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Strategic Alliances – an Underused Marketing Tactic

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Strategic alliances are formal partnerships between businesses which help the businesses achieve a set of goals.

There are many types of strategic alliances, including joint ventures, affiliates and distribution agreements. They are particularly common in industries that are experiencing rapid change, the internet being one example, and are often the quickest way of rapidly expanding a business.

Fortune Magazine called the 1990s “the decade of the strategic alliance” and it has become one of the key tools in rapidly expanding and winning market share.

Benefits of Strategic Alliances

Many startups decide that the best way to rapidly expand their business is to enter into strategic alliances with established companies which serve a different but similar market. The many benefits of strategic alliances are listed below:

  • Access to distribution channels
  • Access to technology, expertise or intellectual property
  • As a means to raise capital
  • New products for your customers
  • Lower R&D costs
  • Economies of scale
  • Raise brand awareness

For a new business looking to develop brand awareness there are few more cost-effective ways of raising widespread awareness than partnering with an established business within the same industry. There’s also no reason to stop there – you can continue to partner with other non-competing firms and benefit from multiple distribution channels.

When approaching a company to propose a strategic alliance remember that you must have something to offer them in exchange.

Disadvantages of Strategic Alliances

The problem with strategic alliances is that there are a number of problems which must be overcome for them to be a success, including:

  • Incoherent goals, with one business not benefiting greatly from the agreement
  • Insufficient trust, with each partner company trying to get the better deal
  • Conflicts over how the partnership works
  • Potential to reduce future opportunities through being unable to enter into agreements with your partner’s competitors
  • Lack of commitment to the partnership
  • Risk of sharing too much knowledge and the partner company becoming a competitor

The main problem with strategic alliances is being able to develop a partnership which is beneficial to both parties. Often a partnership is beneficial to the smaller business, perhaps due to the wide-scale distribution channels that are gained, but the benefits for the established business aren’t quite so clear.

Even when this problem has been overcome the problem of trust arises. Without a degree of trust partnerships become beset with administrative problems and suspicions.

The best way to overcome this is to be transparent and reassess the alliance at regular intervals to ensure that both parties are gaining from the agreement. If they aren’t then perhaps the terms of the agreement need to be changed.

Finally, be careful that a partnership doesn’t end up being more of a hindrance than a benefit. Partnering with a company within a certain field will make it harder, if not impossible, to partner or win contracts from other competing companies within the same industry.

Sometimes the risk can be even closer to home, where the partnering company gains sufficient knowledge for them to become a competitor rather than a partner.

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