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.
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.
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.
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.
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.
- Photo Credit michaeljung/iStock/Getty Images
Definition of Human Resource Strategy
Human resource strategy is designed to develop the skills, attitudes and behaviors among staff that will help the organization meet its goals....
What Is a Master Service Agreement?
As with all contracts, a master service agreement is a contract that states the responsibilities and obligations of one party with another....
What Is the Meaning of Strategic Intent?
"Strategic intent is defined as a compelling statement about where an organization is going that succinctly conveys a sense of what the...
Strategic Management Theory
There is no single strategic management theory that is universally accepted. It is rather the case that there are 12 distinct schools...
Definition of Strategic Cooperation Agreement
A strategic cooperation agreement represents a pact among two individuals or a group of people, businesses or governments whereby resources are pooled...
What Is a Strategic Partnership?
A strategic partnership is a formal alliance between two organizations, with each possessing assets that will help the other. Strategic partnerships are...
What Are the Elements of Partnership?
Companies and organizations develop partnerships and strategic alliances so they can jointly improve their business or marketing performance. The elements of a...
How to Define Strategic Management
Strategic management revolves around the higher visions and missions of the company that inspire the more detailed tactical moves toward a better...
How to Buy Out a Business Partner
Buying out a business partner usually requires legal counsel, as the transaction should be completely legal and legitimate. Find financing to purchase...