Insights
Grow Your Business Through A Strategic Alliance Or Strategic Partnership
December 15, 2020
Mergers and acquisitions are proven highly effective strategies for business owners that want to create growth, diversify, save a struggling business, or craft an exit strategy for their retirement. But maybe you are seeking a less-permanent measure to boost your bottom line. By forming a strategic alliance or a strategic partnership with another business, you can create significant growth and cost savings for both companies.
Strategic Alliances
Your business can gain a series of advantages through a legal strategic alliance agreement. An alliance can improve operations, pool resources, share core competencies, change the competitive landscape, create economies of scale, and offer a lower cost way to enter new sectors. There are three main types of strategic alliances:
- Joint Venture: When two or more parent companies form an entity together with a business objective, sharing in the risks and returns, and retaining their individual legal statuses. It can be an equal joint venture, in which both parent companies own an equal portion of the entity, or it can be a majority-owned venture, in which one partner owns a larger percentage of the company. A joint venture can help to save money, combine expertise, or enter new markets. It is not a partnership, consortium, or merger.
- Equity Alliance: When one company purchases a specific percentage of equity in another company.
- Non-Equity Alliance: When two companies enter into a contractual relationship, which allocates resources, capabilities, assets, or other means to one another.
Strategic Partnerships
According to a 2020 study, partnership marketing is ranked as the 7th most impactful marketing technique for professional services firms, and high-growth firms were three times more likely to use marketing partnerships than no-growth firms. Finding the right partner can enhance brand recognition and reputation, give you a competitive edge, and open up access to new customers. There are several types of strategic partnerships that you can consider for your business.
- Promotional Partnership: For small to mid-size businesses, advertising and marketing can be expensive. A promotional partner can help you reach a larger audience and promote your products or services, helping to send potential customers your way and allowing you to focus your spending elsewhere. You should seek out a stable business that is complementary to yours, with a client base similar to yours, and create a cross-promotion that targets their customers—those who already trust the partner business. The partner should also be aligned with your company values. A promotional partnership can be a win-win for both businesses. For examples, think about how fast food restaurants promote new movie releases, or how you can get a major credit card with your favorite sports team featured on it.
- Distribution Partnership: A distribution partnership is another type of complementary relationship that is designed to drive sales for both businesses involved. A distributor with an established market can also promote your company for you by offering exposure through joint marketing events or getting you access to customers you may not be able to reach on your own. The distributor does all the work, and your company enjoys the profits from it. The right partner will be an influencer with an existing audience that makes sense for your business and create value that benefits both parties. Examples of distribution partnerships would be a supplement company partnering with a pet product distributor, or an agreement between a technology provider and a video security company to roll out a new offering in a new region.
- Cause Partnership: Consumers embrace the idea of companies championing socially responsible causes. A 2014 Nielsen study reported that 42 percent of North American shoppers would pay extra for products and services from companies committed to positive social and environmental impact. Find a social cause that will capture your audience and partner with a local organization or nonprofit that is aligned with your company values. It can be a consistent long-term partnership, support through the sponsoring of an event, or donation of a percentage of sales. This will increase your exposure in a positive way and help your business grow. Also, as your company becomes associated with promoting a good cause, it will help it stand out from the competition. Social media is an effective tool for engaging people in your cause and spreading the word about issues they care about while giving your brand higher visibility, attracting new customers for you while benefiting the partner organization. Examples of cause partnerships would be an airline enabling their customers to donate their travel miles to a nonprofit company, or an outdoor clothing retailer donating a percentage of all sales to an environmental group.
- Competency Gap Partnership: As a business owner, you don’t have to do it all yourself. Look for any gaps or weaknesses in the competency of your company and outsource tasks that you are not doing well or efficiently. This can save you time and money, and strengthen your weakest areas by having an expert handle it. A competency gap partnership will give your business much needed resources so you can focus on advancing other areas without slowing down any possible growth, building a stronger brand, and keeping your business competitive in the market. An example of this would be outsourcing accounting, IT, or human resources to offload administration and fill in gaps in workload imbalances.
Ready to Grow Your Business?
Please reach out to us at Benchmark International. Our M&A specialists have great ideas for creating value, and we would love to hear from you and discuss how we can do extraordinary things for your company.
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