Briefly explain the five areas in which organizations can increase the probability of alliance success

What will be an ideal response?

1. Understanding the determinants of trust. It may be stating the obvious to say that alliances perform better when
partners trust each other. Research suggests that a network of trustworthy partners can itself be a competitive
advantage, as can be a reputation for trustworthiness. Unfortunately, because not all partners are equally
trustworthy, parties in alliances often must rely on a variety of mechanisms to safeguard their interests. Formal
mechanisms, such as long-term contracts, stock ownership, and collateral bonds, can signal credible long-term
commitments to alliance partners. They do not, however, ensure information sharing, which is critical to alliance
success. Partners foster interorganizational trust by using understandable and predictable processes. Informal
mechanisms, such as firm reputation and personal trust among managers and officers, are also keys to creating
long-term value.
2. Managing knowledge and learning. For many firms, learning from alliance partners is one of the primary
objectives of entering an alliance. In addition to reflecting trust, the ability of a partner to learn increases the
collective benefits derived by every partner in the alliance. However, wanting to learn, though obviously important,
isn't enough to make learning take place. Learning is enhanced if a firm develops specific processes for managing
knowledge exchange.
3. Understanding alliance evolution. The researchers suggest that managers who don't look for twists in the road
may run head-on into an unplanned divestiture or acquisition. Although some alliances are actually structured to
terminate in the eventual transfer of ownership, most are not, and unplanned sales may erode shareholder value. Of
course, a sale that's well managed and planned in advance can be to a firm's advantage. Relationships between
partners may change over time. Indeed, if one partner is aggressively pursuing a coevolution strategy that involves
alliances, these changes should be monitored closely and included in the ongoing strategy of both the alliance and
its partners.
4. Measuring alliance performance. Ironically, one reason for the high failure rate of alliances is the fact that few
firms have effective systems for monitoring alliance performance. In the short term, a lack of monitoring systems
means that managers who are responsible for the alliance must rely more on intuition than on good information.
The long-term consequences are even more serious: when problems do surface, it's much more expensive to fix
them. Moreover, performance may have declined so drastically that one or more of the partners starts looking for
ways to exit the alliance?an event that often starts a downward spiral toward more performance problems and
eventual termination.
5. Dedicated alliance function. Cooperative strategies are more likely to succeed when a firm has a dedicated
alliance function. A dedicated alliance function may simply be one manager who is responsible for setting up,
tracking, and dissolving the firm's alliances; however, typically this function is managed by a group of individuals
working together as a team. In many ways, such a function is a structural solution to the need to manage trust,
learning, evolution, and performance in a systematic fashion. Although some firms can't afford this added
management function, the benefits make it worth looking for a way to fill this role.