It is through mergers and acquisitions that some businesses are able to grow, reaching new markets as well as increasing market share in areas where they already have a presence. A third option to fuel growth is through crafting a strategic partnership, what represents a formal alliance between two businesses. Such a business relationship can prove beneficial to both parties.
Strategic Partnership Defined
A strategic partnership brings two commercial enterprises together to forge a formal alliance. Unlike a legal partnership, the two entities remain separate. However, by signing one or more business contracts, the two companies create a vested interest in each other.
The goal for any strategic partnership is to allow two separate companies to benefit from each other. While the companies do remain independent, various contracts link them as well. Therefore, if your business is seeking such a relationship, then carefully consider your potential partners and perform due diligence to ensure that the arrangement will be mutually beneficial.
One form of strategic partnering comes through a marketing alliance. Here, the two companies might share a marketing budget or fund a joint advertising campaign. Much depends on the synergies that can be gained when considering such a coalition.
A simple example of such a marketing confederacy could put two manufacturers together to promote their goods to consumers. Company number one might supply a kitchen floor cleaner. Company number two might provide the mop and bucket. Together, all three products are something consumers would want, so offering all three in a package makes sense.
Your business may find that buying products from suppliers means you are paying more than your chief competitors. After all, they order about four times the goods that you do and are able to take advantage of volume discounts, putting you at a decided disadvantage.
Here, you might ally yourself with another business to share your purchasing strategies. Combined, you can negotiate for better deals with your suppliers and enjoy improved savings aiding both companies’ bottom lines.
Who couldn’t benefit by combining the technology interests of two entities? Indeed, with technologies changing at a rapid pace, your business may long to keep up with its rivals. A strategic partnership here may help advance your cause.
By pooling your resources, the partners may be in a better position to afford new technologies and split those costs. Further, if the two companies are in proximity, then something such as a server or a phone service might be shared. A technological consociation can put your business on even ground with your chief competitors.
Assigning Point Persons
To make a strategic partnership work, each company must assign a point person. The point person will liaise with the other company and report to his own company whatever news and updates must be shared.
A point person is responsible for protecting the interests of his own company as well as ensuring that the strategic partnership is carried out according to plan. It is important that the two point people have a strong working relationship to the betterment of both concerns.
Certainly, a strategic collaboration requires careful consideration and must be approved by senior management. Attorneys must get involved too to ensure that the contracts are binding and that the language is clearly spelled out and can be carried out effectively.
See Also — Business Exit Planning: Getting Out
Originally published at www.novarsgroup.com on March 19, 2015.