This study aims to investigate how competitive priorities relate to firm performance. With the inclusion of strategic alliances, its mediating effect is examined for SMEs in Taiwan. The magnitude and significance of these relationships were assessed by the path of an analytic approach. We used surveys of SMEs in high technology electronics industries. There were totally 73 samples collected. The results show that quality and flexibility priorities can improve firm performance. Cost priority can influence the management of strategic alliances. Strategic alliances directly influence firm performance. Through the full mediating effect of strategic alliances, cost priority enables a positive impact on firm performance. This study empirically demonstrates that the internally developed resources such as quality and flexibility priorities and the synchronised internal and external resources such as cost priority can both simultaneously enhance SMEs marketing position and lead to competitive advantage. The arguable ‘trade-offs’ concept of manufacturing strategy can be overcome through strategic alliances.