First, they seek to achieve organic growth at a higher rate, enter new markets easily, gain expertise in serving customer demands, defray the cost of rising research, learn and apply new technology, access global markets and to benefit from vast managerial resources (Comi & Eppler 2006).
Ease of Entering New Markets .
The ease of making entry into foreign markets is among the key economic logics for entering into strategic alliances. Recent advances in Information Technology and transportation infrastructure have made it easy for international firms to enter into new markets. However, the cost of making headways into a new market may be beyond the capacity of a single firm. Such firms seek to enter into strategic alliances with an international firm to benefit from rapid entry (Cojohari n.d.). The logic is based on Transaction Cost Theory, which suggests that businesses enter alliances to increase economy of scale and minimize costs (Judge & Dooley 2006).
Sharing of Economic Risks.
Risk sharing is a key logic for entering into strategic alliances in situations where a market has just opened up, thus presenting economic uncertainties (Akio 2004). Under such circumstances, businesses enter into strategic alliances with the view of cushioning the effects of the possibility of making losses in the outset. As a consequence, business will be able to share initially anticipated losses. The logic is based on Market power theory, which suggests that business sought to achieve successes in the marketplace by securing stronger positions and strategic advantages.
Sharing Managerial Resources.
Current trends have showed that while businesses are competent in some areas, they lack the required expertise in other areas (Akio 2004). However, forming strategic alliances enables such firms to access knowledge and expertise in their areas that are wanting. Consequently, the information and knowledge gained by allied businesses can be applied within the joint venture projects as well as for internal business projects (Bhatti 2011).
