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next: The Good, Bad and the Ugly of Strategic Alliances, Part 2
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Monthly Business e-Tips Vol 6
Issue 5

The Good, Bad and the Ugly of Strategic Alliances – Part 1

"Partnering has proven itself one of the most powerful business tools for dealing with fast changing markets, technologies and customers. As the global economy speeds up, partnering is becoming the weapon of choice for today's successful competitors." Curtis E. Sahakian

Strategic alliances and informal partnerships can facilitate an expansion or strategic change in direction. For small and mid-sized businesses in particular, partnerships offer a great way to grow organically without incurring major financial debt. Collaborations are usually rather informal and allow for the independent operations of each party. During tough economic times, these relationships can be more important than ever.

When smaller companies align with larger ones, the smaller entities must conform to the processes and systems that larger corporations demand of their partners. Although this "David and Goliath" model is often a disaster, it can be very successful. Especially so when large companies contribute the marketing muscle to open relationships and opportunities that small organizations can't do on their own. In exchange, smaller companies bring more flexibility to product development than their larger counterparts. Thus, each partner recognizes the benefits and commits to the relationship.

Smaller businesses that partner with other small to mid-sized companies in a more even playing field, enjoy a higher degree of success. There are fewer demands of one company over another, and the power parity makes for a smoother and more equitable relationship.

When might a strategic alliance be appropriate?

  • Growing your business. When expanding geographically or globally, it helps to connect with a synergistic company that has inroads in desired locations. If you want to take your company in a new direction, working with a partner can cut the time, risk, and cost of implementing a new strategy.
  • Gaining market share from competitors. Fill the gaps with offerings from a strategic alliance. Two complementary companies can add the value necessary to better compete with the "big guys".
  • Cost sharing and cross-marketing. Share promotional expenses and contacts with a partner to expand your marketing reach.
  • Opening untapped markets or industries. Partners can help you access markets where you lack visibility or credibility. You can do the same for them, making it a win-win for all.
  • Marrying product and service offerings. If both businesses serve the same markets, it can be relationship made in heaven.
  • Landing bigger deals and clients. By sharing talent, skills and experience, companies can catch larger fish. An example is consulting company that partners with another firm that has the technology or tools to give more depth and breadth to their offerings. The smaller group can now compete and satisfy the client who prefers one stop shopping.
There are many other advantages to strategic relationships. Most companies create several flavors of alliances. Think about identifying new partners that could help you grow your business. The next issue of Growing Possibilities will examine how to make these relationships successful.


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