Joint ventures, strategic alliances to increase

U.S. executives plan to increase the use of strategic alliances and joint ventures as key strategies to achieve revenue growth, according to a survey released today by KPMG LLP, the U.S. audit, tax and advisory firm.

Some 64 percent of U.S. executives said they plan to increase the use of strategic alliances in the next two years, while 52 percent said they plan to enter more joint ventures during the same period, according to the survey. In addition, nearly 70 percent of respondents said that such collaborations help meet growth objectives, in part because they offer the prospect of attractive returns and shared risk.

The U.S. survey affirms the findings of a global study, Alliances and Joint Ventures: Fit, Focus, and Follow-Through, which KPMG simultaneously released today as a white paper. Based on interviews with corporate managers responsible for alliance or joint ventures at Global 1000 companies, the white paper describes such partnerships as viable, revenue-enhancing alternatives that can create strong relationships and boost revenue, if executed effectively. When entering such an alliance, companies need to consider "fit" to ensure the right strategy is right, "focus" to be sure they have carefully considered the corporate partner and the venture's purpose, and "follow-through," which calls for close monitoring and adaptability.

Rob Coble, KPMG's Southeast area partner in charge of transaction services and a white paper co-author, cautioned that companies interested in these kinds of business relationships need to determine how the two entities can best work together to achieve financial goals. "When companies view alliances holistically, as strategic relationships, they increase their chances of success," Coble said. "Identifying strategic and cultural similarities is as important as understanding aspects such as the target's financial fitness, its IT capabilities, or its research and development track record."

"A successful alliance has clarity on its long- and short-term goals. Allied companies should not let ambiguity exist about why they are working together," said Shaun Kelly, global partner in charge of KPMG's transaction services practice.

The survey of U.S. executives also found that respondents expected a rise in alliances or joint ventures in burgeoning world markets, such as China, where collaborations with locally based enterprises can help companies penetrate the marketplace.