so that existing cultural differences may not affect the success of an alliance. It is particularly important that you are willing to learn from partners and consider the strategic alliance as a "positive experiment". This willingness to learn could be one reason that Japanese people tend to benefit from strategic alliances, while committed to the Western partners, relying on its own know-how too little. The failed alliance Dunlop and Pirelli, whose management has not understood the gap between the British and Italian organisational culture bridges, underscores the importance of cultural compatibility as a potential alliance partners.[19]

In particular, the human aspects play a crucial role in the success of the strategic alliance.[20] The lack of motivation, managers had at the start of the alliance between AT&T and Olivetti led to failure - even though that was realized, at first glance synergy potential seemed high.[21] Another problem is to do justice to all parties. Especially against the background that the end of the alliance is often not foreseeable, a clear future perspective must be created for the individual.

Although the strategic alliance must be dynamic to find partners they have no choice but to live with the uncertainties of other factors. A cooperative relationship depends on many external and internal factors and on the structurally and culturally significant interest in innovation, the willingness to profound changes and the use necessarily occurring conflicts. [22]

However, even a perfectly managed Strategic Alliance will not be successful if the strategy pursued is proving to be false. There must be an agreement between the Alliance, their environment, their positioning to customers and competitors and their resource potential. Furthermore, confidence in their own performance as well as in cooperation with the partners is an essential prerequisite. [23]

Success factors

Building on the problem awareness a number of theorists and practitioners have formulated factors for success. Wharton University of Pennsylvania summarise the primary factors for success as follows: accessing complementary capabilities, customizing capabilities, knowledge sharing, effective governance.[24]

Kanter (1994) defines eight criteria for successful alliances: individual excellence, importance, interdependence, information, integration, institutionalisation, and integrity.[25] However, there is an almost infinitely potential for conflict. This alone shows the high rate of failed strategic alliances.


Strategic alliances offer a great potential for synergies as well as for conflicts. To reduce the number of conflicts and to transform the cultural diversity of synergy is an understanding of each other's culture, the first step to a successful collaboration. However, founding an alliance follows the rules of a start-up company. An upstream before the founding principles and operation analysis to reduce the risk of failure and lead to better starting conditions for cooperation.

[1] Zineldin, M. and Dodourova, D. (2005)

[2] Lasserre, P. (2007)

[3] Lasserre, P. (2007)

[4] Zineldin, M. and Dodourova, D. (2005)

[5] Bleeke, J. and Ernst, D. (1991)

[6] Pansiri, J. (2005)

[7] Coopers & Lybrand (1995)

[8] Bleeke, J. and Ernst, D. (1991)

[9] Sadler, P. (2003)

[10] Pansiri, J. (2005)

[11] Slowinski, G. (1992)

[12] Pansiri, J. (2005)

[13] Slowinski, G. (1992)

[14] Ernst, D. and Halevy, T. (2000)

[15] Bleeke, J. and Ernst, D., (1992)

[16] Lorange, P. and Roos, J., (1992)

[17] Lorange, P. and Roos, J., (1992)

[18] Schuette, H. and Lasserre, P. (1996)

[19] Schuette, H. and Lasserre, P. (1996)

[20] Taucher, G. (1988)

[21] Elmuti, D. and Kathawala, Y. (2001)

[22] Pett, T. L. and Dibrell, C. C. (2001)

[23] Taylor, A. (2005)

[24] Wharton University of Pennsylvania

[25] Kanter (1994) in Lasserre, P. (2007)