Introduction
A strategic alliance is essential for businesses wanting to scale up the market faster. A successful strategic partnership gives a company a competitive advantage, a chance to enter new markets and be innovative. There are various strategic alliances, but an alliance’s success or failure depends on business compatibility and the ventured market. Amongst many successful partnerships in the market are GoPro and Red Bull partnership. GoPro is an action camera selling business, while Red Bull is an energy drink selling firm. The two most unlikely international companies teamed up in 2016 to form a partnership where each business enjoys the benefits of the alliance. GoPro and Red Bull’s partnership has earned the two businesses new market positions and increased competitive advantage.
Strategic Alliance and their Types
A strategic alliance is an arrangement between two companies to perform a mutually beneficial project without losing their independence as a business. The two firms set their objectives and analyze expected risks, benefits, and outcomes in undertaking the task (Ramadan, 2019). Their relationship could also be formal or informal, and the arrangement could be long-term or short-term, depending on the settled agreement (Ramadan, 2019). Companies enter strategic alliances for various reasons, including accessing new markets, gaining a competitive advantage over rivals, and improving their products, among others.
There are three types of strategic alliances, namely joint venture, equity, and non-equity strategic alliance. A collaborative venture alliance is formed by two businesses when they combine resources to create a new business (Russo & Cesarani, 2017). Both parent firms maintain the new company by sharing resources and signing an agreement. The venture has clear objectives, and profits are split between the two parent companies (Russo & Cesarani, 2017). An equity alliance happens when one company acquires equity in another as a partial acquisition, or each company buys equity from another, also known as a cross-equity alliance. For example, GoPro and Red Bull are involved in an equity type of strategic alliance.
Non-equity alliance is a little bit different from an equity and joint venture. In this alliance, two companies combine resources without forming a separate business. The type of alliance is more accessible and informal than a partnership with equity (Newmeyer et al., 2018). This is the type of partnership adopted by most businesses in the world. Eliminating equity sharing for the two firms gives them an advantage in marketing, sales, production, and research development (Tjemkes et al., 2017). According to Deresky (2013), alliances require five key components to be successful. Such elements include being tied to the core objectives and goals of the business, blocking competitive rivals, developing core competitive advantage, having strategic choices for the industry, and mitigating significant business risks.
Nature of GoPro and Red Bull Strategic Alliance
Types of Alliance
GoPro and Red Bull formed a non-equity alliance on 24th May 2016. The two businesses combined their efforts to create a global and multi-year partnership which included product innovation, production, cross-promotion, and distribution of their resources (GoPro, 2016). In their agreement, Red Bull is to receive equity from Go Pro while GoPro becomes Red Bull’s only provider of imaging technology to capture the events and production of Red Bull.
The alliance allows GroPro to access at least 1800 events in over 100 countries worldwide (GoPro, 2016). The two firms share content rights on distribution, production, and other related networks, including Red Bull TV, GoPro Channel, Red Bull Content Pool, Red Bull.com, and Red Bull media platforms. This kind of alliance is that one company, Red Bull has equity shares in GoPro (GoPro, 2016). They have not formed a separate business but an arrangement within their businesses for mutual benefits.
Purpose
Each strategic alliance has a different purpose based on its type and project ventured. The GoPro and Red Bull partnership goal is to enjoy benefits from shared promotions, production, distribution, and innovation of new products. By taking over Red Bull’s production and imaging needs, GoPro has blocked its competitors against Red Bull as a customer (GoPro, 2016). Furthermore, Red Bull expects nothing but the best services from GoPro in production and event coverage. This is also a chance for GoPro to be innovative and develop new products to meet the needs of Red Bull services.
Red Bull and GoPro have teamed up before the alliance and registered success in the partnership (GoPro, 2016). Red Bull once held stunts such as the shooting of the Stratos space jump filmed by GoPro’s Seven Heros2 cameras. Their collaboration success is one of the reasons that pushed the two firms to work together for mutual benefits.
Compatibility
GoPro and Red Bull are highly compatible businesses because each needs the other as a customer. Thus, instead of working as just customers, the two decided to work as partners. The founder and CEO of GoPro, Nicholas Woodman, admitted to admiring the global execution and scale of Red Bull. According to GoPro (2016), Woodman mentioned the basis of their compatibility: GoPro and Red Bull share a vision of inspiring the world to live a considerable life.
The two businesses have successfully worked together for many years; hence, official partners will be more effective as they help one another meet their vision and scale the businesses. “GoPro and Red Bull, as a match, are as good as it gets,” says Woodman (GoPro, 2016). The compatibility of the alliance is apparent because GoPro needs Red Bull to sell its cameras while Red Bull needs GoPro for the supply. According to Adobe Magazine (2016), the founder and CEO of Red Bull, Dietrich Mateschitz, mentioned that as partners, Red Bull and GoPro are to reach an international level with their power of content and capacity to fascinate the world.
Benefits Gained
The two companies enjoy a variety of benefits from the equity alliance. One of the benefits is that the two partners are working together without making investment capital for an independent business (Mtonga, 2020). The equity-based partnership between GoPro and Red Bull does not involve investing together. Instead, their collaboration is run as their companies operate independently. This is an advantage because even though the alliance would end, no firm would lead to closure.
The following are particular benefits enjoyed by each company independently. Red Bull receives equity from GoPro for allowing them to provide the coverage of events and production. According to Lim (2019), an excellent strategic alliance can bring a business more revenue. Red Bull enjoys this benefit and has exclusive access to the best action cameras in the market hence making their production a success. GoPro, on the other hand, earns from investing in Red Bull. They provide Red Bull cameras, thus obtaining a guaranteed customer for their products. Another benefit for GoPro is that it has a competitive advantage over rivals eyeing Red Bull for sales of similar products. The two businesses scale up the markets using the alliance.
Success
The success of the long-term alliance is no secret as the two companies continue to top in their respective markets. GoPro continues to cover the Red Bulls’ ability to “have wings” as they introduce new features of their cameras. For example, GoPro recently published an article on how to master the mode of Hero10 in videos and photo settings (GoPro, 2016). It has been five years since the alliance was formed; thus, it indicates business success. The strategic partnership between GoPro and Red Bull has grown successfully for five years because they have put the five components of success in place. They set specific objectives and goals, developed and maintained competency, blocked competitive threats, developed strategies, and mitigated business risks (Dhir & Sushil, 2019). As the digital world enhances the need for capturing every moment, the alliance is expected to maintain success.
Conclusion
The admirable strategic alliance between GoPro and Red Bull has been successful for the past five years. The equity-based partnership allows the two businesses to share production, distribution, cross-promotion, and innovation resources. The businesses had worked for years before the alliance and admired each other’s dreams. Sharing a similar vision, the company’s compatibility was easy as they needed to combine to meet each other’s needs. Their compatibility in terms of operation needs is what has kept them strong and going. The two companies have also registered increased revenues due to more acquired market shares brought by the alliance.
References
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