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No man is an island --
While you may be bravely striding down the
path of managing and growing your businesses, there may come a
time when you need to form strategic alliances for your business.
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Given the current
state of business today, competitive pressures are forcing
companies to come-up with imaginative ways to enhance brand
identity, connect with customers and attract top-notch employees. Companies,
both big and small, are teaming up more today than ever before to
enhance their competitiveness in the marketplace and keep pace
with the rapid changes of technological innovation.
More than 20,000 corporate alliances have been formed
worldwide over the past two years. According to studies by Booz,
Allen & Hamilton, the number of alliances in the United States
has grown by 25 percent each year since 1987.
A strategic alliance is an arrangement
between two companies that combine resources to gain additional
business. Strategic alliances are formed
when one company alone cannot fill the gap in serving the needs of
the marketplace. It involves two
companies that pool together expertise and resources to enter
new markets, share financial risks and get products and services
to market faster.
Some strategic alliances are formal written
agreements; others are informal as a handshake. With the Internet,
some alliances are entered into after several email exchanges,
even without the physical meeting of the parties concerned. Some
alliances involve sharing of resources and an exchange of funds;
or sharing of traffic between two dot.coms; others are as simple
as a cooperative marketing arrangement.
Whatever their structure, one goal prevails: strategic
alliances are opportunities for small businesses to accomplish
things that would otherwise take much more money or staff time.
Small business owners, with their limited
resources and marketing reach, could benefit from cooperative
arrangements with other organization and business entities.
Joining forces with another organization can allow your business
to finance certain services or production functions by sharing
expertise, assets, expenses, and risk without necessarily
incurring cash debt or trading equity.
For small businesses, strategic alliances often consist of
simple "bartering" with customers, suppliers, and even
competitors.
Here are several ways that you can
collaborate with another person or company to bring added value,
revenue, traffic and/or expertise into your business.
Partner
with a key customer. If
you are selling a substantial amount of your product to one
company, it is best to explore opportunities for strategic
alliances between your organizations. Your goal is to preserve the
relationship -- imagine the possible devastating effects of losing
your single biggest account. Cementing the relationship into a
long-term formal alliance will help mitigate the risk of losing
your biggest customer and market.
Partner
with a brand leader. When considering strategic partners, most
small businesses will benefit from alliances that add value and
prestige, not just money, through sheer association alone. If a
brand leader wishes to join forces with you – a “small fry”
– grab the offer immediately! Your networking ability plays a
major role in locating and investigating strategic partnering
opportunities. Business
association with a well-recognized industry name can generate
immediate credibility for you.
It can be likened to receiving a stamp of approval from the
best in the industry. Even
if the partnership does not offer direct financial remuneration,
you can leverage your formal association with the brand leader in
the advertising and marketing for your company.
Cross-sector
Partnerships. While strategic alliances are often formed with
businesses, consider the possibility of joining forces with the
non-profit organizations such as trade associations, nonprofit
groups, local community organizations, etc. Cross-sector
partnerships may offer great opportunities for financing some
advertising and distribution expenses. Moreover, you may be able
to work out arrangements with some groups that target a very
specific, and important, consumer audience. An excellent book that
explores the opportunities of a partnership of a for-profit
businesses and non-profit organizations is Eli Segal’s book
“Common Interest, Common Good: Creating Value through Business
and Social Sector Partnerships.”
Partner
with former employer. Many
entrepreneurs start their own companies after seeing potential
partnership opportunities with their employers.
For example, you may develop a product or service that
provides your employer with a solution to a major problem. You
make arrangements to go into your own business selling this
product or service, and your former employer offers you a
long-term contract with his or her company.
The bonus: you end up with great cash flow, and the
long-term contract with a creditworthy company means you can go to
other lenders and possibly get other financing you need.
Partner
with a competitor.
Your
competitors, if handled properly, can be a very good alliance
partners. By understanding the capacity and capabilities of your
competitor, you may be able to tap into their unique strengths for
your own advantages. You may work hand-in-hand with a competitor
over contracts that may be too large for you to handle by
yourself. You may
also refer customers and projects to your competitors if your
manpower resources are tightly squeezed.
If you cultivate a good harmonious relationship with your
competitor, they may also reciprocate and pass on to you projects
and contracts that they feel you can do much better! As the saying
goes, “if you can’t beat them, join them!”
Partner
for cross marketing.
Cross
marketing calls for two distinct businesses to pool their
resources and collectively market to a target customer base. The
strategic alliance will provide additional leverage for their
product offerings and generate greater marketing impact.
The potential to save money for both companies is the
greatest benefit to both companies. An online magazine targeting small business entrepreneurs,
for example, can partner with a site that offers assistance to
entrepreneurs in securing government loans. The online magazine
will be able to increase its business tools offering to its
readers, while the government loans site can widen its reach.
Your company may have started out as a solo
enterprise, and you still want it to remain that way – but you
see the value in making connections.
Or, your business has now grown to include one or more
employees and you’re looking for ways to expand your reach
without generating a lot of debt or overhead.
For these situations, and many more, strategic alliances
and partnerships are a smart solution. Design them any way you
want – keeping in mind a win/win philosophy – and you’ll
discover ways to grow your business without the direct use of
money.
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