What Is the Meaning of a Strategic Partner?

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A strategic partnership is an agreement between two distinct business entities to share expertise, resources or competencies for mutual benefit. Typically, you seek out a strategic partnership to fill a gap in your own strengths or to create a synergy that increases your profit potential. A partnership normally has a defined time period or plan for periodic review. You sometimes outline the details in a contract or formal agreement.

Goals

  • As a business owner, you need to recognize your company's internal strengths and weaknesses so you fairly assess opportunities and threats. Weaknesses or gaps negatively impact your ability to achieve business goals. A strategic partner can help fill in those gaps and address the weaknesses. A partnership allows you to explore alternative or more effective strategies to better your market share, reach additional customers, communicate your message more thoroughly or achieve higher profits. To form a partnership, each company must bring something to the table that is otherwise not available to the partner.

Benefits Gained

  • When you form a partnership, you need to know what you gain from the other company. For example, resellers often form partnerships with trusted suppliers to leverage their distribution systems beyond what you get from a typical supplier-buyer relationship. Technology companies with different areas of expertise might partner to create a more powerful consumer or business solution. Businesses in complementary industries also form marketing partnerships. For example, real estate agents, lenders and title companies routinely agree to refer prospects to each other when appropriate.

Profit Structure

  • In a strategic alliance or partnership, each business remains separate from the partner. Therefore, the profits generated by one partner's business activities remain its own. The premise is that each partner recognizes increased business, revenue or profit as a result of the partnership. If the arrangement becomes overly one-sided, the partner receiving a disproportionate benefit would simply withdraw. Therefore, it is to each company's advantage to monitor the success of the partnership and to communicate openly.

Joint Ventures

  • A joint venture is another agreement between two companies that is often discussed in the same breath as a strategic partnership. In a joint venture, two companies also join forces, but this time they contractually agree to form a new, independent business. The motive is to formalize the agreement for the long-term and to brand the separate entity apart from the two partnering firms. The profit sharing structure of the joint venture is established when you complete necessary paperwork to form the new company. If one business puts in more resources or expertise, it typically gets a higher percentage of the joint profit.

References

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