A strategic alliance is a relationship between two or more entities that agree to share resources to achieve a goal of mutual benefit. For example, a company manufactures and distributes a product in the United States and wants to sell it in other countries. Another company wants to expand its product line with the type of product that the first company manufactures and has a worldwide distribution channel. The two companies establish an alliance to expand the distribution of the first company’s product.
Critical factors of success
A successful strategic alliance is mutually beneficial for the two companies involved. Each one should see a clear benefit of the agreement. The responsibilities of each company in the implementation of the alliance must be clearly identified. Both parties must agree on the objectives of the relationship and be flexible and adaptable in the operation of the alliance. Each company can have a different culture and method of doing business.
To ensure a strategic alliance, define what type of partner you are looking for, along with the ideal characteristics of a partner. Clearly identify what strengths you could offer to the other party and why the potential partner would like to forge a relationship with you. Make a list of potential candidates for alliances. If possible, get in touch with alliance partners through someone they both know. If that is not possible, send a direct letter explaining your interest and asking for an opportunity to explore a relationship. Hold an exploratory meeting and, if there is an interest, prepare a letter of understanding that explains how both partners will work together and how the money will be allocated. Have your lawyer prepare a formal agreement for both of you to sign.
Strategic alliances allow a company to look for an opportunity more quickly, taking advantage of the resources and knowledge of the other party. Less resources are needed than if a company pursues an opportunity alone. An alliance can provide easier access to new opportunities and a low barrier to entry.
The implementation and management of a strategic alliance can be difficult, since each partner in the alliance has a different way of operating. Mistrust can occur, especially when competitive or private information is involved. Partners in the alliance could be more dependent on each other, which makes it difficult to re-operate as separate entities if necessary.
A successful alliance is based on the strengths of each party. Do not quickly relegate the details of a relationship to a lawyer without your participation. The success of strategic alliances is based on establishing and cultivating relationships. This is particularly important during the early stages.