What are the best possible outcomes of a strategic alliance between apparel industries?


In earlier times, businesses could be managed in isolation. This has changed rapidly, and now decisions made by one business directly, or indirectly impact others. Businesses of today are built on a complex network of information, interaction, and change. This evolving nature of business has led back to one of the most fundamental aspect of business - relationships. In order to be more successful, companies need to take advantage of the strength of other organizations. Strategic alliance between two or more organizations is vital to succeed in today's client driven and networked economy.


Does working together mean success?


The alliance mainly aims to provide mutual benefits, improve their competitive positioning, gain entry into new markets, share the cost and risk of new development projects, and complement their critical skills. Developed and propagated as formalized inter organizational relationship, the alliance seeks to achieve organizational objectives in a better way through collaboration, rather than competition. The companies aspire to work in collaboration, facilitating global sourcing in the textile value chains.


Textile & Apparel industry benefits:


Strategic alliances reflect the desire of two businesses to achieve their independent business objectives cooperatively. Apparel industry consists of value chain influenced by buyers, and three lead firms; marketers, retailers, and manufacturers. Strategic alliances would pave way for apparel industries to move up the value chain, developing its capacity.


Easier to access target markets:


Introducing a product in a new market can be challenging for any business. Furthermore, it is also costly and complicated exposing the business to entrench competition, operational hurdles, and hostile statutory regulations prevailing in that region. Opportunity costs and direct financial losses due to inappropriate market conditions may also occur.


Going in for a strategic alliance with a well established business in that region will overcome these issues, and help the organization to minimize its entry cost in the new market. Companies can receive orders from branded retailers, designers, and manufacturers. Networks would be developed, proving crucial for the transition of full production.

Overcome political obstacle:


New market access might also mean stringent statutory regulations, and other complicated political factors imposed by the Government of the region. This can be overcome by having a joint venture with the local firms. Strategic alliances help the business to penetrate into the local market of the targeted region.


Acquiring the synergy:


A business may or may not be strong enough to obtain its objectives all by itself. But, with the joint efforts together, it will be possible. The combination of individual strength of two businesses will help them to compete more effectively rather than making attempts of its own.


Gaining a competitive market edge:


Creating a favorable image in the consumers mind is time consuming, and involves some cost. An enterprise which wishes to enter into a new market may use the brand image of another business that is already well established, and strong in the consumers mind. This makes market penetration of the first business easier, at a relatively lower cost.


Disadvantages:


Despite all rosy hopes, strategic alliances still suffers its own drawbacks. A weaker management may result in an equity stake. The presence of the local partner may cause a threat of market insulation for the business targeting entry into newer markets. As two different businesses work together, it may result in issues relating to product quality, operating costs, and many more.


Strategic alliances are becoming an integral part of business activity. Both companies can benefit from the strength of another, and gain competitive advantage. Successful alliances are mutually beneficial. Understanding its own capabilities and honestly assessing its own strength and weaknesses will help every business to commit, and contribute to a successful partner relationship.


References:

  1. Importexport.about.com
  2. Smallbusiness.chron.com