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The Strengths and Potential Weaknesses of Each of Three Types of Strategic Alliances

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Strategic alliances are defined as, “A mutually beneficial, long term, formal relationship formed between two or more parties to pursue a set of common goals or to meet a critical business need while remaining independent organizations. Strategic alliance is called quasi-firm or hybrid arrangement”. There are three types of strategic alliances: (1) Pooled Service Alliance (2) Joint Venture Alliance and (3) Network Source Alliance.

Strengths of Pooled Service Alliance

1. Greater Purchasing Power: Pooled service alliances are formed by large number of members. So they have their more finances and can purchase higher amount of services or resources.

2. More services to offer: Alliances contract with their members organizations for providing more services. Thus their member organizations are benefitted.

3. Reduced labor and cost: pooled service alliances purchase greater resouces from supplier and purchase volume of their member organizations are used to induce lower costs from the suppliers.

Weaknesses of Pooled Service Alliance

1. Membership agreement: All pooled service alliances are not free; some have membership fees that are to be paid once a year. There are several agreement policies to which each member has to abide.

2. Minimum case orders: The supplier might bid only if he has to supply a certain minimum amount of resources, so when the organizations need only small amount of resources, the supplier might not bid.

Strengths of Joint Venture alliance

1. New opportunities: The agencies can have opportunities to get new expertise that is available from joint venture.

2. Possibility of expansion: Agencies can enter into new business or can gain access to distant geographic areas.

3. Ownership and authority: Since there are few members, they can have straightforward ownership and more authority.

Other strengths of joint venture alliances include risk sharing with partner, contact to more resources and new technology, entering into business that is different from the organizations’ core business.

Weaknesses of Joint Venture Alliances

Building a relationship with partner organization might be tough. If the partner organizations have different mission and vision, it would be difficult. There might not be a good balance of expertise, investments brought from partners in joint venture alliances. If objectives are not clear to everyone in the partner organizations, it might lead to failure.

Strengths of Network Source Alliance

1. Outsourcing of functions by core organizations benefits the contract organization. Contract organizations can get a capital, license and some required opportunities without much effort.

2. Core organization can get credits for the contract for example, if a pharmaceutical company contracts for clinical trials, the pharmaceutical company can get credits for research done for clinical trials and the agency that does clinical trials can get capital, time and resources to conduct trials.

Weaknesses of Network Source Alliances

There might be disagreement between core organization and contract organization. Contract organization won’t get authority. Contract organization would have to follow the rules of core organization. This might not go well with all contract organizations. Sometimes the functions (example: research) from contract organizations would take longer time and more resources than expected.

Example of Pooled Service Organization

Group purchasing organizations (GPO) are the most common examples of pooled service alliances. One such GPO is Vizient. As a combination of VHA Inc. (formerly known as Voluntary Hospitals of America), a netweork of non-profit hospitals, University HealthSystem Consortium and Novation, Vizient was formed in 2015. University HealthSystem Consortium is an alliance of nation’s outstanding academic medical centers and Novation is healthcare contracting company.

MedAssests’ Spend and Clinical Resources Management were acquired by Vizient in 2016. Vizient is driven by affiliates and it is the outstanding healthcare improvement company in the country. To deliver extraordinary cost effective care, affiliates are connected to solutions to enhance quality and improve business. Example of joint venture alliance:A definitive agreement has been signed to make a partnership that would own and operate Carondelet Health Network based in Tucson, Arizona by Tenet Healthcare Corporation, Dignity Health and Ascension. In this new joint venture, Tenet Health will be the major owner and the operations of the three hospitals, related physician practices, outpatient and ambulatory services, and other affiliated businesses will be managed by Tenet. The facilities included in the new partnership are: St. Joseph’s Hospital (486 beds) in Tucson, St. Mary’s Hospital (400 beds) in Tucson, Holy Cross Hospital (25 beds) in Nogales, Carondelet Heart & Vascular Institute at St. Mary’s Hospital, Carondolet Neurological Institute at St. Joseph’s Hospital, Carondelet Medical Group, Carondelet Specialist Group as well as imaging centers and other ambulatory services.

Example of Network Source Alliance

Devoted to clinical research, Reading Hospital establishes collaboration with different national organizations and vast university hospitals. Partnerships are provided to increase research opportunities. Patients are benefitted from the treatments developed from these collaborations. John Hopkins Medicine is linked to varied network of community based healthcare delivery system by John Hopkins Clinical Research Network (JHCRN). JHCRN is a regional translational research organization.

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