Chapter 5. International business alliances

• Nature of collaborative agreements and alliancing
• Vertical alliances
• Horizontal alliances
• Non-equity alliances
• Equity based alliances
• Diversity of alliances by purpose
• Pros and cons of alliancing
• Questions for chapter review
• Chapter bibliography

When an ordinary consumer is asked to name the manufacturer of their favorite clothing, computer, or car, they usually mention famous brands. It would probably be difficult for the reader to mention more than ten brands in every industry. In some industries, such as the smartphone market, there are only two or three brands that are recognized and used worldwide. However, it is not correct to think that many products in a specific industry are produced by only a few large corporations.
This chapter reveals the cooperation schemes of global well-known global brands with a large number of relatively small and unknown business enterprises. Small and medium-sized enterprises are the backbone of the economy of many countries, but they can enter global markets thanks to networks of partnerships called alliances. The components and materials for the well-known brand product used by the reader are most likely manufactured by companies that have not been heard of before.
Chapter describes also the economic logic and nature of business cooperation alliances. The chapter provides a structured presentation of alliance types, benefits and reasons why it is beneficial for business enterprises to enter into long-term cooperation agreements. The chapter describes the principles of operation of alliances based on vertical integration of the value chain, supplier-buyer relationships, benefits and emerging threats. Separate attention is paid to horizontal alliances in which companies providing the same services or products cooperate.
The chapter examines the differences between equity and non-equity alliances, describes the life cycle of an alliance and possible reasons for the dissolution of alliances or the transition from non-equity alliances to equity alliances. Joining international alliances is one of the most common forms of business internationalization, which helps to reach the right customers or the right suppliers around the world.

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