Strategic Alliances: A Competitive Necessity

The past two decades has been an era of global evolution, in which the globalisation of markets, the crossing of and rapid shifts in technologies, and the breakdown of many traditional industry boundaries, has rendered strategical alliances a competitive necessity (Ohmae, 1989). A single firm is supposed(prenominal) to possess all the resources and capabilities to achieve global competitiveness. Therefore, collaboration among organisations that possess completing resources is often necessary for survival and growth (Dussauge, Garrette and Mitchell, 1998).Defined as a long-term, translucent contractual agreement pertaining to an exchange or combination of some of a firms resources with another firm(s), strategic alliances allow firms to share risks and resources, gain knowledge and technology, exposit the existing product base, and obtain access to new markets (Burgers, Hill and Kim, 1993 Dacin, Hitt and Levitas, 1997 HagedoornAlthough the benefits of strategic alliances are wel l documented, whether strategic alliances can be a operable entry strategy option for small and medium-size enterprises (SMEs) to successfully penetrate markets held by major incumbent suppliers is less clear.In this paper, strategic alliances are shown to be an good entry-cum-deterrence strategy for SMEs to successfully penetrate markets that are well established and prevail by major corporations. In addition, the conditions under which SMEs can call strategic alliances as an entry strategy without restricting themselves to target only those markets unattended by bigger firms are identified.In terms of methodology, this paper follows a deductive approach one based on game theory, to examine explicitly the reactions of bigger firms to the entry of SMEs into their markets, specifically taking into account the resource limitations go about by SMEs. To verify that the abstractive arguments presented are consistent with practice, two cases of the use of strategic alliances by SM Es as an entry strategy to penetrate markets dominate by major corporations are examined. The practices and experiences of these SMEs were found to be consistent with the theoretical arguments presented here.