How Strategic Alliances Improved the Airlines Industry

There are many cases in which two competing companies would both be better off if they formed a strategic alliance. The companies in the alliance would still differentiate themselves, but at the same time, they’ve successfully removed a competitive threat. A situation like this, of course, depends on the companies and the industry, but it’s lesson can be applied to several other cases.

An Ivey Business Journal article discusses strategic alliances and how they can be used to eliminate a competitive threat. The article uses the example of an airline alliance that allows route-sharing among carriers to explain how such an alliance would benefit all businesses involved:

“The two primary determinants of customer flight selection are routing and cost. Therefore, the adoption of route-sharing alliances by the airlines blocks the competitive threat of preferential routing in the specific markets in which the airline chooses to compete. In essence, strategic alliances within the airline industry ensure competitive parity with respect to routing and force other factors such as on-time departures and customer service to become the bases for competitive differentiation.”

Consider for a moment what the result would be if the airlines did not form a strategic Airplane over ocean.alliance. There would be many petty squabbles between airlines about routes and route-sharing, and it would ultimately have a negative effect on the customers. People buy plane tickets based off of routes and costs, and without the strategic alliance based on route-sharing, they would have less options to choose from when flying.

Instead, many airlines allow route-sharing and benefit from the alliance. It opens up more business opportunities for each company and in the end, the customer is happy because he has more decisions when purchasing a plane ticket. The companies still compete and differentiate themselves from one another, but it’s based off of factors like customer service, rather than routes.

How does this apply to you? How can you create an alliance with your competitor, customer, supplier, or distributor? You can create an alliance with any company, but how you create it, and manage it determines how if you succeed or fail.

If you would like more information about strategic alliances, contact us.

—- by George Tyler

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