Small Firm Alliances as a Response to Maturing Industries

This paper describes the response of two small manufacturing firms to changes in their business and technological environment. Both firms chose to form alliances to meet these challenges, but for contrasting reasons. The first case study describes a firm that utilises an alliance with another small firm with a complementary technology to gain access to a new market. The second case profiles a firm that hopes to consolidate its position in its existing market by becoming technologically more specialised, while forming an alliance with a group of similar companies with complementary capabilities. Both of the case-study companies operate in capital intensive industries and face similar issues with respect to maturing technology and business dynamics. Their markets have evolved and each has a strategy to realign their core competency – one by broadening the service they can provide, the other by specialising. The alliances provide a mechanism to minimise risk while their market position readjusts. In conclusion, we examine the risks and benefits for these firms in using alliances to develop and consolidate their business. A simple decision tree is presented which indicates when it may be appropriate for small firms to consider alliance as a response to a maturing industry environment.