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 business entities.
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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
competitors.
Here are several ways that you can collaborate with another
person or company to bring added value, revenue, traffic and/or
expertise into your business.
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.
Cross-sector Partnerships. 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
Segals 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 need.
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 cant
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 reach.
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 youre 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 youll discover ways to grow your
business without the direct use of money.
