How Strategic Alliances Enable Brands to Collaborate

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Learn what strategic alliances are and how leading companies use them to reduce risk, increase profits, and drive innovation.

There are many reasons why you might decide to team up with another company. Perhaps you want to gain access to their customer base or see them as a valuable supplier.

What is a strategic alliance?
In business, a strategic alliance is a partnership between two or pitcairn island b2b leads more companies to work together, with each party remaining a separate business entity. Many companies form strategic alliances to enter new markets, pool resources, and improve their ability to innovate.

Types of Strategic Alliances
The term “strategic alliance” covers a variety of business relationships. Here’s an overview of the three main types:

Joint venture
A joint venture occurs when two or more parent companies create a third company, known as a joint venture or subsidiary. When one company owns more than 50% of the shares of the new venture, the subsidiary is called a majority-owned enterprise.

Equity Strategy Alliance
In a strategic equity alliance, one company invests financial resources in another. In most cases, the investing company acquires a certain percentage of the other company's shares.

Non-equity based strategic alliance
A non-equity strategic alliance is any partnership between independent firms that does not involve an equity investment or a joint venture. Examples include business strategies such as co-marketing, where two companies team up to promote each other's products, and co-branding, where alliance partners collaborate to develop a product sold under both brands.



Benefits of Strategic Alliances
Successful strategic alliances have many benefits, depending on the type of alliance and the specific needs of the business. Here is a quick overview:

Raising capital
A strategic partnership can provide a business with funds to achieve business goals such as launching a new product, investing in research and development, entering new markets, or improving infrastructure.

Capital raising mainly refers to joint ventures and equity partnerships. Non-equity-based strategic alliances allow companies to share resources but do not involve a direct transfer of assets.

Advanced Features
Strategic alliances allow businesses to pool valuable expertise that can help companies develop and implement innovative solutions to customer problems. Partners can share industry knowledge and marketing, provide distinct skill sets, and pool operational resources.

Reducing risk
Forming a strategic alliance allows companies to share costs, reducing risk for each partner. An alliance can also increase efficiency, further reducing costs. For example, a strategic relationship based on one partner’s robust manufacturing infrastructure and the other’s extensive research can help both companies produce higher-quality products for less money.

Access to new markets and customers
Alliances can help partners enter new markets or gain market share in a competitive business environment. For example, an alliance between a national retailer and a local store can enhance the competitiveness of both companies in regional markets by combining the national retailer's broad reach with the local store's community connections and personalized customer service.

Strategic alliances provide access to restricted markets: For example, a company that wants to sell products internationally may form a strategic alliance with a trusted local partner to legally target markets that restrict foreign ownership of a business.

Flexibility
You can create strategic alliances to meet specific business needs. You can use them to increase brand awareness, optimize market penetration, achieve economies of scale, or implement a win-win project (depending on your current business model and the overall market landscape of your industry).

The need for strategic alliances often depends on how quickly a particular company must develop and produce new products to remain competitive in its industry—called the product life cycle. Product life cycles are classified as slow, standard, and fast, with companies operating on faster cycles experiencing greater pressure to innovate.



Problems of strategic alliances
Relationships, as they say, take work – and the same is true in the world of business. Here are some of the challenges of creating a successful strategic alliance:

Communication
A successful relationship means agreement on goals, milestones, roles, and responsibilities. Poor communication in any of these areas can result in wasted resources or, worse, the collapse of the alliance. Many companies implement formal governance structures and agreements to define the terms.

Administration
Leveraging complementary resources effectively requires ongoing communication; both partners must invest time and money in maintaining the relationship over its life. If a strategic alliance results in staff reductions—for example, two hiring managers in a joint venture or two data management systems in a non-equity alliance—partners may need to hold regular cross-departmental meetings or reorganize processes to ensure that parallel teams operate effectively.

Distribution of benefits
Strategic alliances do not always provide equal benefits to the partners, even if all parties involved contribute equally. An alliance can fail if one partner fails to justify its investment in the relationship—for example, if two companies invest in a joint marketing partnership but only one sees an increase in revenue.

Conflict of interest
Strategic alliances create mutual interests, and many alliances arise because of shared goals, but not all of each potential partner's needs are perfectly aligned. For example, alliances enhance companies' reputations; partnerships may fail if one company's actions or communications alienate the other's target audience.