344 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
organizations. This form of cooperation lies between mergers/acquisitions
and organic growth.
3
However, the exchange of managerial talent, resources,
capabilities, and possibly an equity investment elevates the alliance beyond
a mere contractual agreement. The three main characteristics of strategic alli-
ances are summarized next:
◾ Multifaceted, goal-oriented, long-term partnerships between two companies
◾ Both risks and rewards are shared
◾ Typically leads to long-term strategic relationship
15.6 The “Big Question”
Before embarking on any strategic alliance quest, management must answer
the “Big Question”:
◾ Do we create organic sales growth vs. sales growth through acquisitions?
The rm can grow organically (by internal investment) or inorganically
(by strategic alliances, i.e., cooperative ventures, joint ventures, joint owner-
ship, or mergers and acquisitions). One theoretical way of approaching the
“Big Question” is to look at the continuum of strategic partnership interde-
pendence as shown in Figure15.5.
When two or more companies combined participate in a project, it is
a cooperative venture. This participation can be in the form of sharing
nancial or technical resources for mutual benet.
A joint venture (JV) creates a separate entity in which both rms invest.
The JV agreement species investment rights, operational responsibilities, vot-
ing control, exit alternatives, and the allocation of risks and rewards. The entity
could be a division or an entirely new business established for the venture.
In a joint ownership alliance, the parties agree to long-term licensing
agreement, co-marketing agreements, co-development agreements, joint
IPO advantages
Improved financial condition
Using stock for acquisitions
Using stock as employee incentive
Investor liquidity (exit)
Enhanced company visibility
Figure 15.5 Strategic alliance option—Strategic alliances may be a protable way of
growing the company rapidly.