Strategic Alliance

What is a strategic alliance?

A strategic alliance is a partnership between companies with a shared goal and target audience. This type of partnership combines resources and expertise to go further as a team than as separate entities. Companies establish a strategic alliance to expand their customer base, improve product offerings, and grow their business. 

Companies involved in strategic alliances use cloud consulting services to share information and store files easily. Cloud systems improve efficiency, flexibility, and safety when compared to hardware-based infrastructure. 

Strategic Alliance Software

Software that mention strategic alliance as a feature or term.

Salesloft

Types of strategic alliances

Depending on a partnership’s goals and objectives, one type of strategic alliance may work better than another. The different types of strategic alliances include: 

• Joint venture: In a joint venture, two companies combine to form a third company, also known as a “child” company. When each company owns half, this is known as a 50-50 joint venture. However, if one company owns a larger portion of the child company than the other partner, it is classified as a majority-owned venture. 
• Equity strategic alliance: An equity strategic alliance occurs when one partner purchases equity in another company (partial acquisition) and shares part ownership in the company. Alternatively, when each partner buys equity in each other’s companies, this is known as a cross-equity transaction. Equity strategic alliances combine their businesses’ resources to create a competitive advantage. 
• Non-equity strategic alliance: Unlike a joint venture or equity strategic alliance, a non-equity strategic alliance creates an agreement between organizations to share resources without creating a separate entity or sharing equity. Non-equity strategic alliances make up the vast majority of business alliances. 

Strategic alliance examples

Partnering with another company can be fruitful if both brands benefit from the partnership. A few examples of successful strategic alliances include: 

• Barnes & Noble and Starbucks: In 1993, American bookstore chain Barnes & Noble established a strategic alliance with coffee giant Starbucks. People browsing books at Barnes & Noble use Starbucks as a coffee shop, and coffee lovers browse the aisles while sipping their lattes. As a result of this partnership, both companies have expanded their customer base. The partnership helped Barnes & Noble survive, despite the popularity of digital book formats and retailers such as Amazon. 
• Uber and Spotify: This prominent partnership lets Uber users connect to Spotify and stream their favorite playlists during a ride. Not only does this personalize the Uber experience, but it also gives Uber a competitive advantage over other rideshare services that don’t offer this service.  
• Apple Pay and MasterCard: MasterCard was the first to come forward when Apple needed a strategic partner to support Apple Pay, its new contactless payment system. The companies collaborated to provide a cutting-edge service, and MasterCard was able to align with one of the most innovative brands in the world. 

Advantages of a strategic alliance

Strategic alliances help businesses grow and prosper when used correctly. However, partnerships should be carefully researched and considered to ensure both parties equally benefit. Some advantages of a strategic alliance are: 

• Increased resources. One of the most significant benefits of a strategic alliance is that both companies share the best of what they offer, including product, sales, or marketing knowledge. Additionally, a company can often apply what it learns during the partnership to its own business. 
• Access to new markets. Successful partnerships offer clear benefits to the audiences of both brands. They can expand their reach and generate more sales. In most cases, the companies can create solutions that wouldn’t have been possible independently. 
• Greater brand awareness. As a bonus to expanding the customer base and gaining access to new markets, collaborating with a business that has a stellar reputation enhances brand awareness. 
• Growth and innovation. Strategic alliances allow partners to outpace their competitors and create effective solutions for their audience that change the market landscape.  

Disadvantages of a strategic alliance

Strategic alliances also come with their own set of challenges, which include: 

• Increased liability. In a joint venture or equity strategic alliance, both companies are at risk of loss of reputation. Both companies may suffer if one company mismanages its resources or lands in financial trouble.  
• Lack of transparency. Mutual trust is an essential part of a strategic partnership. If partners misrepresent their business or purposely hide aspects of it, this puts the companies’ reputations at risk. 
• Loss of control. For a strategic partnership to be effective, it’s essential to relinquish some control to the other party and responsibilities. Open lines of communication and setting clear objectives are essential. 
• Time lost searching for the right partner. Conducting research to learn the strengths, weaknesses, and capabilities of a potential partner takes time, but ensures the partnership will be mutually beneficial.  

Best practices for creating a strategic alliance

Strategic alliances allow corporations to gain a marketplace advantage and achieve more together than they would on their own. Here are some best practices for creating a successful strategic alliance: 

• Determine the “why”. Companies must understand their goals and objectives to determine how each partnership fits into their overall business plan. 
• Research partners. Finding the right partner is a timely endeavor. However, it’s important to research their communication style, skill, work ethic, and values to ensure a good fit. 
• Set expectations upfront. Clearly defining the roles and responsibilities of each partner minimizes problems. The more specific the expectations, the more likely the partnership will succeed. 
• Establish a transparent communications process. It’s essential to understand how each partner prefers to communicate.
• Formalize partnership with a written document. A formal document helps resolve any future cases of disagreement. Additionally, this document can protect a company and help uphold expectations.