Final answer:
A strategic alliance can have several downfalls, including limited market access, reduced innovation, and higher operational costs.
Step-by-step explanation:
One of the downfalls of a strategic alliance is limited market access. When two companies form a strategic alliance, they often agree to limit their activities in certain markets to avoid competing with each other. This can result in limited access to potential customers and reduce the overall market share for both companies. For example, if two airlines form a strategic alliance, they may agree not to operate on certain routes, limiting their market reach.
Another disadvantage is reduced innovation. When companies collaborate in a strategic alliance, they may become complacent and rely on each other's resources and capabilities instead of investing in their own innovative ideas. This can stifle creativity and hinder the development of new products or processes.
Additionally, a strategic alliance can lead to higher operational costs. This is because companies may need to invest in new systems or technologies to integrate their operations, share resources, or ensure coordination between different parts of the alliance. These investments can be costly and may not always yield the expected benefits.