The 5 Benefits of Augmenting Your Services With Strategic Alliances
If your business is looking to expand into a new market or improve its product line, then consider the benefits of strategic alliance management services. Not only will forming a strategic alliance help you cut costs, but this collaborative partnership can also lead to a long-term value-creating relationship.
What is a strategic alliance?
A strategic alliance is an agreement between two companies to work together on a mutually beneficial project or achieve particular objectives. The idea of this partnership is to share resources, develop more effective processes, and build knowledge that produces more profit in the long term.
Several real-world examples of profitable strategic alliances include Starbucks and Barnes & Noble, Spotify and Uber, Apple Pay and Mastercard, and Nike and Apple. Each example was able to combine resources to enhance their offerings and add value for their customers while lowering costs.
Ways your business can benefit from a strategic alliance
Diving into a partnership with another firm is not a decision to take lightly. But, when done right, with careful planning and evaluation of risks, the collaborative effort of your strategic partnership will ultimately result in greater success than can be achieved alone.
Now, let’s take a look at the five major benefits of strategic alliances to confirm that it’s the right move for your business.
1. Ease of access to new markets
Successfully penetrating a new foreign market can often be a challenging endeavor. Even large enterprises, with vast resources and incredible marketing firepower, have failed with their cross border efforts.
Prominent examples of this include eBay’s expansion attempt in China, Walmart’s foray into Germany, and Target’s prompt entry into and exit from the Canadian market.
As expanding to new business territories can be a pathway to sustainable success, companies can buffer their risk and learning curve by forming a strategic alliance with a local partner.
Working with an “on-the-ground” or established business in your target market will allow you to tap into their local market expertise, especially if you have limited experience expanding overseas.
2. Addition of competitive skills to your business
A knowledge share with an alliance partner can help you better address issues like operational complexity or cost-efficiency.
Sharing intellectual capital between you and your alliance partner, whether that’s marketing skills or technical expertise and even management styles, can help your business address inefficiencies in a way that was not previously possible.
3. Strengthening of innovation capabilities
Expertise transfer and integrating resources with an alliance partner can also lead to innovative breakthroughs that improve the quality of your product offerings and add value to your bottom line.
The Uber and Spotify partnership is a prime example of this. By adding Spotify integration to the Uber ride, passengers were able to control the music in the vehicle’s sound system directly. This gave passengers a more pleasurable and personalized riding experience.
This type of strategic alliance allowed both partners to increase their brand awareness, garner new audiences, and capitalize on return customers.
A company with complementary capabilities will enable your business to integrate technological diversity and knowledge sharing to its research and development processes, positively influencing the innovation performance of your organization.
4. New opportunities for growth
The most enduring and prosperous companies understand that they can only reach a certain ceiling until they need to reinvent themselves to continue delivering organic growth. Without strategic transformation change, a company’s success can become stagnant and eventually result in dire consequences.
Access to new technological instruments, markets, and business models through a strategic alliance allows your organization to pivot itself and unlock new avenues of growth. As a growth strategy, alliance partnerships provide growth opportunities at a fraction of the cost of individual efforts.
5. A competitive advantage gained
Joining resources with another company increases the operational capabilities you need to compete. Through your strategic alliance, you gain access to lower-cost suppliers, new distribution networks, and a highly skilled labor pool.
Consolidating your resources and expertise with a strategic partner helps create economies of scale. This becomes advantageous as it solidifies your presence in the marketplace, limiting its vulnerabilities to hostile takeover bids and other external threats.
Even smaller businesses can use economies of scale to compete against industry goliaths.
In the example of Uber and Spotify, both companies were disruptive startups in their firmly established industries. By working together, they were able to achieve tremendous success. Today, the profitable partnership has accelerated the digital transformation of their respective industries.
How to find the right strategic alliance
While there are significant advantages to a strategic alliance, selecting the wrong company can be detrimental to the success of your business. To establish a successful and value-driven partnership, create a strategic criteria.
The criteria should articulate the vision and objectives of the project.
This will confirm whether both parties are strategically aligned, culturally and operationally. Alliance governance will also need to be discussed to ensure both organizations commit the right resources and capabilities to the partnership.
Lastly, perform your due diligence. This can be done by working with a strategic alliance consultancy firm that can help you better structure your partnership to maximize the value of your arrangement.
A strategic consultant can provide management services, reviewing your strategic plan, assessing potential risks, creating metrics that evaluate the alliance performance, and developing recommendations for better results.
Stany Pereira is the Managing Partner at PKF UAE. He is a Fellow Chartered Accountant who has been with PKF since 1987 and has been responsible for the development and management of the firm's practice. He has an overall experience of over three decades in audit and assurance services. Stany also oversees the tax and structuring practice of the firm.