Strategic alliances or joint ventures allow you to partner with an existing business to share the risks and opportunities in a new market.
A strategic alliance is a form of collaboration between two or more companies, which can take on forms such as:
Each partner in the alliance usually retains their independence while contributing towards a mutual shared goal.
A joint venture involves a potentially long-term investment of funds, facilities and resources by two or more companies to a combined venture, which benefits all companies. All involved will have an equity stake in the new venture.
A joint venture may be formed to:
Joint ventures can also be used to get around country trade barriers. In some cases a joint venture with a local company may be required to enter some overseas markets.
Forming a business relationship with a partner, or partners, may provide you with a number of advantages. You may be able to access technologies or patented processes owned by the other partner. Alternatively, you may be able to access their distribution network.
If you are thinking of forming a partnership, consider your strengths and weaknesses compared with your potential partners. The ideal partnership takes advantage of your core competencies while strengthening weaker areas of your business.
Well-chosen partnerships can provide advantages.
Disadvantages of working with a partner include:
If a partnership breaks down, it can be expensive and time consuming to pick up the pieces. It is important that you take time to thoroughly research and evaluate all potential partners. Working with a partner you already have a working relationship with can be a good solution. For example, you may wish to create a more formal arrangement with an overseas agent or distributor.
There are some simple steps that can reduce the potential of your partnership running into problems.
Make sure you take time to research and evaluate a potential partner. Check to see if their goals and values align with your own business. Consider the following.
Overseas partnerships can be complicated and potentially costly if things go wrong. Make sure you get plenty of advice before entering into any partnership arrangement. Information sources can be:
For example, you can focus on product development while your partner focuses on sales and marketing.