As a professor, I am one to say… “Don’t cite Wikipedia” as an official source for your term paper but it is a good place to start to understand a subject. When trying to understand the differences between the following constructs, where do you even begin?
Strategic Alliance vs. Partnership vs. Joint Venture vs. Coalition
Let’s take a peek at Wikipedia just to start… The following are definitions from wikipedia.com.
A strategic alliance is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. This form of cooperation lies between mergers and acquisitions and organic growth. Strategic alliances occurs when two or more organizations join together to pursue mutual benefits.
Definitions and discussion
There are several ways of defining a strategic alliance. Some of the definitions emphasize the fact that the partners do not create a new legal entity, i.e. a new company. This excludes legal formations like joint ventures from the field of Strategic Alliances. Others see joint ventures as possible manifestations of Strategic Alliances. Some definitions are given here:
Definitions including joint ventures
- A strategic alliance is an agreement between two or more players to share resources or knowledge, to be beneficial to all parties involved. It is a way to supplement internal assets, capabilities and activities, with access to needed resources or processes from outside players such as suppliers, customers, competitors, companies in different industries, brand owners, universities, institutes or divisions of government.
- A strategic alliance is an organizational and legal construct wherein “partners” are willing-in fact, motivated-to act in concert and share core competencies. To a greater or lesser degree, most alliances result in the virtual integration of the parties through partial equity ownership, through contracts that define rights, roles and responsibilities over a span of time or through the purchase of non-controlling equity interests. Many result eventually in integration through acquisition.
Definitions excluding joint ventures
- An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project. A strategic alliance is less involved and less permanent than a joint venture, in which two companies typically pool resources to create a separate business entity. In a strategic alliance, each company maintains its autonomy while gaining a new opportunity. A strategic alliance could help a company develop a more effective process, expand into a new market or develop an advantage over a competitor, among other possibilities.
- Agreement for cooperation among two or more independent firms to work together toward common objectives. Unlike in a joint venture, firms in a strategic alliance do not form a new entity to further their aims but collaborate while remaining apart and distinct
Partnership:A partnership is an arrangement where parties, known as partners, agree to cooperate to advance their mutual interests.
Joint Venture: A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets.
Coalition: A coalition is a pact or treaty among individuals or groups, during which they cooperate in joint action, each in their own self-interest, joining forces together for a common cause. This alliance may be temporary or a matter of convenience. A coalition thus differs from a more formal covenant. Possibly described as a joining of ‘factions’, usually those with overlapping interests rather than opposing.
What about an “alliance”? An alliance may be seen as the ‘joining of forces and resources, for a specified or indefinite period, to achieve a common objective’.