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Related how-To guides:

Developing Business Partnerships

Business Partnerships (slide show)

Joint Ventures

Mergers & Acquisitions

Why Strategic Alliances?

In the new economy, strategic alliances enable business to gain competitive advantage through access to a partner's resources, including markets, technologies, capital and people.

Teaming up with other adds complementary resources, enabling participants to grow and expand more quickly and efficiently. Especially fast-growing companies rely heavily on alliances to extend their technical and operational resources. In the process, they save time and boost productivity by not having to develop their own, from scratch. They are thus freed to concentrate on innovation and their core business.

Many fast-growth technology companies use strategic alliances to benefit from from more-established channels of distribution, marketing, or brand reputation of bigger, better-known players. However, more-traditional businesses tend to enter alliances for reasons such as geographic expansion, cost reduction, manufacturing, and other supply-chain synergies.

As global markets open up and competition grows, midsize companies need need to be increasingly creative about how and with whom they align themselves to go to market. 

Planning for a Successful Alliance

Before entering into a strategic alliance, enough thought is to be placed behind the structure of the relationship and the details of how it will be managed. Consider the following in your planning process:

• define expected outcomes from the relationship for all the parties in the strategic alliance

• define and document the elements provided by each party, and the benefits a successful alliance brings to each

• identify the results that will cause the alliance to be most beneficial for your business and define the structure and operating issues that need to be addressed to achieve these results

• protect your company's intellectual property rights through legal agreements and restrictions when transferring proprietary information.

• define the basics of how you will operate

• be certain that the company cultures are compatible, and the parties can operate with an acceptable level of trust.

Some Pros & Cons

Strategic alliances can allow your business to meet its objectives, while maintaining the flexibility to adapt quickly by switching partners, as appropriate.

However, such a partnership may be too informal if your corporate strategy requires the long-term certainty of a joint venture, merger or acquisition. In this case, if your success depends upon a strategic partner's continued cooperation with your business - and not your competitor's business - a strategic alliance might be a trial phase before committing to such an arrangement.