Business partnerships, or strategic alliances, connect two or more businesses together for the singular purpose of helping each business attain strategic goals they would not be able to attain alone.
Though tied together in a partnership, strategic partners continue as separate and distinct organizations in their own right. But they jointly control the partnership and collectively share its benefits.
This type of partnership is usually formed by businesses desirous of expanding their frontiers into new markets, industries, and regions. And for as long as such partnerships exist, partners proactively work to sustain the partnership through monetary and other such contributions.
The purpose of this article is to present the advantages of business partnership and to show why every business should carefully consider entering one. Wherever appropriate, examples of businesses that went into partnerships will be presented including how they benefited.
Keep in mind that although some of these businesses are now giants, they all started from scratch. Also note that in some instances, it was a business partnership that actually helped these businesses become the global mammoths they are today.
Let us now examine the advantages of having a business partnership.
Better brand presence:
Most business owners know the value of a robust brand presence. Yet, most brands are very far from known even in their immediate locality. This could be as a result of several factors including insufficient brand publicity and underperforming brand promotion.
Smart business owners circumvent this problem by forming business partnerships. They know that by partnering with other businesses they functionally extend their brand presence.
Broader market:
Another important result of business collaboration through partnerships is the free presentation of a new and bigger market segment.
By default, business partnerships are usually formed by businesses operating in complementary industries or markets. Often, the result is that each member of a partnership automatically delivers and opens up its market to other members of the partnership.
Case study
Starbucks is well known as a player in the coffee drinks industry. Its sales outlets are almost synonymous with fresh delightful coffee.
Back in the 1990’s, Starbucks realized that pushing cold coffee drinks into the retail industry had a massive potential. So it began experimenting with different products to this end.
Starbucks’ Frappucino drink resonated so well with consumers that it decided to enter the retail market with it. But there were problems. Basically, it lacked a production line to serve the retail market and a viable channel into that market.
So, in 1996, Starbucks went into business partnership with PepsiCo.
PepsiCo had everything Starbucks needed. It could easily access a vast network of dairy bottling plants. It had a robust product development experience and a huge retail sales and distribution network.
Of course, PepsiCo benefited from this partnership too. But the point of this example is to show that Frappucino is in almost every home today because of this business partnership which both reinforced the Starbucks brand and opened new markets to it.
Innovation leverage:
Over the last few decades, innovation has consistently driven the bottom line of businesses. In a marketplace where customers’ needs are ever evolving, innovation impacts business success by significantly increasing the speed with which business goals are achieved. As numerous cases amply illustrate, any lag in this regard spells business doom.
This is one of the best reasons to create a business partnership for your business. There is only so much any business can achieve in a given time. However, forming a partnership enables your business and your partners’ to freely access and use each other’s innovation.
This effectively decreases the time it takes your business to bring your products to the market or to implement a process that improves your bottom line.
Case study
Apple is best known for its sleek and very smart electronic devices. Over the years, Apple has progressed from manufacturing every single one of its products’ components to now relying on others to produce most of the ‘nuts and bolts’ it uses in manufacturing.
One feature that has consistently set Apple apart in its market is its super user-friendly and ultra-smart products. From the iPod to the iPad, Apple continues to lead the pack in manufacturing thoughtful solutions to consumers’ everyday needs. That is why the company’s sales continue to soar despite it pricey products.
In April 2010, Apple announced a partnership with Clearwell Systems, a leader in e-discovery. The partnership was to enable Apple leverage on Clearwell’s e-discovery platform technology and jointly make it available through Apple’s iPad.
Thus, enterprises and law firms who use Clearwell’s e-discovery platform for collecting, sorting, and analyzing electronically stored information can now do so using the iPad.
So Apple successfully strengthened its market leader perception by simply leveraging on a business partner’s innovation.
Sidestepping political barriers:
Sometimes, businesses realize that their biggest challenge to entering a market is political. This is often the case in certain populous and potentially profitable African and Latin American countries, such as Nigeria.
In such countries, government regulations and official statutes make it extremely difficult for foreign businesses to enter and do business.
In some countries the bottleneck is not so much in entry as it is in actually doing business there.
In 2010, for example, the European Chamber of Commerce in China said in its annual position paper that “compulsory certification in excess of what is reasonable is being used to keep foreigners out of the market and business license requirments continue to exclude companies from entire sectors.”
In simple speak, a foreign business may face difficult challenges if it ever considers expanding into certain region.
How about if they partner with businesses indigenous to such countries? Can such a move navigate them through deliberate political roadblocks?
Case study
General Motors is one of the most popular American auto makers. Its legacy is more than 100 years old and is seen in several brands such as, Chevrolet, Pontiac, and Hummer.
Like all forward-looking businesses, GM desired a footprint in China. So in 2002, it entered into a business partnership with two Chinese auto makers, Liuzoi Wuling Automobile Industry Co. Ltd and Shanghai Automotive Industry Corporation to form SGMW.
Today, SGMW is one of the largest manufacturers of microvans in China and its Wuling Sunshine brand is the best selling microvan in China.
So yes, partnering with an indigenous business made it possible for GM to do business in China.
In this post, you have seen several benefits of forming a business partnership, or strategic alliance. So will you make the move? That is a question to seriously think about. And as you do, remember that a business partnership can practically take your business to Eldorado.