A Global Strategic Alliance Is Not an Acquisition

A global strategic alliance is usually established when a company wishes to edge into a related business or new geographic market -- particularly one where the government prohibits imports in order to protect domestic industry. Typically, alliances are formed between two or more corporations, each based in their home country, for a specified period of time. Their purpose is to share in the ownership of a newly formed venture and maximize competitive advantages in their combined territories.

The cost of a global strategic alliance is usually shared equitably among the corporations involved and is generally the least expensive way for all concerned to form a partnership. An acquisition, on the other hand, offers a faster start in exploiting an overseas market, but tends to be a much more expensive undertaking for the acquiring company -- one that is likely to be well out of the reach of a solo operator.

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While a global strategic alliance works well for core business expansion and utilizing existing geographic markets, an acquisition works better for immediate penetration to new geographic territories. Hence, an alliance provides a good solution to global marketers that lack required distribution to get into overseas markets. A global strategic alliance is also much more flexible than an acquisition with respect to the degree of control enjoyed by each party. Depending on your resources, you can structure an equity or non-equity partnership.

Within an equity partnership, you can hold a minority, majority or equal stake. In a non-equity partnership, the host country partner has a greater stake in the deal, and thus holds a majority interest. Yet whom you choose as your partner is arguably more important than how the partnership is structured. For when it gets down to business, you want a partner who will have an active contribution to make, and who is flexible and able to resolve conflicts as the alliance evolves. Even more important, however, is that you keep clearly in mind what you are seeking to gain from the alliance and that you choose a partner whose contribution will enable you to achieve those goals.

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