Growing Your Business Through Strategic Alliances

Strategic alliances - Firm handshake symbolising the alliance of two parties

If you are looking for a way to enter a new market faster, Increase your productivity or gain a competitive advantage, the solution could be strategic alliances.

Building strategic alliances is a way that to grow your business without necessarily increasing its size or making additional investments. They give partners the opportunity to create a win-win situation.

Most of the time, strategic alliances help:

  • Find new clients
  • Enter New markets
  • Grow Faster
  • Diversify your range of products or services
  • Get better prices by grouping orders with your Partner
  • Get access to new technologies
  • Accelerate research and development activities by sharing costs

The type of partnerships between two companies depends on the nature of the contract in place. In most cases, they can be grouped into 3 categories.

3 types of strategic partnerships

1 – Joint venture

A joint venture is a child company created by two or more parties, usually characterised by shared ownership. Whether integrated into a specific or ongoing strategy, a joint venture has a clear purpose and the benefits are shared between the parties.

2 – Equity alliance

A strategic Equity alliance occurs when a company buys shares in another company (partial acquisition). It is also possible for each of the companies to mutually buy shares (cross trades).

3 – non-Equity alliance

In a strategic alliance without Equity, the parties create a strategic partnership agreement that precisely describes the nature and obligations of both parties. By their less engaging nature, these types of partnerships are often the easiest to set up and are the most common alliances in the business world today.

When looking to qualify a potential partner, ask yourself the following questions:

  • What qualities are you looking for in a partner?
  • Do you have similar goals?
  • Have you clearly expressed your mutual expectations?
  • Will you be competing in the same market?
  • Will your alliance affect your position in your main market?
  • Are your brands compatible?
  • How long will the relationship last? Is it a one-off association or a long-term commitment?
  • Do you have a clear exit strategy?
  • Do you know what type of contract you are going to sign?

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