A strategic alliance is a collaborative relationship between two companies to achieve a specific and mutually beneficial business goal. For many projects, partnering with another company will be a great decision, especially if you’re in the growth stage of your business.
In this article, let’s discuss what is a strategic alliance in detail and the steps to create it.
What Is a Strategic Alliance?
A strategic alliance is a collaborative relationship between two companies to partner on a mutually beneficial project. The companies form this alliance when they recognize they can achieve more by working together than operating independently. A strategic alliance can be formed between companies from the same or different industries.
A strategic alliance should fulfill these characteristics:
- Mutual benefit
- Shared risk
- Joint-decision making
- Long-term relationship (to build trust and reap the benefits from the partnership)
- Proper communication
- Common goal (for the project)
- Trust
Benefits of Creating a Strategic Alliance
In a strategic alliance, the resources, expertise, and efforts between two companies are shared, which, as a result, offers a lot of benefits, such as:
- Increases profit
- Opens access to new markets, both domestic and international
- Helps mitigate risk by sharing equal responsibilities with partners, which helps navigate uncertain business environments
- Helps create unique products by utilizing each other’s strengths
- Higher marketing budget, which helps to reach more customers
- Helps reduce lead times and costs by collaborating on supply chain activities
How To Create a Strategic Alliance (8 Steps)
Here are the questions to answer before creating a strategic alliance.
- What do I love to do, and what would I like to delegate?
- What are the values, qualities, and skill sets to make a partner ideal?
- What are your greatest strengths and weaknesses?
- Where can I find my ideal strategic alliance (5 places)?
These questions will give you a rough idea of what you want to achieve through the alliance. Once you have an answer to them, follow these steps to create a strategic alliance.
1. Define Objectives
The first step to creating a strategic alliance is to specify the goals. The goal can be expanding into new markets, increasing profit, sharing resources, or enhancing product offerings.
2. Shortlist Potential Partners
Once you define your objectives, perform research and shortlist companies that can help you achieve them. It’s best to shortlist companies in the same industry and with similar values. Assess the company’s culture, general strategy, and financial strategy.
3. Build a Relationship With the Best One and Negotiate
Choose a partner among those you have shortlisted and start interacting. A strategic alliance is a long-term relationship, so it’s necessary that you first communicate and get to know mutual interests and opportunities.
As the next step, define the terms of the alliance, including roles, responsibilities, contributions, and benefits for each partner. Also, specify how the risks and profits will be shared.
4. Develop a Legal Agreement
If you like the alliance and agree to the proposed terms, proceed with developing a legal agreement.
You may work with a legal expert to draft a comprehensive agreement outlining the alliance’s rights, obligations, and governance structure. Ensure to include details like intellectual property rights, dispute resolution mechanisms, and exit strategies.
5. Allocate Resources
Sharing resources (financial, human, and technological) is a crucial part of a strategic alliance. Decide and create a strategy to best utilize the available resources for achieving the alliance’s goals.
6. Implement and Execute the Plan
Discuss and develop a plan that consists of the steps needed to achieve the alliance goals. Also, define the governance structure of the alliance, including decision-making processes, leadership roles, and communication protocols for effective coordination between the partners.
Once done, start implementing the plan. Ensure there’s proper communication between team members for effective functioning. If any challenges arise, fix them swiftly.
7. Manage the Alliance
In this step, it’s necessary that you effectively maintain the collaboration with your partner. If you need to make some adjustments to the functioning of your company, do so to ensure you meet the objectives.
Initially, it’s a good idea to lighten the load and stress of your alliance by investing your resources upfront. Doing so can help in building a healthy long-term relationship.
8. Review Progress
To make the most of a strategic alliance, it’s good that you review the progress weekly. Assess the challenges and overall effectiveness of the partnership and make adjustments as needed to improve outcomes.
Conclusion
Before ending this article, here are some questions I have for you:
- Do you ever feel overwhelmed with all you have to do?
- Do you work more hours than you would like to?
- Do you sometimes wish you had a different life?
If you answered YES to these questions, it’s time for you to seriously look for forming a strategic alliance to leverage what you do.
If you need help to create a strategic alliance and grow your business drastically, book a coaching session with Ken D Foster. Ken — an expert business coach and best-selling author — has over 35 years of experience in business development and has helped hundreds of entrepreneurs succeed.
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