Small Businesses and the Power of Strategic Alliances
By Isabel M. Isidro
Strategic alliances are opportunities for small businesses to accomplish
things that would otherwise take much more money or staff time. This
article explores several ways small businesses can collaborate with other
No man is an island --
While you may be bravely striding down the path of managing and growing
your businesses, there may come a time when you need to form strategic
alliances for your business.
Given the current state of business today, competitive pressures are forcing
companies to come-up with imaginative ways to enhance brand identity,
connect with customers and attract top-notch employees. Companies, both
big and small, are teaming up more today than ever before to enhance their
competitiveness in the marketplace and keep pace with the rapid changes of
technological innovation. More than 20,000 corporate alliances have been
formed worldwide over the past two years. According to studies by Booz,
Allen & Hamilton, the number of alliances in the United States has grown by
25 percent each year since 1987.
A strategic alliance is an arrangement between two companies that combine
resources to gain additional business. Strategic alliances are formed when
one company alone cannot fill the gap in serving the needs of the
marketplace. It involves two companies that pool together expertise and
resources to enter new markets, share financial risks and get products and
services to market faster.
Some strategic alliances are formal written agreements; others are informal
as a handshake. With the Internet, some alliances are entered into after
several email exchanges, even without the physical meeting of the parties
concerned. Some alliances involve sharing of resources and an exchange of
funds; or sharing of traffic between two dot.coms; others are as simple as a
cooperative marketing arrangement. Whatever their structure, one goal
prevails: strategic alliances are opportunities for small businesses to
accomplish things that would otherwise take much more money or staff time.
Small business owners, with their limited resources and marketing reach,
could benefit from cooperative arrangements with other organization and
business entities. Joining forces with another organization can allow your
business to finance certain services or production functions by sharing
expertise, assets, expenses, and risk without necessarily incurring cash
debt or trading equity. For small businesses, strategic alliances often
consist of simple "bartering" with customers, suppliers, and even
Here are several ways that you can collaborate with another person or
company to bring added value, revenue, traffic and/or expertise into your
Partner with a key customer.
If you are selling a substantial amount
of your product to one company, it is best to explore opportunities for
strategic alliances between your organizations. Your goal is to preserve the
relationship -- imagine the possible devastating effects of losing your single
biggest account. Cementing the relationship into a long-term formal alliance
will help mitigate the risk of losing your biggest customer and market.
Partner with a brand leader.
When considering strategic
partners, most small businesses will benefit from alliances that add
value and prestige, not just money, through sheer association alone.
If a brand leader wishes to join forces with you – a “small fry” – grab
the offer immediately! Your networking ability plays a major role in
locating and investigating strategic partnering opportunities.
Business association with a well-recognized industry name can
generate immediate credibility for you. It can be likened to receiving
a stamp of approval from the best in the industry. Even if the
partnership does not offer direct financial remuneration, you can
leverage your formal association with the brand leader in the
advertising and marketing for your company.
While strategic alliances are often
formed with businesses, consider the possibility of joining forces with
the non-profit organizations such as trade associations, nonprofit
groups, local community organizations, etc. Cross-sector partnerships
may offer great opportunities for financing some advertising and
distribution expenses. Moreover, you may be able to work out
arrangements with some groups that target a very specific, and
important, consumer audience. An excellent book that explores the
opportunities of a partnership of a for-profit businesses and non-profit
organizations is Eli Segal’s book “Common Interest, Common Good:
Creating Value through Business and Social Sector Partnerships.”
Partner with former employer.
Many entrepreneurs start their
own companies after seeing potential partnership opportunities with
their employers. For example, you may develop a product or service
that provides your employer with a solution to a major problem. You
make arrangements to go into your own business selling this product
or service, and your former employer offers you a long-term contract
with his or her company. The bonus: you end up with great cash
flow, and the long-term contract with a creditworthy company means
you can go to other lenders and possibly get other financing you
Partner with a competitor.
Your competitors, if handled properly,
can be a very good alliance partners. By understanding the capacity
and capabilities of your competitor, you may be able to tap into their
unique strengths for your own advantages. You may work
hand-in-hand with a competitor over contracts that may be too large
for you to handle by yourself. You may also refer customers and
projects to your competitors if your manpower resources are tightly
squeezed. If you cultivate a good harmonious relationship with your
competitor, they may also reciprocate and pass on to you projects and
contracts that they feel you can do much better! As the saying goes,
“if you can’t beat them, join them!”
Partner for cross marketing.
Cross marketing calls for two
distinct businesses to pool their resources and collectively market to a
target customer base. The strategic alliance will provide additional
leverage for their product offerings and generate greater marketing
impact. The potential to save money for both companies is the
greatest benefit to both companies. An online magazine targeting
small business entrepreneurs, for example, can partner with a site
that offers assistance to entrepreneurs in securing government loans.
The online magazine will be able to increase its business tools
offering to its readers, while the government loans site can widen its
Your company may have started out as a solo enterprise, and you still
want it to remain that way – but you see the value in making
connections. Or, your business has now grown to include one or
more employees and you’re looking for ways to expand your reach
without generating a lot of debt or overhead. For these situations,
and many more, strategic alliances and partnerships are a smart
solution. Design them any way you want – keeping in mind a win/win
philosophy – and you’ll discover ways to grow your business without
the direct use of money.
For a step-by-step guide to starting a business, order the CD-Rom
"Power Home Business Ideas" from PowerHomeBiz.com at http://www.powerhomebiz.com/Index/powercd.htm
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