Benefits of strategic alliances in international business

By | April 11, 2014

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Strategic alliances are important and needed in international business because of the at least 4 benefits that could possibly enjoyed by the MNCs. Firstly, the use of strategic alliances could ease the market entry because the local partners have been doing business in the targeted market with experience, so the entry process will be more smooth than the entering without the help of the local partners. Secondly, with more joint ventures the risk will be risks in term of financial risk, cultural risk and management risk. For example, when an American company wants enter the software industry in India, because the software industry in India is very competitive, there is no guarantee that this American company would surly succeed in entering into the India market and make profit in certain period of time. With local partner joining the new investment in India, even the investment fails the risk will be shared among the partners. Thirdly, the shared knowledge and expertise is also very important and attractive to many companies because almost all companies want to learn the undated expertise in their industries but in many cases the more advanced knowledge could not be get within one country. Last but not least, if cooperation works well synergy and competitive advantage is possible and is very beneficial to both parties. The most simple reason for the synergy is that sometimes both sides’ advantages could help make up the other party’s disadvantages.