The Impact of Horizontal Strategic Alliances
The business world has changed drastically since the dawn of the millennium. Companies that seek success and sustainability no longer view their rivals as threats to their existence, but rather as potential partners that could help their business shift the balance and stay ahead of the competition. Entering into horizontal strategic alliances is one such way organizations attempt to gain an edge and expand their business operations.
A horizontal strategic alliance involves two or more entities, typically within the same industry, joining forces and joining resources. The type of alliance may vary – it could be a joint venture, a joint ownership venture, or a strategic alliance between companies, sharing ideas, technologies, and capabilities to expand business opportunities and market reach. Other goals such as cost efficiency, risk reduced, and market stability may also be accomplished under this type of alliance.
Those companies may come from different countries, with different laws, skills, etc. Therefore, the process of forming a horizontal alliance is complex and full of potential risks. The organizations involved in the alliance should first evaluate the impact of such an arrangement on their respective organizations. The manner in which the two entities cooperate and operate, the terms of the agreement, and the potential risks should also be fully taken into consideration.
Another issue to be addressed is the regulatory environment. Domestic and international laws and regulations may affect the success of the alliance, and often have to be taken into account when signing such an agreement. Also, organizations should recognize the potential financial and cash flow implications that an alliance may have on the partnership and should plan their capital expenses and investments accordingly.
Nevertheless, the advantages of forming such relationships are numerous. Horizontal strategic alliances can open up new markets, achieve greater scale of production, reduce costs and increase margins, and even leverage the development of new technologies as well as the possibilities to use different approaches in R&D. Some alliances may even serve to strengthen the market positioning of their partner companies and give them a competitive advantage.
Horizontal alliances can also bring new ideas, approaches, and opportunities. The combination of different companies, each with its own culture, resources, and experience, can lead to the development of projects that wouldn’t be possible if either partner acted alone. This, in turn, can lead to the emergence of entirely new and innovative solutions or products.
Overall, horizontal strategic alliances are a great way for organizations to increase their competitive advantage in the marketplace. Such agreements have the potential to increase revenue and profit, reduce costs, and gain access to new technological capabilities, resources and customers. Organizations need to bear in mind the legal considerations, and the potential for failure, but if done correctly there can be no doubt that horizontal alliances can be beneficial and lucrative.
