A strategic partnership happens when two or more businesses come together for a specific period of time in order to achieve a mutual goal. Such a partnership usually involves the sharing of resources such as people, information and finances. However, before choosing a strategic partner, here are some things you need to consider:
- Location – How close is the potential partner to your business? Will the difference in time zones have any effect on the partnership?
- Brand alignment – Do your companies have a similar culture and brand values? For instance, if your business is faith-based, you might need to find a partner that subscribes to your values.
- Complementary products – Find a strategic partner that sells complementary products. For instance, if you sell computers, you could consider partnering with a software company.
- Target audience – Your strategic partner should have a customer profile similar to your own.
- Ability to deliver – To ensure mutual benefits, choose a partner that is equal or greater in strength and size to your company.
Here are some of the benefits your business can derive from strategic partnerships:
1. Increased capital
Running a business usually requires investing a substantial amount of money. Raising this capital can be a very great challenge for an individual business. A strategic partnership allows businesses to put their resources together towards different ventures. In addition, it could enhance the chances of securing funding from financial institutions. This means that each of the businesses involved can meet their objectives faster.
2. Cost savings
One of the major advantages of strategic partnership is cost saving. For instance, when you combine with another business to order supplies in bulk, you are likely to get a better price. In addition, you could cut your advertising costs significantly by undertaking a joint marketing campaign. You can also lower your expenses through joint staff training, and sharing infrastructure and transport facilities.
3. Faster growth
Forming partnerships with other companies allows you to share operational and technical resources. For instance, if you are a manufacturer, you can partner with a company that has established marketing and distribution channels. This not only allows you to save money but also time which can be invested in innovation and your core business. This will boost your productivity and result in a more rapid growth.
4. International penetration
Successfully penetrating international markets is a challenge that many businesses want to expand grapple with. However, a strategic partnership with a business in the target country can make things much easier. Such a partner is familiar with the business styles, protocols, cultures and even language of the foreign country. In addition, they probably already have useful networks which could be useful to your own business.
See Also: How to Start a Business with a Partner
Despite the benefits mentioned above, a strategic partnership could fail due to reasons such as lack of trust, clashes in leadership styles, slow decision making, an imbalance between partners, and a general lack of strategic fit. Therefore, before jumping into any partnership, make sure you take the time to weigh the pros and cons.