In ever-increasing numbers, both small and large companies are forming strategic alliances to move their businesses forward.
What is a strategic alliance?
A strategic alliance is an arrangement, based on anything from a handshake to a legally binding contract, between two companies to combine resources in order to achieve a strategic goal (typically, each gaining additional business).
A brief history of strategic alliances
A famous example of a strategic alliance is the pairing of a US bookstore chain with a coffee chain. In 1993, Barnes & Noble, figuring the educated, middle-class consumers who sat around cafes drinking macchiatos were the same people who bought books, came up with the then-revolutionary idea of having Starbucks provide in-house coffee shops in their outlets.
End result: Barnes & Noble sold a lot more books and Starbucks shifted far more coffee. Two decades later, no self-respecting bookstore is without an in-house cafe, and Starbucks has gone on to form a range of other strategic alliances with companies such as PepsiCo and United Airlines, allowing them to shift a huge amount of products in channels far removed from their network of coffeehouses.
If anything, strategic alliances work even better for small enterprises than big ones. Small business owners with limited resources and even more limited marketing budgets stand to benefit enormously from sharing expertise, assets, expenses and risk in a way that doesn’t involve taking on debt or diluting equity.
What type of strategic alliance is right for me?
There are many different arrangements that can be entered into with customers, suppliers and even competitors. Here’s some you may wish to consider:
• Partner with an important cuomerst:
If one business accounts for a large proportion of your sales, it’s wise to safeguard that relationship with a strategic alliance. If you’re a cake shop that sells a lot of pastries to a caterer, you may work out a deal where you send a free cake to that catering company’s 20 largest customers every month. The catering company will think twice about moving its business elsewhere, and you’ll no doubt get some extra business directly from the recipients of your cake.
• Partner with a related business:
Jane is a chiropractor whose clients sometimes need deep-tissue massages. Jill is a masseuse whose clients often ask her if she knows a good chiro. By agreeing to refer customers to each other, both can grow their businesses.
• Partner with a competitor:
Counterintuitive as it may sound, working co-operatively with the competition can pay dividends. John and James are two wedding photographers operating in the same market (along with 20 other photography businesses). When John gets approached to do a job on a day he’s booked, he recommends that the client get in touch with James. James returns the favour. When one of them gets a job too large to handle solo, they can bring the other one in to go halves on the expenses, labour and profits.
• Partner with an employer:
Lisa is an entrepreneurial checkout operator who has noticed that many of her store’s customers do small daily shops rather than one big weekly shop due to not having a car. Her employer, Tony, has enough on his plate without getting into the home delivery business, but is happy for Lisa to drop off groceries in her van for a small fee. Tony gets to sell more to customers who appreciate the new service, while Lisa gets to launch her own courier company.
The range of strategic alliances you can enter into is limited only by your imagination, and the more win-win arrangements you can broker with suppliers, customers and competitors, the more profitable and resilient your business is going to be.
This article represents the views of the author only and not those of American Express.
Nigel is a freelance journalist and web content provider. Over the past 15 years he has worked for many of Australia's major print media companies and written for a wide range of newspapers, magazines, trade publications and websites. Nigel most enjoys writing about entrepreneurship, popular culture, politics, social trends and small business.