The Strategic Value of Alliances

Consequently, the alliance is the mechanism that allows cooperation to replace competition.

• This, in turn, permits institutions to leverage their available capabilities to achieve a common goal, rather than relying on a competitive style that could lead to one institution exiting the market.

• The alliance serves as a robust factor for controlling risks and threats.

• It allows for the sharing of profits, benefits, and both tangible and intangible gains.

Fourth: Reasons for Resorting to Banking Alliances

One of the paramount motives for establishing alliances is to ensure that the allied parties remain present in the markets or to secure an increasingly larger share of the market.

The underlying reasons behind these alliances can be summarized as follows:

1. Key Drivers for Alliances

A. The Emergence and Growth of Globalization

This phenomenon has encompassed production, marketing, technological, and informational fields, as well as goods and services markets.

• Many institutions now purchase supplies from another institution or country.

• They then market their products in their domestic market or in the markets of other countries.

B. Maximizing the Cost of Technology (Transfer or Development)

This is driven by price competition to ensure the company has the lowest production and marketing costs.

• Alliances, in their technical form, allow for a cheaper transfer of technology.

• This is preferable to investing millions in developing a specific technology without a guarantee of successful commercial production.

C. Seeking to Provide a Qualified Workforce

This contributes to improving productivity and increasing overall competitiveness.

D. Risk Sharing

Alliances are utilized to reduce risks arising from competition, or at the very least, to control the negative impact or potential threats of those risks.

2. Specific Motives and the Local Context

Therefore, the motives for establishing a banking alliance vary based on the alliance's objectives and types, such as:

• A bank's desire to acquire the necessary technology to develop and add new banking services.

• A bank's desire to expand its activity by entering new markets.

• Note: This cooperative relationship must not lead to the establishment of restrictive commercial practices in the banking industry.

The State of the Banking Industry in Iraq

It is worth noting that the banking industry in Iraq is still characterized by:

• An increase in the number of banks.

• Total reliance on competition without adopting cooperative policies.

• A lack of building alliances and partnerships with various financial institutions.

3. Prerequisites and Stages of Forming an Alliance

Based on the above, it can be said that a banking alliance is concluded when a bank determines that:

1. Resource Insufficiency: The resources it possesses are insufficient to complete a project alone.

2. Need for New Resources: It desires to acquire new resources that contribute to revitalizing its banking operations and achieving the highest profit ratio.

3. Technological Needs: There is a need for modern technology, techniques, devices, and machinery used in providing comprehensive banking services.

4. Environmental Pressures: Difficult environmental conditions and increased competitive intensity make cooperation a necessity to limit rising threats, risks, and costs.

Consequently, the bank must engage another party (or parties) that possesses the qualifications and resources capable of providing what the allied parties require.

Stages of Execution

However, concluding these alliances is not a simple task; it must pass through several critical stages:

• Project Study: To develop plans that enable the achievement of good results through this alliance.

• Partner Selection: Choosing the appropriate ally who possesses a competitive advantage—whether productive, technological, marketing, or financial—that aligns with the bank's motives.

• Implementation: The final execution of the alliance.