Alliance Network

An Alliance Network is a collaboration between two or more firms that band together on a loose, non-contractual basis. Many firms do not manufacture their products themselves, but have a complex network of companies that supply them with complex products. Collaboration often involves the manufacturing process, but can also involve the R&D process, such as in Pharmacy, or exploration of new geographic markets. Driving forces behind this growing phenomenon are customers' growing demand for customization, service and speed, fierce global competition,outsourcing of non-core activities, and on the other hand, the enabling technologies of the internet and advance planning systems.It has become difficult for a single company to compete alone against these networks in many industries. Examples include many automotive assemblers (Ford, GM, Toyota) who order complete dashboards from suppliers, computer assemblers, (HP, Dell, Compaq) who integrate complete ordered main boards along with some peripherals, clothing (Nike, Benetton), IKEA.[1]

Alliance networks may differ from each other in many ways. Any network may consist of a few or many companies. They also differ as to the size and composition, the level of internal competition and cooperation within the group, configuration and finally according to the method of partner selection. Decision making in the context of these factors is regarded as the main challenge for network managers, since to a great extent it determines the way the company competes and its resultant effectiveness.A characteristic feature of alliance networks is duality, which means simultaneous presence of internal competition and cooperation (Lei 1993). In the case of competing companies, this duality is called co-opetition. The complexity of cooperation and competition is based on simultaneous implementation of two contradictory logics of relationship between companies, i.e. trust, which is a symptom of common interests and conflict of interests, which is characterized by conflict, and confrontation (Cygler 2007). This raises a paradox: companies cooperating in the network have to trust each other, share information and experience, remembering at the same time that they are dealing with their competitors. Internal competition in alliance networks is determined both by the number of companies performing similar functions in the market, as well as by the mutual relations between them. Some network members will prefer a limit of the number of members up to a given number, which reduces internal competition within the group. Others will accept full competition within the network, which in turn allows for complementary operations. Internal competition has two different effects:
• It increases the flexibility of the network, introduces innovations and ensures security of supplies. However, it may also break up a business so thoroughly that none of the companies can sufficiently achieve economies of scale or earn a reasonable profit.
• It determines the boundary between optimal and excessive competition. Partners can prefer a higher order (this applies to companies that are exposed to internal competition), or use the competition between suppliers or buyers within the network (Gomes-Casseres 1994).[2]


  1. Defining Alliance Network12 Manage
  2. Management of Alliance NetworkSroka W., Hittmar S.

External References