When talking about strategic alliances in a business context, it refers to the union between two or more entities to achieve a personal benefit from mutual support. In colloquial terms, this union is usually referred to as a business marriage.
It is one of the strategies that allow the development and growth of the company from a shared flow of information, services, and products. This modality makes it possible, among companies, to distribute resources that abound in a company, whether financial, personnel, technical, credibility, among others. This allows for expansion, as well as savings on both sides. Likewise, a strategic alliance provides a friendly link with a third party and the possibility of insertion in a competitive framework at a local and global level with a reduction in possible contingencies.
Reasons why a union is a good option
It is important to observe both external and internal factors when making decisions within a company, especially if it is the marketing management sector, in which strategy is a form of growth that implies both risks and possibilities of success. In this sense, it is necessary to know in-depth what a movement implies, outside and inside the company. For example, a large company joining a strategic alliance with a small company could be because the slower-growing corporation has greater access to markets that the other company wants to access. This case usually occurs especially when talking about international business.
On the other hand, you could update the technological resources from a partner of a smaller entity but with knowledge in the area. At the same time, it will happen if you want to look for innovative ideas in medium-sized inventors. You could also make alliances to minimize risks when presenting a new product or development.
In other words, this form of cooperation, based on mergers, or acquisitions, of companies constituted as related, leads to obtaining benefits for the two or more parties that comprise them. The allied companies must contribute and receive for the agreement to be valuable; and, the results must be better than they would be without the union.
Several advantages and benefits can be obtained from these unions. Greater flexibility can be achieved (depending on the agreement made), a greater number of customers can be reached, as well as access to innovative technologies or new markets. At the same time, another benefit is that risks are shared, which allows greater security when acting.
It must be recognized that, on many occasions, making one or several strategic alliances is necessary for some industries or markets. This allows being inserted without requiring all the resources or technologies for all the production processes since another company can provide us.
- Formulation: A strategic plan is made in which the objectives, benefits, and risks that the commercial alliance would imply are set out.
- Evaluation: In the evaluation process, the partners who will cooperate from both sides of the business marriage are analyzed. Also, each company will evaluate the characteristics of the other (strengths, weaknesses, and management styles).
- Negotiation: In this phase of the union process, contracts are made in which the goals of each company are determined, and their feasibility, while the agents responsible for each part of the agreement are assigned.
- Operation: During the moment of action, each company makes an operational plan and assigns agents to the new functions.
- Termination of the alliance: The cessation of strategic alliances can be obtained in several ways. It can be spontaneously (when the objectives are achieved) or prematurely (that is, without having achieved the objectives). There is also the possibility of the emergence of an exclusive continuation, which occurs when one of the allies decides not to continue with the project, but the other company decides to continue. Moreover, it can end with a partner acquisition, which occurs when the stronger company takes over the weaker one.
Survival of the alliance
For good relations between companies to be maintained, certain precautions must be taken. In the union, transparency must be maintained in the objectives of each part of the agreement, while maintaining discretion in aspects that are not involved with the union. Concerning transparency, this will be key at the time of the initial negotiations, in which the strategic plan must be explained to the union.
The involvement of all partners and directors in the merger will become essential so that no future restrictions or problems arise from any of the parties that make up the agreement. In this sense, transparency is not only with the third party with which it is planned to work together but with the same agents that are part of the deliberative body of the company. It could be said that the cosmetics of the true objectives or strategies of a company or a single individual can lead to the failure of a union.
Types of agreements
It should be noted that there is a great variety of archetypes of strategic alliances, and those that have to be mentioned are only some of the outstanding or most common ones. Among some models of agreements we find:
- Joint Venture: Situation in which two or more companies decide to work together to create a new company.
- Venture capital: This is the name given to the strategy in which one company acquires shares of another.
- Flexible associations: The agreement is made to maintain the independence of each of the parties and is usually a temporary union.
- Franchise: Context in which a company transfers to an entrepreneur, in exchange for remuneration, its image, and products for sale.
- Outsourcing: This occurs when one organization delegates one of the business processes to another.
- Research and development: This type of alliance occurs when two companies align themselves in the development of a product that both will use independently in the future.
- For production: This is the name given to the alliance between two organizations in pursuit of the joint manufacture of a product.
- For distribution: Situation in which the parties join forces to distribute products and services of each one.
- For promotion: This strategy is linked to the image and advertising of brands and occurs when two or more parties agree to promote their products.
Although these are just a few examples of partnerships, they show us the great variety of opportunities and benefits that can be obtained by working together with another organization.