Man and woman discussing business partnership. Source: Jopwell from Pexels.
A partnership or a strategic alliance is a broad term that encompasses the coming together of two or more businesses to form a new entity or an array of collaboration options for the businesses to independently achieve common strategic goals.
A business alliance structure can include joint ventures, franchising, cross-licensing, cross-marketing, and co-manufacturing and can enable your company to realize its potential and maximise your success more quickly.
What Types of Common Strategic Goals Can Be Achieved?
- Expanding the Scope of Your Limited Resources: The resources of a small company can be supplemented via capital- access to greater funding; personnel – more manpower; information – marketing strategy; technology infrastructure – software expertise; and means of production.
- Access to Economies of Scale: Greater competitive purchase and supply market. This will lead to lesser cost in retrieving raw materials and shipping final products with increased volume.
- Giving An Extra Edge To Your Strategic Objectives: A small business can benefit from the brand recognition and established persona of a big company in exchange for providing them with the innovative solutions that your business provides ranging from tech to operational strategies and providing big brands with a fresher outlook. It’s a win-win situation.
- Aids in Mitigation of Risk: Risks can be shared for a greater share of return on investments. This can address the problem of survivability of small businesses and sustain them for a longer duration of time.
However, it is important to keep in mind the difference between a partnership and a strategic alliance. Partnerships can vary in nature and structure but for the purposes of this article we will define partnerships as “ forming a new entity altogether where the profit and liabilities of the product are shared equally on mutually agreed terms”. Strategic Alliances, on the other hand, are similar to collaborations where two independent companies get together to achieve a strategic objective and dissolve once the objective is achieved while maintaining the individualism of each company intact.
How Can Women-Owned Businesses Benefit?
Partnerships and strategic alliances also come as a creative solution for women-owned businesses in a number of ways.
- Funding: It is no secret that there exists a wide gulf between the funding women need to sustain successful businesses and the funding they receive. Partnerships can help develop financial pipelines that women need in order to float their business.
- Business Mobility: 90% of the women entrepreneurs have emerged in the last few years which means their businesses exist at the lowest rung. Partnerships can help move their business up in terms of adding more stability and revenue generation.
- Greater Cohesion of Society and Technology: Women represent a greater number in social initiatives as opposed to tech. With strategic alliances, social problems can be solved with technologically inspired solutions and provide innovative and inclusive societal development.
- Greater Market Targeting: Women and minority-led businesses are better equipped to target similar demographics. If they are backed with the right resources and means of production – they can include a broader base of consumers in their fold.
What Should You Consider Before Partnering?
Before entering into a partnership, it is important to analyse that the other company has similar objectives and an organizational structure that meshes well with yours.
As pointed out by Harvard Business Review, successful partnerships are not unlike successful marriages.
It is important to seek compatibility in values in terms of ideologies and goals. Leader-to-leader communication which is clear and caters to the lucrative relationship is an essential part.
Each partner should recognise their respective strengths and build on it with the other while leaving enough room for change and learning lessons along the way.
To get the best out of partnerships a formal structure consisting of processes and skills always helps in smoothing professional and interpersonal differences.
And in the end, each entity should respect each other’s differences and keep their expectations in check with reality. There will be pros and cons to every new relationship, and while we hope things work out, sometimes the best business decisions are taken when there is an option to exit gracefully should things take a different course.
If you are interested in developing your partnership and alliance strategy, please contact us today or book your virtual coffee with Olaitan Orie.
