Strategic alliance:

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Introduction

Over recent years, the need to expand, improve and deal with competition has made
companies engage in strategic alliances. A strategic alliance refers to an agreement between
firms to co-operate, work together and share resources to achieve a common goal while
maintaining each companies independence. Due to increased needs such as sharing costs,
access in the new market, deterring competitors, and combining complementary skills, firms
find it necessary to come and work together and undertake a commonly beneficial project.
Firms engage in strategic alliance by sharing resources such as products, knowledge, and
expertise and helping each other in distribution channels. A good example of firms with
strategic alliances is Spotify and Uber.
Brief introduction of chosen firms, partners of allianceSpotify and Uber allied in 2014 to help
Uber riders to listen and enjoy their favorite tunes through the Spotify app. Spotify is a
company based in Sweden that helps users to access millions of songs through subscription
fees. Spotify now has approximately more than seven million artists and was founded on 23
April 2006. On the other hand, Uber Technologies is an American company that was founded in
2009. Uber connects the world to move to happen and provides courier services, cars for hire,
food, and package deliveries.

This partnership has created more personal links for Uber riders and makes Uber more
competitive over other ride offer companies. It also gives Spotify access to millions of new
customers. This strategic alliance between Spotify and Uber impacts the growth of both brands
since customers have a perfect opportunity to the two firms at ease (Shontel 2020).

1. Type of strategic alliance used by Spotify and Uber? Explain its different reasons.

Generally, there are three types of strategic alliances. These are; joint ventures alliance,
strategic equity alliance, and non-equity strategic alliance. For a joint venture alliance, two
firms come together to form a third separate legal business. In an equity alliance, one partner
acquires equity from another company or purchases equity in each other's firm. Non-equity
alliance is where the partners invest resources toward a common business objective in an
informal agreement. Technological competencies and similarities affect the choice between
equity and non-equity agreements with close technological knowledge leading to a greater
possibility of non-equity arrangements (Cantwell and Colombo 2000).

Spotify and Uber use a non-equity strategic alliance because the two entities ideal create a
mutual advantage for both firms. This solid strategic partnership brings the two parties
together with a shared vision and objectives to create a competitive and mutual environment.
This alliance started as a result of both firms leaning into the other expertise. The common goal
for Spotify and Uber was not to fix a problem but rather to create something fun and valuable.
Spotify and uber formed no new entity, but each company maintained its independence.

The main reason these two firms use non-equity strategic alliances was that they never wanted
to create a new separate entity but to share resources to enhance development and success to
the firms. For both firms, they believed having a non-equity alliance would create no barrier in
entry and exit. Uber believed that a non-equity alliance with Spotify would attract more
customers. In the same way, Spotify gained an advantage in increased subscriptions from Uber
riders.

1. The method used by Spotify and Uber to manage their cultures after alliance.

The culture here refers to the outcome of the vision or mission of the firm's values that guide
the behavior and working norms of the people that determine how work is done. Spotify and
Uber, in this case, had a plan on how to manage their cultures after the marge. Interactions
between resources and learning lead to the outcome of resources (performance). These
interactions depend on how close partners are and how they handle their cultural differences
effectively (Meyer 2004).

After the merge, Spotify and Uber agreed on the method used to manage their cultures
effectively. The method used was defining the non-negotiables. Despite allying, each firm would
think of a culture change, look at its current culture, and decide which aspects the firm wants to
retain, determining what's not up for debate. They used this method to operate together for a
common goal but not one company's goal.

Drivers and governmental organizations regularly criticize Uber for proclaiming that their
drivers are sovereign contractors. Equally, Spotify is accused of misusing its product providers
(musicians). Despite these challenges, the companies have continued to grow because of the
alliance.

The pros of the method used are that it allows the two firms to work together and help each
other in favor of both firms without involvement in any company's private culture. The
outcome for the alliance is mutually beneficial.

Although this method produced the outcome, it has cons. I mean, how can two firms working
together have differences? A good merge means that all cultures guiding the firms should be
standard for achieving their goals.

1. Is Spotify and Uber strategic alliance successful? Justify

The partnership between the two firms is successful because the ability of both sides to work
together is evident through their success. For example, both firms have continued to grow in
success and more customers since both firms formed this alliance. Uber has a Spotify app
where music playlists appear, and customers can control their music wirelessly during the ride.
The alliance has become successful because both companies are digital and modern, making it
possible for the two services to be used at once, making the experience of using both services
enjoyable to their customers, and this improves the reputation of the firms.

1. Recommendations to Spotify and Uber managers of these to improve their

competitiveness

For Uber Company, I would advise the manager to lower the prices to increase market share
from the competitors as it helps reduce the competition. I would also advise them to ensure
their drivers are well trained to reduce the criticism that Uber drivers are selfish and only after
money. I would also suggest Uber make modifications and designs to vehicles to target more
customers.

I would also recommend Spotify manager increase the amount paid to musicians to attract
them to join Spotify. This will ensure there are wide varieties of music that customers can
choose from. Spotify should also attract local musicians.
Conclusion

The need for strategic alliances between companies will continue to increase as technology
advances, and therefore, firms should embrace digital transformation in forming alliances. In
this essay, I have explained how the alliance between Spotify and Uber has become a successful
alliance. Alliance with the right company may be the next step in the future in businesses, and
how you approach and maintain it is crucial for success.

References

Cantwell, J., & Colombo, M. G. (2000). Technological and output complementarities and inter-
firm cooperation in information technology ventures. Journal of management and governance,
4(1), 117-147.

Inkpen, A. C. (2005). Strategic alliances. The Blackwell handbook of strategic management, 403-
427.

Meyer, C. (2004). Theorising European strategic culture between convergence and the
persistence of national diversity.