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Strategic Alliances: Collaboration with Your Competitors--and Win1

Collaboration is a strategic alliance typically between two firms with the goal of providing mutual benefit for each firm. Collaborating with your competitors is like a double-edged sword. Sharing between firms is a smart strategy as long as the relationship is give-and-take and is one that will benefit both parties without compromising each of the firm’s competitive position in the industry. Firms must be careful in what information is shared across this delicate communication trail.

To borrow a line from the Godfather, "keep your friends close, but your enemies closer". This article's discussion of competitive collaboration lends itself to the idea that learning and studying your enemy pays. Although are infinite possibilities arising from collaborations, be wary of the risk of sharing knowledge with the enemy when it is core to your firm's competitive competencies.

Types of competitive collaboration

  • 1.

    Joint Ventures

  • 2.

    Outsourcing agreements

  • 3.

    Product Licensing

  • 4.

    Cooperative research

The study of 15 mergers of three major types: four intra-European alliances, two European- Japanese alliances, and seven U.S.-Japanese alliances found that collaboration is something often used by successful businesses. Alliances between Asian companies and Western rivals seem to

work against the Western partner.

Collaboration is competition in a different form.

Companies have to enter collaborations

knowing that competition still exists. They must have clear strategic objectives, and understand how their partners’ objectives will affect their success.

Harmony is not the most important measure of success. Most successful alliances do not always have win-win scenarios. As competitive competencies develop, conflict will arise between the partners over who has the right to the rewards of the partnership.

Cooperation has limits. Companies must defend against competitive compromise. Companies need to make sure that employees at all levels understand what corporate information is off limits to the partner. Compromising too much information can make you vulnerable to losing market share to your partner.

Learning from partners is paramount. Remember that Asian companies focus on learning, while Western companies want to demonstrate their superiority and leadership. This provides partners with knowledge that will benefit them in the long-term. You cannot make a Western company want to learn. Western companies have certain arrogance after decades of leadership that detracts from their ability to learn.

Why collaborate? 1. Gain technological advancement at a relatively low cost.

1 Gary hamel, Yves L. Doz, and C.K. Prahalad, Harvard Business review, January-February 1989, pp. 133- 139.

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