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STRATEGIC ALLIANCESFACTORS INFLUENCING SUCCESS AND FAILURE ABSTRACT: With the advent of globalization and integration of markets, organizations,

for survival, enter into strategic alliances. Strategic alliances are a much studied subject in fields of strategy and organizational behavior. This paper is an attempt to identify the reasons for success and failure of such alliances, through a review of existing literature. By the very fact that extensive research has been done on this subject it would be a Herculean task to be able to do a comprehensive review of literature; however an attempt has been made to see that justice is done to the topic under discussion. The paper starts with an introduction which defines what alliances are, and its relation to strategy. It further brings out the rationale for firms to enter into alliances and brings out the issues related to performance measurement, which is considered crucial to understand the reasons for success of an alliance. The reasons for success are discussed and the paper concludes by proposing that successful alliance relationships are expected to be characterized by higher levels of commitment, collaboration, communication, and trust than are less successful alliances. This is ensured by ensuring that the alliance partners have a fit with respect to alliance objectives, its mechanics of operation and the performance evaluation criteria. INTRODUCTION: With the advent of globalization and integration of markets into a global market, organizations are now subject to changes occurring in the environment outside their immediate domain. Not only have markets become global, tastes have converged, technologies are changing at a rapid pace, and product life cycles have become shorter. Since organizations are now subject to increasing number of environmental variables, to survive and grow in this highly competitive world, alliances are being entered into. Though the term

alliances may have referred to a particular type of relationship, it now serves as an umbrella label for a host of relationships (Faulkner & Rond. 2001, pp3). These relationships can range from Joint ventures Licensing agreements Minority equity investments 2 Co marketing/ branding/ development agreements Consortia coalitions An alliance is commonly defined as any voluntarily initiated cooperative agreement between firms that involves exchange, sharing, or co-development, and it can include contributions by partners of capital, technology, or firm-specific assets (Gulati & Singh,1998). An inter-firm alliance is an organizational structure to govern an incomplete contract between separate firms and in which each firm has limited control. Because the partners remain separate firms, there is no automatic convergence in their interests and actions. As a result, to deal with unforeseen contingencies inherent in the incomplete contract, the partners need to make decisions jointly (Routledge Encyclopedia of International Political Economy). For many economists, the prevalence of incomplete contracts yields the basic rationale for the existence of the firm (Coase, 1937). An alliance is an alternative way to govern such an incomplete contract. In contrast to full integration, alliances use some form of joint decision making to deal with unforeseen circumstances. All alliances have a strategic perspective to it. This perspective can be from either of

the partners or from both. The strategy used to foster such relationships is termed as cooperative strategy. Cooperative strategy is an attempt by organizations to realize their objectives through cooperation with other organizations (Child & Faulkner, 1998,pp1). Strategic alliances are voluntary arrangements between firms involving exchange, sharing, or co development of products, technologies, or services. They can occur as a result of a wide range of motives and goals, take a variety of forms, and occur across vertical and horizontal boundaries (Gulati, 1998). Strategic alliances between firms are now a regular phenomenon. Their proliferation has led to a growing stream of research by strategy and organizational scholars who have examined some of the causes and consequences of such of the partnerships. For us to discuss the causes of success or failure of strategic alliances, it is essential that we must know as to why firms enter into strategic alliances. Once we know these reasons we are in a better position to understand and evaluate the performance of an alliance. From these two, it would be possible to interlink the causes of success or failure of an alliance and draw conclusions from them. 3 THE RATIONALE FOR ALLIANCES: Empirical studies of cooperative behavior are framed in distinct theoretical perspectives. They are Market power theory, Transaction cost theory, Agency theory, and Resource dependency theory . In recent years Game theory, Real options theory and Social network theory have been growing in popularity (Faulkner & Rond. 2001, pp3-5). These theories attempt to explain the rationale for firms entering into strategic alliances. Market power and strategic management perspective In 1980s Michael porters theory of competitive strategy dominated the literature in strategic management. This stated that the competitive intensity of industries was determined

by five fundamental forces namely: degree of rivalry between competing firms, power of suppliers and buyers, the threat from new entrants, and threats posed by potential substitutes. Consequently a firms strategy would be to take advantage of these forces as best as it can (Porter, 1980). Thus a strategy of cooperation achieved through strategic alliances allows a firm to do an activity in a superior way than had it done individually, and thus achieve higher performance indicators. Hymer (1972) further differentiated the utility of strategic coalitions. Coalitions which are intended to strengthen the position of a firm by diminishing the competitors market share are called offensive coalitions. Coalitions which strengthen the position of a firm by allowing it to create entry barriers are called defensive coalitions. For eg: in 1980s Rover entered into a collaboration with Honda to secure new model designs and engineering capabilities without which it could not have survived (eg of defensive coalition) while Honda used the alliance to enter new markets(eg of offensive coalitions). Thus attainment of increased market power, and thereby enhanced returns, can be attained through alliances. Thus cooperation through alliances may be a faster and cheaper way to gain market power than mergers, acquisitions or organic growth. To achieve this it is also essential that the partners achieve a fit between their respective strategies so that an alliance between them makes a positive contribution to the attainment of each partys obje ctives (Faulkner & Rond. 2001, pp5). Most of the strategic management work on alliances has concentrated on why and how alliances are formed. Faulkner (1995) classifies the motives for alliance formation into internal and external ones. The key internal motives are: 4 1. The need for specific assets or capabilities not currently possessed.(resource dependency perspective)

2. Those arising from the need to minimize costs(transaction costs theory) 3. The need for speed to market not achievable by other means 4. Those concerned with the spreading of financial risk(transaction costs) The key external motives are 1. Those surrounding the issues of globalization or rationalization 2. Those concerned with the turbulence and uncertainty of international markets. 3. Those centered on the need for vast financial resources to cope with fast technological changes and shortened product life cycles.(resource dependency) Strategic management theory draws the attention to the merits of a cooperative strategy over a competitive strategy. It stresses on the partner selection criteria which emphasizes the matching of partners interests, rather than looking at cooperation from a single partners view. This assumes significance when we assess the reasons for success or failure of an alliance. Finally the choice of an alliance is the strategic choice by the actors and thus all forms of alliance have a strategic angle to it. With increasing globalization and competition, it is being seen that firms on their own are unable to fight it out in the market place. Even strategic alliances but between individual firms are increasingly unable to cope with the pressures of competition. Increasingly firms are collaborating to form conglomerations through a medium of networks and close relationships led by a strong leader. Alan rugman and Joseph Dcruz(1993)through their theory of the flagship firm provide a model for development of market power. By a system of relationships with key players in a business system, there is an attempt to focus on strategies that are mutually reinforcing. Such relationships foster and form important facilitating mechanisms for development of long term competitiveness. Here relationships with key competitors include joint ventures in new markets, market sharing arrangements, technology transfers, supplier development etc.

Transaction cost theory perspective The perspective on formation of alliances offered by transaction cost theory views such arrangements as potentially cost reducing methods of organizing business transactions. With increasing internationalization and globalization, one of the dominant issues within the area of strategic alliances deals with the choosing of appropriate mode of entry for foreign markets. 5 1. A firm seeking to perform business function outside its domestic market must choose the best mode of entry. The array of choices(Anderson& Gatignon,1986) include a wholly owned subsidiary a joint venture including a strategic alliance licensing contractual venture The impact of entry modes on the success of foreign operations is significant. Entry modes differ greatly in their mix of advantages and drawbacks. Although there is no tested and accepted theory as to how much control each mode affords, based on research available it is possible to group entry modes in terms of the amount of control. Such a classification is as follows: high control modesdominant equity interests 1. wholly owned subsidiary 2. dominant shareholder(one to many partners) medium control modes balanced interests 1. equal partner 2. plurality shareholders

3. contractual joint venture 4. contract management 5. restrictive contract 6. franchising 7. non restrictive contract low control modes: diffused interests 1. small shareholder(one to many partners) 2. Non exclusive, non restrictive contracts. Assuming that the market being entered has at least enough potential that the firm can regroup the overhead of a high control entry mode, the efficiency depends on the optimal degree of control. This is dependent upon: 1. investments , the unpredictability of entrants external environment, 2. the entrants inability to determine its agents performance by observing output measuresinternal uncertainty 3. agents ability to receive benefits without bearing the associated costsfree riding potential 6 There fore based on the transaction cost theories the following propositions have emerged: 1. Modes of entry offering greater control are more efficient for high proprietary processes or products, unstructured, poorly understood products and processes, when socio cultural distance is great, when value of brand name is higher. 2. These factors are also dependent upon switching costs, government restrictions, and strategic considerations of the parent multinational.

Based on this it can be safely postulated that a low resource commitment is preferable until proven otherwise. Thus alliances are the preferred mode of entry . Thus transaction cost analysis has emphasis on the growth of ties that impinge on uncertainty, balance of risks, and scale of operations. Agency theory perspective Traditionally cooperative arrangements were often seen as second best to strategic option of going it alone. Licensing, joint ventures, co production and management service agreements were seen as second choices to be done under pressure. With the removal of many of the regulatory pressures and the world market moving towards a free market, presently cooperative associations are between firms in industrial free market economies. These associations may involve firms comparable in size, international in scope, and making similar contributions. The decision to enter a cooperative arrangement or whether to expand via a wholly owned operation is often a critical issue in international strategy(Contractor & Lorange,1988). A cooperative venture (CV) is preferred over fully owned subsidiary when Incremental benefit of CV (cooperative venture) minus incremental cost of CV is greater than share of other partners profit in venture and/ or significant reduction in risk through cooperation The incremental net benefit of a cooperative venture over a go it alone alternative has to be not only positive but moreover, it should be large enough to cover the other partners share of the profits in order for the cooperative alternative to be chosen. Or the risk of the cooperative alternative has to be substantially below the go it alone option. This must be occurring in large number of cases, judging from the prevalence of joint ventures etc. In a closed globalised administrative system, efficiency and optimization require centralized control over fully owned operations.. Cooperative forms of international

7 business can be superior in cases where local mandates, marketing and cultural variations, entrenched competitors, high development risk are observed. Joint ventures are a devise for mitigating the worst consequences of mistrust (Buckley & Casson, 1988). They represent a compromise contractual arrangement which minimizes transaction costs under certain environmental conditions. But some joint ventures do provide a suitable connect in which the parties can demonstrate forbearance and thereby build up trust. This may open up possibilities which otherwise could not be entertained. An important role of joint ventures is to minimize the impact of quality uncertainty in collaborative research. Theory of cooperation in international business International joint ventures represent a strategy of moderation. Just as equity participation in a joint venture is an intermediate between a licensing arrangement and full scale merger, an international joint venture emerges as an intermediate in strategic terms as well. Joint ventures are the dominant form of business organization for multinational enterprises in the developing countries and are frequently used by fortune 500 companies in the developed countries(Beamish & Banks,1987). In fact for U.S. based companies all cooperative arrangements outnumber wholly owned subsidiaries by a ratio of 4:1. M.N.E S prefer joint ventures over wholly owned subsidiaries. International theory was developed to provide an economic rationale for the existence of M.N.ES. Research in international business has shown economic rationale for establishment of MNES as a response to imperfect markets utilizing transactions cost logic. By extending this logic it has been found useful to distinguish between strategies of vertical integration and horizontal diversification since the nature of market failure is different. The failure in vertical integration is concerned with failure of markets for intermediate goods,

while in case of horizontal diversification it is failure of markets in intangible assets like management know how, proprietary technology. In order to justify the utilization of international joint ventures, two necessary conditions must be shown to exist: 1. the firm possesses a rent yielding asset which would allow it to be competitive in the foreign market, and 2. Joint venture arrangements are superior to other means of appropriating rents from sale of this asset. 8 Although, according to the internationalization theory, firms would have a strong economic incentive to avoid joint ventures. It is suggested that joint ventures that conform to certain preconditions and structural arrangements actually provide a better solution to the problems of opportunism, small numbers dilemma, and uncertainty in face of bounded rationality. Different entry modes have different performance levels. New ventures outperform the joint venture mode and the joint venture mode out performs the acquisition mode. These results were based on a survey of all Japanese manufacturing subsidiaries In North America(Beamish & Makino,1994). The study develops a model for entry mode performance differences. The ownership advantages explain a firms resource commitment and the internationalization advantage explains the firms organizational control difficulties. It is seen that greater the degree of ownership, greater is the resource commitment. Thus in a joint venture the commitment of resources is minimized. Thus a firm not having the resources is compelled to enter the market through a joint venture. In the case of a joint venture, crucial is to find partners who will share resources. Such a partnership is built on inter firm trust a perception that sharing of resources

will not negatively impact the firm strategically. A variety of research studies have shown that core resource contingencies influence entry mode selection. Differentiating between core and non core and inimitability and transferability of resources is critical to the selection of an entry mode. Procurement of resources adds to the transaction costs. In the case of acquisition the costs are large based on costs for searching the target, the cost of acquisition, the cost of asymmetric information and excessive payment for acquisition and problem of getting cheated. New joint ventures have minimal risks associated with resource overpayment however there are the costs of search and examination which joint ventures must bear. The costs related to managing organizational control are related to type of control mechanism use and the number of control relationships required. In joint ventures non ownership control mechanisms are seen which are intrinsically inefficient and slow than direct control mechanisms. The joint venture mode has also to manage more relationships. Social perspective Lastly there is the social perspective that a firm's social connections guide its interest in new alliances, and provides it with opportunities to realize that interest. This is closely rooted in the processes that underlie a firm's entry into new alliances. A firm may on its own initiative 9 identifies the need for an alliance, identifies the best partner available, and chooses an appropriate contract to formalize the alliance. Many new opportunities for alliances are also presented to firms through their existing sets of alliance partners. In the instances in which firms independently initiated new alliances, they turned to their existing relationships first for potential partners or sought referrals from them on potential partners. Social networks of prior ties not only influenced the creation of new ties but also affected their design, their evolutionary path and their ultimate success (Gulati, 2001).

To sum up the reasons why strategic alliances are entered into are that these Foster growth faster than internal development and mergers and acquisitions Allow Companies to focus on core competencies Creates cooperation and collaboration in economy Give Speed in reacting to changing environment Mitigate risks Allow entry into new markets Allow sharing and access to resources which individually were not accessible. Minimize costs We have seen the reasons why firms enter into strategic alliances. In the discussion above, some of the crucial factors like trust, fit of strategy, and behavior of alliance partner have been referred to, which influence the effectiveness of the alliance. The success or failure of any firm at any point of time is based on an assessment of its performance at that point of time. An important issue for alliances is their performance consequences, both in terms of the performance of the alliance relationship itself and the performance of firms entering alliances. Two questions focus on the performance issue: (1) what factors influence the success of alliances? And (2) what is the effect of alliances on the performance of firms entering them (Gulati, 2001). EVALUATION OF THE PERFORMANCE OF AN ALLIANCE: Performance evaluation becomes exceptionally difficult because joint alliances are often undertaken for amorphous purposes and in highly uncertain and risky settings. Most joint ventures should not be evaluated using the standard operating procedures that corporate headquarters apply to wholly owned companies with conventional business objectives. One important reason is that the interests of the alliance and the parent are often

conflicting.. Secondly their organizational politics are more complicated. Thus alliances are 10 more likely to become scape goats, especially when the parent itself has performance problems. Hence alliances are vulnerable to a game of corporate politics. Too often the result is politically expedient performance assessment which is too harsh. The scenario is likely if performance evaluation draws no distinction between subsidiaries and alliances (Anderson, 1990). For many businesses, profitability is an excellent index of performance. But alliances are different. alliances are especially popular in risky, uncertain situations, for it is there that firms are most likely to concede some control if that will spread the risk and expand experience. When risk and uncertainty are high, profitability by itself is a poor measure of the joint ventures value. The profits, if any, are in the future and costs are in the present. Thus in most cases, alliances operate in settings where current financial results bound to suggest poor performance. Businesses rate performance as characterized by a combination of growth, profit, high return on stock holders equity, consistent avoidance of losses, consistently positive earnings, and occasional improvements in operating results, good bond ratings and stable management. This package approach is a case where inputs and outputs are weighed to arrive at a composite index of effectiveness which is then used to allocate resources. The most basic issue in alliances is the question as to whose performance is to be assessed. Performance against the objectives of the parents with which they entered the alliance is relevant. However the most important thing is that alliances must be evaluated as stand alone entities seeking to maximize their performance and not that of their parents. This perspective frees the venture from parent politics and parochial

viewpoints. Encouraging the alliance to find its own way promotes harmony among parents. This freedom increases their chances of survival and facilitates learning and innovation which are the primary reasons for entering the alliance. Based on the fact that the environment can either be information rich or poor, firms can either assess outputs properly or poorly. In many cases they are not in a position to actually assess the output at all. Where firms cannot assess the outputs because they cannot measure them, such alliances: 1. Operate in new or experimental product classes. 2. are knowledge acquisitions ventures 3. Exist primarily to thwart a competitor. 11 For these alliance standard output measures are irrelevant. These ventures are relatively young. When firms are able to measure output with some confidence but are not able to interpret them such ventures fall into: 1. ventures which operate in little known markets 2. Operate in the introductory or early growth stage of the product cycle. 3. face poorly defined competition Such ventures are again recently formed. In contrast where results are clearly measurable and can be interpreted properly, these are joint ventures that operate in mature product markets, sell in familiar markets, face defined competition, and are in information rich environments. In most alliances formal evaluation is of little value. They must be given considerable time before they are ready to be judged on traditional output measures. FACTORS INFLUENCING SUCCESS AND FAILURE OF AN ALLIANCE:

Some of the key facets of the behavior of firms relating to alliance formation and alliance performance can be understood by looking at the sequence of few interrelated factors in alliances. This sequencing of factors includes the organizational and firm characteristics that influence the propensity of firms to enter into strategic alliances, the choice of appropriate partner, alliance relationship characteristics, and the success of the alliance overtime (Zaman & Movando, 2001). The two key determinants identified in the literature on strategic alliance formation are partner match and strategic orientation of the partnering firm (Mason, 1993, as quoted in Zaman & Movando, 2001).
PARTNER MATCH

Firms entering alliances face considerable moral hazard concerns because of the unpredictability of the behavior of partners and the likely costs to a firm from opportunistic behavior by a partner, if it occurs. Despite the rapid growth of both domestic and international alliances in many industrial sectors, such partnerships are still considered risky (Doz, Hamel, Prahlad, 1989). A partner may either free-ride by limiting its contributions to an alliance or simply behave opportunistically. Such concerns are further compounded by the unpredictable character of such relationships. Rapid changes in the environment may lead 12 organizations to alter their needs and orientation, thus affecting their ongoing partnerships. For organizations to build ties that effectively address their needs while minimizing the risks posed by such concerns, they must be aware of the existence of their potential partners and have an idea of their needs and requirements. Organizations also need information about the reliability of those partners, especially when success depends heavily upon the partners behavior (Bleeke& Ernst, 1991 as quoted in Gulati, 2001). Therefore Partner match calls for the creation of alliances in which the chosen

partners are similar in management style and company culture. Considerations such as domain similarity and goal compatibility have been found to enhance the effectiveness of alliances (sengupta, 1991, as quoted in Zaman & Movando, 2001).
STRATEGIC ORIENTATION

The strategic orientation of a firm reflects the willingness of the firm to enter into strategic alliances and to adopt innovative strategies. Firms select strategies to improve their competitive postures and to gain an advantage over one or more competitors (Harrigan, 1988, as quoted in Zaman & Movando, 2001). Strategic alliances are formed based on strategies of how to manage environmental uncertainties, how to overcome lack of resources and, in particular, how to manage the firms range of interorganizational relations. Extant literature has focused on commitment, collaboration, communication, trust, and conflict resolution as the important attributes of alliance relationships (Cobianchi, 1994, as quoted in Zaman & Movando, 2001). The existence of these attributes implies that both partners acknowledge their mutual dependence and their willingness to work for the survival and prosperity of the relationship.
TRUST

The significance of trust in developing long-term organizational relationships has been emphasized in the alliance literature (Jennings, Artz, Gillin, Murray, &Christodouloy, 2000, as quoted in Zaman & Movando, 2001). Trust between firms refers to the confidence that a partner will not exploit the vulnerabilities of the other (Barney and Hansen, 1995, as quoted in Zaman & Movando, 2001).There are strong cognitive and emotional bases for such trust, which are perhaps most visible among individual organization members. It was observed how close personal ties emerged between individuals in organizations that contracted with each other; these personal relationships in turn exert pressures for conformity to expectations.(Macauley, 1963, as quoted in Gulati, 2001).

Similarly, Ring and Van de Ven(1989, as quoted in Gulati,2001) pointed to the important role of informal, personal connections across organizations in determining the governance 13 structure used to organize their transactions. Second, social networks can serve as an important basis for enforceable or deterrence-based trust(Shapiro, Sheppard,Cheraskin,1992, as quoted in ,Gulati,2001). A social network of prior ties can promote trust through two possible means. First, by serving as effective referral networks, the prior social structure makes firms aware of each others existence The anticipated utility from a tie with a given partner and those with shared partners motivates good behavior. Each partners awareness that the other has much to lose from behaving opportunistically enhances its confidence in the other partner. Potential sanctions include loss of repeat business with the same partner, loss of other points of interaction between the two firms, and loss of reputation. The existence of trust in a relationship reduces the perception of risk associated with opportunistic behavior. Partners that trust each other generate greater profits, serve customers better, and are more adaptable. It is seen that when exchanges are governed by trust, the transactor can reduce transaction costs (e.g. bargaining and monitoring costs). Studies suggest that one critical factor determining alliance performance is the degree of trust between alliance partners. Indeed, it has been argued that trust is so important to alliances that it is considered the cornerstone of the strategic partnership success (Spekman, & Mohr, 1994, as quoted in Zaman & Movando, 2001).
COMMUNICATION

Communication between partners is critical for building a successful relationship. In order to achieve the benefits of collaboration, effective communication between partners is essential. Communication allows the partners to understand the alliance goals, roles and

responsibilities of all the actors. It also helps with the sharing and dissemination of individual experiences(Inkpen,1996, as quoted in Zaman & Movando, 2001). In sum, more successful alliance relationships are expected to exhibit higher levels of communication quality, more information sharing between partners, and more participation in planning and goal setting than less successful alliances.
COMMITMENT

Commitment suggests a future orientation in which partners attempt to build a relationship that can weather unanticipated problems. A high level of commitment provides the context in which both parties can achieve individual and joint goals without raising the specter of opportunistic behavior (Cummings, 1984, as quoted in Zaman & Movando, 2001). Indications of commitment include investment by the participating organizations, exclusive agreements between the organizations and the absence of major conflicts between the 14 organizations (Anderson & Narus, 1990, as quoted in Zaman & Movando, 2001). Committed partners are likely to be more cooperative, communicative and flexible in accommodating conflict issues. Commitment development between partners within an alliance would act as a counterbalance against failure of the strategic alliance.
COLLABORATION

Collaboration is the key dimension of the strategic alliance relationship. The alliance partners must collaborate to achieve their strategic objectives. The collaborative associations are interactive and adaptive in nature (Anderson & Narus, 1990, as quoted in Zaman & Movando, 2001). Understanding the nature and scope of collaboration is essential in analyzing the operation and success of an alliance. A highly collaborative relationship provides the flexibility and adaptability necessary to overcome uncertainties, resolve conflicts and achieve mutually beneficial outcomes.

In sum, successful alliance relationships are expected to be characterized by higher levels of commitment, collaboration, communication, and trust than are less successful alliances.
CONFLICT

Conflict often exists in interorganizational relationships due to the inherent interdependencies between partners(Cummings,1984, as quoted in Zaman & Movando, 2001) . Firms in strategic alliances are motivated to engage in joint problem solving because they are, by definition, linked together to manage an environment that was more uncertain and turbulent than each one could control. Conflict may be distinguished as functional or dysfunctional. Functional conflict would enhance an alliances performance whil e dysfunctional conflict within the alliance would affect the effectiveness of alliance performance (Morgan, Hunt, & Shelby, 1994, as quoted in Zaman & Movando, 2001). Dysfunctional conflicts are counterproductive and are likely to strain the fabric of the partnership (Mohr,& Spekman,1994, as quoted in Zaman & Movando, 2001). Alliances generally fail because they are mismanaged, their objectives are poorly aligned and they are not understood. Alliances serve a wide range of strategic objectives in todays economy. Accordingly their governance, financial and operating structure should be tailored to fit these different needs. Alliances often fail because the infrastructure does not support the underlying goals. Because performance is more difficult to measure in alliances as compared to traditional mergers and acquisitions, managers often times let post integration evaluation slide. Alliance performance is indeed harder to benchmark as success is based on intangible criteria rather than sound financial performance measures. Alliance goals fluctuate often and are hard to define. Despite these challenges, successful alliance partners will 15 overcome the hurdles. The key to measuring success in a partnership is to concentrate on a few core metrics that closely align with the basic strategy of the alliance.

It is therefore proposed that successful alliance relationships are expected to be characterized by higher levels of commitment, collaboration, communication, and trust than are less successful alliances. This is ensured by ensuring that the alliance partners have a fit with respect to alliance objectives, its mechanics of operation and the performance evaluation criteria. The model can be represented as follows: Factors necessary for a successful strategic alliance
Fit-objectives operations evaluation Trust Commitment Collaboration communication

In the world of business, there has been the advent of competition, integration of markets through globalization. We have also seen the firm evolve from a unit to a multi unit organization, from regional unit to a pan country organization and finally evolve into a transnational corporation. The mechanics of business have evolved from monopoly to competition, strategic competition to collaborations and collaborative competition. Alliances have been backbone on which these changes have been built in the recent years. Alliance has now metamorphosed into networks and are evolving into constellations. Are we then evolving from competition to collaboration to mutual sustenance and finally back to cartelisation? Is the life cycle of evolution of firms turning a full cycle? Answers to these questions need to be looked into in the future. This paper has been written using the A.P.A style guide. Core values and processes Strategic fit

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