What is the impact of strategic alliances on shareholder value?

1 Benefits of alliances

Strategic alliances can create value for shareholders by enhancing the competitive advantage, innovation, and market access of the partners. For example, alliances can help firms leverage complementary assets, skills, or technologies, reduce costs or risks, or enter new markets or segments. Alliances can also enable firms to access diverse knowledge, learning opportunities, and network effects, which can foster innovation and differentiation. These benefits can translate into higher revenues, margins, and growth potential for the partners.

2 Costs of alliances

Strategic alliances can also entail costs for shareholders by reducing the control, flexibility, and profitability of the partners. For example, alliances can create coordination challenges, cultural clashes, or goal misalignment, which can hamper the efficiency and effectiveness of the collaboration. Alliances can also expose firms to opportunistic behavior, knowledge leakage, or competitive threats from their partners, which can erode their competitive position or core competencies. These costs can reduce the returns, performance, and sustainability of the partners.

3 Measurement of alliance impact

To assess the impact of strategic alliances on shareholder value, firms need to measure both the benefits and the costs of their alliances over time. This can be done using various methods, such as financial ratios, market reactions, strategic outcomes, or balanced scorecards. However, measuring alliance impact is not easy, as it requires accounting for the complexity, uncertainty, and dynamics of the alliance environment. Moreover, measuring alliance impact is not sufficient, as it also requires managing and improving the alliance performance and relationship.

4 Best practices for alliance value creation

To maximize the value creation potential of strategic alliances, firms need to carefully select the right partners, goals, and governance structures for the alliance. They should also align the interests, expectations, and cultures of the partners, and develop trust, commitment, and communication among them. Additionally, firms should leverage the synergies, learning, and innovation opportunities of the alliance while monitoring, evaluating, and adjusting its performance and relationship. Moreover, conflicts should be resolved and risks managed to protect assets in the alliance. Finally, it is important to end or renew the alliance when appropriate.

5 Role of business relationship management

Business relationship management (BRM) is a skill that enables firms to establish and maintain effective relationships with their internal and external stakeholders, such as customers, suppliers, or partners. BRM can be a vital contributor to the value creation potential of strategic alliances by helping firms identify and evaluate the strategic fit and value proposition of potential alliance partners, negotiate and design the optimal alliance contract and governance structure, facilitate the integration and coordination of alliance activities and resources, promote collaboration and co-creation of value among partners, support the measurement and improvement of the alliance performance and relationship, as well as manage the evolution and transformation of the alliance over time.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?