Key factors determining the success of a strategic alliance with special reference to the global travel industry

 

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The purpose of this essay is to discuss and critically analyse the key aspects which define the success of a strategic alliance by providing the most famous examples from the global travel-tourism industry such as Star Alliance, British Airways and Aeroflot Airlines, Qantas and Emirates global alliance and a well-known OneWorld alliance.
A strategic alliance is an agreement between firms to cooperate in certain ways to achieve strategic benefits. (Hoffman, 2007) A company looking for entry into a foreign market executes an agreement with a host-country firm allowing it to do its local marketing and sales agent in return for doing the same in its own country. Some European airlines have such marketing agreements with North American Airlines. The companies cross sell each other’s routes. Alliances success particularly depends on an effective and efficient alignment between the involved partners. (Dougman, 2000) Nowadays, tourism industry groups also have been formed among and between online travel web-sites, hotels, rental cars, tour companies, cruise liners and strategic alliances are at the core of almost every firm’s business model and revenue streams.
The main advantage of a strategic alliance is that the company benefits from host-country partner’s knowledge and awareness of the market, industry situation, customers preferences and government regulations. In other words, it can build a close contact and trusting relationship with business partners. For instance, Star Alliance is an agreement amongst 25 airlines, including United Lufthansa and Air Canada, to code share flights and join frequent-flier points programs. Another example illustrates British Airways and the Soviet airline Aeroflot who set an independent airline to service routes between Europe and the USSR. (In the late 1990s, car companies and hotels also joined in cross-marketing alliances with airlines.) Today, Aeroflot Russian Airlines has about 200 interline agreements with foreign airlines.
The second advantage is that strategic alliance contributes knowledge sharing between partners, resulting in enhanced education and the development of new competencies. A good industry example of this is the airlines Qantas and Emirates companies. They received a final approval to form a five year global alliance. According to “The Guardian”, Qantas and Emirates airlines also plan to cooperate on sales, marketing and pricing in 2014.
Joint venture involves two or more companies creating a legally independent company to share some of the parent company’s resources with the purpose of developing competitive advantage. (Lynch, 2012) It can take many forms, the most obvious one being a 50/50 shareholding in a joint company. The key advantages that can arise from joint ventures between a large multinational and a local company are risk reduction via sharing the project and speedy market access plus prompt profits. OneWorld is an alliance of the world’s top airlines committed to providing the highest level of service and convenience to frequent international travellers. The company has been named as Best Airline Alliance 2014 which has 13 airlines members, such as Air Berlin, British Airways and Qatar Airways, plus some 30 affiliated airlines. It is interesting to note that more than 20,000 alliances have been formed worldwide – and strikingly, more than half of them are between competitors. (Harbison, 1998) Many hotels, car rental agencies and other industry firms were also interested in alliances: for instance, tour company May-flower Tours have established multi-product and multi-geographic alliances with industry groups, including other tour operators, airlines, travel agencies, international travel administrators/operators, hotel, cruise and other suppliers, and with destination marketing organizations. (Holdenberg, 2009)
In conclusion, Porter (1998) states that alliances represent a tempting solution to the problem of a company wanting the advantage of foreign enterprises or hedging against risk, without giving up independence. Alliances are best used as a selective tool, employed on a temporary basis or involving noncore activities. Success in alliances also turns into superior growth where both partners achieve their objectives.

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2 thoughts on “Key factors determining the success of a strategic alliance with special reference to the global travel industry

  1. very much informative that many confusion got cleared. thanks for providing such a qualitative information,,,nasir

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