Collaborate in different ways
Working with other businesses can create new opportunities and help you grow in ways you couldn’t on your own. Whether it's sharing resources, reaching new customers or combining strengths, here are two common ways to collaborate.
Strategic alliances
A strategic alliance is a type of collaboration between two or more companies, which can include:
- technology transfer
- purchasing and distribution agreements
- marketing and promotional collaboration
- joint product development.
Each partner in the alliance usually retains their independence while contributing towards a mutual shared goal.
Joint ventures
A joint venture can be a long-term investment of funds, facilities, and resources by two or more companies. The joint venture benefits all companies and may be formed to:
- run production facilities in another country
- establish a marketing and distribution presence
- use complementary technologies held by each company.
Joint ventures can also be a way to navigate country trade barriers. In some cases, a joint venture with a local company may be required to enter certain overseas markets.
Level up through partnership
Forming a business relationship with a partner or partners can come with many advantages, helping you level up your business. 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're thinking of forming a partnership, consider your strengths and weaknesses compared with your potential partner's.
The ideal partnership takes advantage of your core competencies while strengthening weaker areas of your business.
Pros and cons of partnership
Well-chosen partnerships can come with many advantages. For example, partners can:
- share risk – allowing you to offset your market exposure
- create opportunities for growth – access to your partner’s distribution networks may help you gain market share faster than if you go it alone
- provide access to resources – such as specialised staff, finance and technology.
Working with a partner may also have disadvantages. For example, partnerships can involve:
- less profit – as profit will be split between partners, it may take longer to make a return on your investment
- disputes – if the relationship breaks down, ownership of intellectual property (IP) and jointly developed products can be an issue
- cultural challenges – working with an overseas company or a company that is a different size to your business can bring some cultural issues, as ways of doing business may be very different
- high level of commitment – both in terms of finance and time.
Choose the right partner
It’s important 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.
When evaluating potential partners, ask yourself the following questions:
- How well do they perform?
- Will they share your level of commitment to the venture?
- Do you trust them?
- Are they financially secure?
- What do their customers say about them?
- Do they have any existing partnerships that could cause a conflict of interest?
Formalise your business relationship
Once you’ve chosen a suitable partner and have agreed to collaborate:
- make sure communication channels are kept open
- decide on reporting methods, milestones and goals for the partnership
- agree in advance on what arbitration methods you'll use if there is a dispute.
Get a written agreement between the partners. Because strategic alliances tend to be less formal than a joint venture, an exchange of letters should suffice as a written agreement.
In the case of a joint venture, a joint venture agreement should be signed by both parties.
Collaborating overseas can be complex
Overseas partnerships can be complicated and potentially costly if things go wrong.
Make sure you get plenty of advice before entering any partnership arrangement.
Information sources can be export and marketing consultants, international accountancy firms, international legal firms and patent attorneys.
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