chapter  18
23 Pages

Strategic alliances

ByKarin Weber, Prakash K. Chathoth

Firms have used strategic alliances as a key source of competitive advantage. Numerous alliances have been formed worldwide with the objective of increasing the economic benefits of allying parties. Booz, Allen and Hamilton reported that the top 2000 companies in the world have benefited by using strategic alliances. These firms reported a return on investment of 17% (http://www.boozallen.com). While the 1990s saw the increased use of strategic alliances, their

effect on firms as a key source of competitive advantage has continued to grow during the past 6 years. Even stock exchanges have been engulfed in pursuing this strategy as seen recently in the case of the New York and Tokyo Stock Exchanges (Mills, 2007). Aircraft manufacturers such as Boeing and Lockheed Martin have also pursued this strategy to effectuate innovation in the field of air transportation in the United States (Airline Industry Information, 2007). Alliances are effective in managing the business risk of firms, espe-

cially for those operating in an international business domain. Thus, alliances are not only vehicles for growth, but also provide avenues to mitigate risk. Specifically, alliances can address to a large extent environmental uncertainty (Burgers et al., 1993; Dickson and Weaver, 1997), assist in sharing costs of risky projects (Harrigan, 1985), and help businesses re-establish themselves in their competitive domain (Staber, 1996). Devlin and Bleackley (1988) suggested that firms seek alliances when confronted with mature, low-growth markets. In a competitive setting, the role of alliances can be seen from the

perspective of strategy formulation, allowing firms to keep up with the pace of new developments (Booz and Hamilton, 1996) with the objective of creating value for the firm. The scarcity of resources as well as the need to build strengths to sustain value has driven firms to use alliances as a key strategy to gain a competitive advantage. Notably, alliance networks with competitors, suppliers and customers, and firms in other industries have been used as key strategies for value creation (Lewis, 1990). The hospitality and tourism industry has made extensive use of this strategic option, and managers need to employ it even more in the future as an effective strategy to sustain the value addition in growing and mature markets. This chapter provides an in-depth review of the concept of strategic

alliances. In particular, it outlines various types of strategic alliances and details the strategic alliance formation process. The discussion of tourism and hospitality alliances provides a historical account of alliances’ evolution and assesses the benefits that result from such collaborative arrangements. Despite the numerous benefits of strategic alliances, potential negative consequences of alliances have to be also acknowledged. The chapter assesses the current state of research in the field and offers directions for future research.