If business is a game of war, then strategic alliances is the art of developing allies in the battlefield. The strongest nations have relationships with others that enable them to increase in strength and numbers. Nations often specialize in resources by utilizing their competitive advantage of natural resources, human capital and intangible knowledge. Businesses may establish the same shared advantages that these nations to through a variety of methods that this article will outline:
A common approach for strategic alliances is the classic joint venture. A new venture project and/or company is risky and often requires extensive investment. By sharing the investment, companies are sharing the risk of losing resources requiring allocation. The joint venture also enables the same specialization of countries collaborating such as a technology firm and consulting firm creating a hybrid self-service ERP software by combining both areas of expertise. At first, companies may be skeptical of forming such joint ventures.
The fear is founded on good logic and experience, because such shared resources may create issues later on that create greater complexity for disassembling. Terminating a consulting relationship or employee is rather quick and effective. Ending a business relationship may mean completely abandoning the project in some cases, or resulting in a complex legal process that may require more dedication of time and resources than not having a partner to begin with. However, the advantages can often significantly outweigh the risks and should be determined with great care and meditation on a case by case basis.
This category includes all marketing and sales related functions of the company. Firms that have the same target audience and customer base may be able to leverage that of other companies to significantly reduce customer acquisition cost. For instance, a company that specializes in wholesale chemical sales may have the opportunity to cross-promote a company that sells machinery for chemical production on the assembly line. The company may form such a relationship using an affiliate agreement, cross-promotions, and price per lead or other relationship that is determined on a case by case basis.
On a more sophisticated level, companies may both collaborate on marketing campaigns to save on costs. An expensive public relations campaign or coverage in a national media outlet may be advantageous to more than one company, especially to those along the supply chain. For instance, a grocer that wants to increase awareness as it enters a new market, may work with manufacturers to promote specific products and collaborate on marketing campaigns.
A more creative way to establish a strategic alliance, particularly for smaller companies may include the sharing of assets or human capital. For instance, if a company purchases warehouse space and acquires a quantity discount, it may develop a strategic alliance with companies to take advantage of this opportunity to both achieve greater economies of scale. Amazon enables companies to utilize its fulfillment centers and Internet resources with a successful business unit of Amazon Web Services or e-commerce management for complete fulfillment outsourcing. Many companies that have economies of scale may leverage that of their peers and share their own to create a core focused company.