Partnership between large firms

The share price of the chipmaker, AMD, was up by more than 15% after it listed Alphabet and Twitter as its clients (especially Alphabet). In addition, Microsoft’s share price also jumped significantly after it announced its partnership with AT&T. Yesterday, Samsung also announced its partnership with Microsoft, despite we have not seen any significant change in either company’s share price. While having competitions, firms are also forming partnerships in the market. Firms do not tend to form partnerships within their own sectors, they generally seek partnerships outside their own sectors. This is because of several reasons.

First, forming partnerships within their own sectors could have some legal problems that it can violate anti-trust laws. Secondly, firms from same sectors are often competing for more market shares, it is difficult for them to form any kind of partnership when they are fighting for the same goal. Thirdly, the partnership between firms from different sectors is a little bit like a merge between firms from different sectors that they can take advantage of each other’s unique advantages and strength. Fourthly, sometimes it is just better for them to cooperate. They may produce complimentary products, so they can sell their products together and promote both firms’ products at the same time. Fifthly, partnership is very flexible, unlike merge, firms can choose when and how they want to end a partnership. Sixthly, forming a partnership with another firm is a way of saying having this firm as my client now.

Overall, I think that we are going to see more partnership among firms, especially when the development of cloud and IOT makes the barriers between different sectors thinner.