In the current economic climate, businesses must look at new ways to win customers. As such, many firms are now looking at strategic alliances which allow them to access new segments of the market.
If properly executed, a strategic alliance can be good for business and good for the consumer. A strategic alliance is similar to a joint venture, in that everyone remains an individual entity but comes together for a single purpose or period of time to create something that could not otherwise be created.
There are challenges that business owners and managers must consider before entering into a strategic alliance with another business. For instance, evaluating each partner’s value and capabilities is mandatory before agreeing to an alliance. The who, what, where, when and why questions all need clarification, with failsafe measures which must be agreed and documented before commencing the strategic alliance.
Here are some considerations for any business considering a strategic alliance:
Agreeing to the Terms
It is necessary to identify the areas of interest that are yours and to also identify the areas of interest that are relevant to the other partners. Strategic interests must be similar, and products or services comparable. The figures must add up – each partner must have enough economic benefit for each to remain committed. There must be an operational agreement in place, and it is advisable to engage the services of a lawyer in order to draft this and other terms.
What do you or each partner bring to the alliance? What is each person’s purpose and goals? Does each partner have something unique to offer which adds value to the business relationship?
Defining and Measuring Progress
Who is going to define or handle sales? What target market will be pursued and when? How will the revenue be generated and distributed? What will occur if the measurements aren’t met? A reporting structure should be agreed and put in place. Regular meetings (perhaps monthly or bi-weekly) should be scheduled and all key stakeholders should attend.
In summary, creating a strategic alliance is not something to be taken lightly.
Business owners, more than ever, need to have a proactive approach in managing their business. We need to be able to detect and identify warning signs of potential problems and know what steps to take as soon as problems become apparent. Problems rarely arise suddenly. It is more usually a gradual process, as a result of a variety of circumstances either external or internal. External causes cannot always be predicted with accuracy in advance. Internal factors however, may, in many cases be capable of being foreseen.
Businesses will usually have expert skills and experience in the area of activity the business operates.
No matter how good a product or service is, skills and experience in areas such as business planning, financial reporting, marketing, customer relations and financial management cannot be taken for granted. Running a successful business requires not only good creative and operational skills but good business skills too. If these skills are not available in-house, then the business will need to source these skills from specialist advisors.
Advice from professionally qualified financial accountants should be sought regularly, at all the stages of business life. Some of the many benefits of this include being able to take advantage of any opportunities of growth and to anticipate any threats to the survival of the business and reacting to them promptly. The key areas that a professionally qualified accountant usually provide expert advice is in regards to accounting, financial planning and credit management. Advice in areas such as bookkeeping and financial reporting practices and sound business practice should also be utilised in order to produce high quality financial information, which sets the ground for the efficient and effective growth and the survival of the business.
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