For Instance, A bakery could form a strategic alliance with a florist in offering discounts for brides. By bundling the wedding cake and the floral arrangements the bride could get both for less than she would spend on each one purchased individually.
In theory it is a great arrangement that can benefit both companies, but it does take some planning in how to build strategic alliances.
Have a clear goal for the alliance
It is important to have a clear and realistic idea of what you expect of the alliance before you get into it. If you are expecting your partner to deliver thousands of new customers to you and you only receive several hundred, you will be disappointed.
Make sure you understand the size of the customer base your partner brings, as well as the demographics of those customers. Don’t expect long term customer retention if all your partner can deliver is bargain hunters.
Define how you will operate
While the example above is an easy type of partnership to manage, some strategic alliances are more complex. If two companies are collaborating on a single product it can become more difficult.
One thing you will need to do is have a clear plan for who is managing the project, how decisions are being made, and how disagreements are going to be resolved. This usually means having an agreement in writing that binds both parties. In the event that there is a question about how the partnership should work, the agreement could be used to resolve those differences.
Try it on a limited basis
Strategic alliances are typically set up on a temporary basis, but some of those alliances can last for several years. Before you enter into a long term relationship with a new partner, it might be a good idea to set up a more limited project first so you both have a better idea of how well you will work together.
Once you reach thee end of your temporary arrangement you will have a much clearer idea of whether you want to pursue the relationship on a long term basis. If you feel that it is not a good fit you can part ways with no hard feelings. It is a lot easier that having the relationship end in a bitter dispute.
Protect the brand of your partner
You need to remember that your strategic alliance partners brand is as important to him as your brand is to you. You may feel that he has an inflated sense of the importance of his brand, but you should realize that he might have the same opinion of you.
As you work together you need to be sensitive to brand issues. You will need to work hard to ensure that one brand does not overshadow the other. This is especially true in naming issues, but it can also come up in the look and feel of the final product.
Have an Exit Strategy
Strategic alliances are typically temporary arrangements. In order for both partners to know just how temporary the arrangement is there should be specific criteria for ending the alliance. That could be a specific time, or a certain dollar amount, or any other criteria you agree on, but it should be well defined.
If the end of the alliance is left open-ended it could cause some hard feelings if one partner wants out of the alliance, but the other partner wishes to continue.
Learning how to build strategic alliances is mainly a process of defining as many different aspects of the arrangement as you can before you get started. The more details you can work out, the smoother the partnership will operate.
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