Feasibility of strategic alliance as an entry strategy into markets dominated by major competitors

Abstract

Although the benefits of strategic alliances are well documented, whether strategic alliances can be a viable entry strategy option for small and medium‐size enterprises (SMEs) to successfully penetrate markets held by major incumbent suppliers is less clear. In this paper, strategic alliances are shown to be an effective entry‐cum‐deterrence strategy for SMEs to successfully penetrate markets that are well established and dominated by major corporations. In addition, the conditions under which SMEs can use strategic alliances as an entry strategy without restricting themselves to target only those markets ignored by bigger firms are identified. In terms of methodology, this paper follows a deductive approach – one based on game theory, to examine explicitly the reactions of bigger firms to the entry of SMEs into their markets, specifically taking into account the resource limitations faced by SMEs. To verify that the theoretical arguments presented are consistent with practice, two cases of the use of strategic alliances by SMEs as an entry strategy to penetrate markets dominated by major corporations are examined. The practices and experiences of these SMEs were found to be consistent with the theoretical arguments presented here.

Citation

Sheang Lee, K., Hua Lim, G. and Tan, J. (2000), "Feasibility of strategic alliance as an entry strategy into markets dominated by major competitors", Journal of Small Business and Enterprise Development, Vol. 7 No. 1, pp. 43-57. https://doi.org/10.1108/EUM0000000006804