Establishing partnerships with other businesses allows you to combine your resources to overcome challenges. By creating an alliance with other organisations you can develop a synergy that improves your ability to meet the needs of your target market.
The right strategic alliance has many benefits for your business. By building a strategic partnership you reduce your exposure to risk. This is because liabilities are shared amongst the partners in the alliance. Your combined efforts, skills and resources can help produce economies of scale and give you a competitive edge. The right strategic partnership can extend your access to new markets.
Building a strategic alliance is not easy. Many strategic partnerships fail because of a lack of strategic compatibility or imbalances within the alliance. Another pitfall is that you may have to share your unique expertise with other organisations. This may diminish your competitive advantage. The formation of successful business partnerships can also be hindered by incompatible management styles.
Developing partnerships with other organisations requires the establishment of a long term mutually beneficial business relationship. Partnerships are based on trust. Without trust the partnership will fail. All businesses in the alliance need to act within the best interests of the partnership.
When developing a partnership, it is essential to find an organisation that is a good strategic fit for your business. Conflicting interests will ruin the business relationship. The goals of the alliance must be mutually agreed upon and must benefit all parties.
When choosing the right strategic partner, businesses should analyse their external business environment to identify threats and opportunities. The business can then form partnerships with organisations that will help limit the impact of threats. Alternatively, the business can form partnerships with organisations that may help them capitalise on opportunities.
An analysis of the internal environment should be undertaken. Businesses need to look at their strengths and weaknesses. Weaknesses can be counterbalanced by forming alliances with organisations with complementary strengths. To stand the test of time, your partnership must be flexible. It must be able to adapt to the changing needs of all parties in the alliance. When selecting a strategic partner it is helpful to consider other organisations who already serve your target customer.
Once you have found the right strategic partner, you need to decide on the nature of your cooperation. You need to agree on areas where you wish to collaborate. You need to identify the level of cooperation required by each party. Since business partnerships can be very intricate, it is advisable to appoint a manager to administer the partnership relationship.
Companies can work together to market complementary products. Promotional alliances can be formed where strategic partners promote each others products or services. Logistical alliances can be developed where businesses support each other in the warehousing and delivery of products. Pricing collaborations can be created. In a pricing collaboration, customers purchasing products from one strategic partner become eligible to receive a discount on products offered by another strategic partner.
Many different types of partnerships exist. An organisation can build a vertical alliance. This is an alliance with an organisation in the supply chain. This helps you control the costs of components and gives you more control over the quality of your end product.
A business can create a horizontal alliance. This is an alliance with other competitors. In a horizontal alliance, weaker businesses can form a competitive bloc against a stronger player in the marketplace.
A business can develop a diagonal alliance. This is an alliance with companies from different industries. If both companies share the same target market, this can help broaden the offering to the customer.
Alan Tollemache offers
Sydney based Accounting Services and has over 40 years of experience in business growth.
