A strategic alliance is a unique relationship between two or more companies working together on a project designed to generate a profit that neither partner could achieve on its own. Alliance partners keep ownership of their own businesses, while contributing capital, expertise and other “tradables” to the mutual venture.
An attractive option
During the past two decades, strategic partnering has become a more attractive option because of the wide range of benefits, without the risk and burden of paying for them. These benefits include:
- expanded access to markets
- advanced technology
- quicker product development
- broader geographic range.
The goal is to find a partner in areas where one or other of the companies has limited expertise. In a successful alliance, partners gain access to specific strengths – for example, in sales, technology, finance or distribution – that they don’t possess themselves. Another driving force behind alliance building is the desire to control the quality and performance of the entire production process, from raw materials to system design, from manufacturing to global distribution.
Sharing benefits and risks
The synergy generated by two cooperating organisations results in a sum greater than its parts. A successful alliance preserves the distinct competitive advantage of each business and allows those advantages and core competencies to grow.
The benefits of partnering also include economies of scale, resulting in:
- increased versatility
- reduced costs through increased production
- enhanced purchasing and financial arrangements
- a stronger negotiating position with suppliers, customers and/or regulatory agencies
- greater access to critical resources
- opportunities for large-scale marketing efforts.
For the unprepared or uninitiated, a strategic alliance can be a minefield. Below are two of the most pervasive myths about partnering.