Strategic AlliancesByRaymond D. Matkowsky
What is a strategic alliance? A strategic alliance is an arrangement between two or more companies that is mutually beneficial to each. Each company retains its independence. The agreement is less binding than a joint venture. The businesses pool their resources to create a separate entity. The alliances come in two forms: Vertical and horizontal.
In a vertical alliance, none or only one of the companies is in the business of the alliance. With a horizontal alliance, the business of the alliance is the same as the partners. There is no problem with a vertical partnership, but the horizontal alliance may present some ant-trust, anti- competitive questions. These should be well thought out before entering into any agreements.
In a nutshell, a strategic alliance allows all the participants to gain or leverage the expertise of the others. This occurs as each participant conducts their individual business normally. The right kind of alliance can expand a company's profit margin and enhance shareholder values.
Examples
Starbucks has been a big player when it comes to strategic alliances. Starbucks partnered with Barnes & Noble to sell their products in their stores. They did the same with Target Discount Stores. This gave Starbucks an instantly recognized name.
Starbucks partnered with Nestlé to roll out their products in Southeast Asia, Oceania, and Latin America. Alliances are credited with being the main driver of the company’s long term success. Just because two things don't seem to go together doesn't mean they're not a good match.
Ocean Spray has partnered with Costco to label their brand of cranberry juice with both the Ocean Spray and Kirkland logos. Ocean Spray has also teamed up with Costco to produce unique juices under the Kirkland label. I would guess that most if not all consumer products can benefit from the same strategy.
The list of examples is long. Ford Motor Company and Eddie Bauer-partner to supply luxury leather in Ford cars. Something only European car makers provided for a long period. For their part, Eddie Bauer co-brands their suitcases with the Ford logo. This further associates the Ford brand with luxury.
Ford also partners with the Shelby organization. The Ford Mustang and Shelby GT associates racing enthusiasts with the Ford brand. The same goes for sponsoring races.
The Columbia Broadcasting System (CBS) has an alliance with the Weather Channel. The Weather Channel provides weather reports and analysis for CBS national programs.
The list also includes pharmaceuticals partnerships, expertise recommendations, co-usage of mailing lists, etc. There are many business opportunities for both small and large players.
Many semi-conductors are designed in the United States but fabricated in Southeast Asia. Financially, it is very synergistic business process. This process has been extended to most consumer goods. The list of possibilities is endless.
With horizontal partnerships, one company can obtain the orders the other company cannot fill. One partner can suggest the usage of the other partner's products to complement their own. One partner may be able to utilize seldom needed equipment that they don't have and the other partner does.
You Don't Have To Be A Large Player
You don't have to be a large player in your industry. All you have to do is offer something the other person doesn't have and show them the potential benefit in partnering with you. Many industries have started small and grown big through strategic alliances.
You Are Only Limited By Your Imagination
The purpose of this article is to get you to think. There can be many successful ventures that can open up new markets to you. It probably isn't as hard as you believed to break into new and profitable ventures through strategic alliances.
If you have any comments, let us know. Email me at rdm@datastats.com. We will try to print it in our next newsletter.
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