Strategic alliances are agreements between two or more independent companies to cooperate in the manufacturing, development, or sale of products and services or other business objectives.
For example, in a strategic alliance, Company A and Company B combine their respective resources, capabilities, and core competencies to generate mutual interests in designing, manufacturing, or distributing of goods or services.
There are three types of strategic alliances: Joint Venture, Equity Strategic Alliance, and Non-equity Strategic Alliance.
A joint venture is established when the parent companies establish a new child company. For example, Company A and Company B (parent companies) can form a joint venture by creating Company C (child company).
In addition, if Company A and Company B each own 50% of the child company, it is defined as a 50-50 Joint Venture. If Company A owns 70% and Company B owns 30%, the joint venture is classified as a Majority-owned Venture.
An equity strategic alliance is created when one company purchases a certain equity percentage of the other company. If Company A purchases 40% of the equity in Company B, an equity strategic alliance would be formed.
A non-equity strategic alliance is created when two or more companies sign a contractual relationship to pool their resources and capabilities together.