4 Disadvantages of a Strategic Partnership

This Means War
This Means War

A strategic partnership is a relationship between two or more entities or individuals who are working towards a common goal. Such alliances are usually formed for a specific period and involve sharing resources such as finances and human resources. For example, a business that manufactures a product could form an alliance with another which has a wide network of distribution channels. This makes it easy to distribute their products faster and in a more convenient way. Some of the benefits of establishing strategic partnerships include access to more capital, cost savings, faster business growth, and the opportunity to expand internationally. However, strategic alliances also have some downsides:

See Also: 4 Advantages of Strategic Partnerships

1. Clashing cultures and management styles

Every organization has its own culture and management style. This determines how affairs are run within the company. For example, one organization might have an open door policy which allows employees to interact freely with their bosses. Others might have a more rigid culture where the boss is not readily accessible. Creating a partnership with an entity that has a very different culture and management style could cause problems.

2. Vulnerability

Getting into a strategic partnership with another entity places you in a very vulnerable position. If you are not careful, your partner could take advantage of you and cause great damage to your business. For instance, if they have access to your computers, documents or property, they could steal from you or expose your trade secrets. This is why it is very important to carry out proper research before getting into a partnership with anyone. Do a thorough background check on the organization and the people who run it. When forming an alliance, take all the necessary measures to protect yourself from any dangers. For instance, you could ask a lawyer to create a comprehensive non-disclosure agreement which all parties involved will be required to sign.

3. Legal entanglements

Forming an alliance with another entity implies that you are legally entangled with them. When a lawsuit arises, both of you are likely to be sued regardless of who was actually responsible. For instance, if your partner fails to deliver a product or service to a client, both of you could be held liable in a lawsuit. If you receive funding for a project and your partner runs off with the money, you are likely to find yourself in court even if you knew nothing about it.

4. Damage to reputation

One of the greatest dangers of forming alliances with other entities is the possibility of getting your reputation tainted. Even if your partner fulfills all the requirements of the alliance, your reputation could still suffer if they are involved in other shady activities. For example, after forming an alliance, reports could emerge about cases of fraud in the past. When your company is linked to such an organization in internet articles, magazines or broadcasts, people might start seeing your company in a negative light. Therefore, whenever you find yourself in such a situation, you need to carry out an urgent PR campaign to disassociate yourself from the acts of bad faith by the other company.

See Also: How to Divide Assets of a Partnership

To avoid the situations mentioned above, be sure to select the right strategic partner. Share your thoughts with us in the comments section below.