Alliances are meant to benefit companies involved and there are several types of business alliances.
The following are the five major types:
1. Sales alliances: These types of business alliances are undertaken by companies who want to sell complementary products together in order to have a greater share of the market. There are some products that consumers must buy together such as sugar and coffee, or bread and butter. Companies manufacturing these products can form sales alliances by combining their resources together and gain a considerable market for their products. These types of business alliances are very common in competitive market where there are several products competing against the products offered by both companies. Here, they try to beat competition and retain competitive edge by effectively utilizing their economies of scale.
2. Solution-specific alliances: These types of business alliances are undertaken by two or more companies who see the need to jointly provide a particular product for the market. They can come together with their resources and jointly manufacture or produce goods or services they feel is needed in the market. These types of business alliances are most carried out when these companies do not have the resources to produce these goods themselves. So, they try to combine their resources in order for production to be possible.
3. Geographic alliances: This occurs when business organizations come together and agree to sell their products to different geographic locations. These types of business alliances help companies quickly expand their products or services and make them available to a broader market. It is usually formed by companies with complementary products who do not have the necessary resources to carry out the expansion themselves.
4. Investment alliances: These types of business alliances help two or more companies develop products that can be very valuable to the market. Product development can be very expensive and sometimes too expensive for a single company to undertake alone. In situations where there’s a need to develop a particular kind of product and one company is not able to fund the project, they can form an alliance in order to pull their investment dollars together to achieve their aim. Investment alliance can also take another form where one company supports the other financially to develop its product in the hope that the introduction of that product will positively impact the marketing of its own product. These types of business alliances occur for complementary products.
5. Joint Venture Alliance: These are the most common types of business alliances today. A joint venture allows two or more companies to pull their resources (both material, financial, and human resources) together and create products and services that will meet specific needs of consumers. New companies or already established companies can form a joint venture. The main goal here is to gain synergy by harnessing their resources to form business partnership. Joint venture is undertaken because the companies feel their individual resources will not be enough to meet up with the demands of producing the product or services, hence an alliance is undertaken.