Answers to the Most Common
Partnering and Strategic Alliance Questions

It is joining with one or more partners to share resources, risks, and rewards from a joint enterprise.

Corporate Partnerings can take any of a number of forms such as: a strong relationship with a major customer, a partnership with a source of distribution, a relationship with a supplier of innovation or product, or an alliance in pursuit of a common goal.

Sometimes partners will form a new jointly owned company. In other instances one partner purchases equity in the other. Most often the relationship is defined by a contract.

It's the quickest way to grow a company, particularly in times of change.

Partnering has proven itself one of the most powerful business tools for dealing with fast changing markets, technologies and customers.

Fortune Magazine called the 1990s "the Decade of the Strategic Alliance." As the global economy speeds up, corporate partnering is becoming the weapon of choice for today's successful competitors.

The Internet has taken this trend and accelerated it.

It is no coincidence that partnering is most common to industries experiencing rapid change.

There is a direct relationship between the rate and scope of change within an industry and the amount of corporate partnering that occurs in that industry.

Think about it. Look at the computer industry. Look at electronics, communications and health care. Companies in these industries are vigorously developing webs of strategic alliances, joint ventures, technology licensing deals and consortiums.

The industry with the greatest amount of change, the Internet, exhibits the greatest amount of partnering.

We are seeing more and more of these collaborative business arrangements every day. They go by many names. Here are a few:
     -     Strategic Alliances, Joint Ventures, Strategic Partnerships, Business Partners and Alliances, Partnering Agreements, Business Coalitions
     -     Just In Time Suppliers and Relationships, Sole Source Suppliers, Outsourcing
     -     Keiretsu, Zaibatsu, Shudan (traditional types of Japanese corporate partnering)
     -     Technology and Product Licensing, Joint Development, Technology Sharing and Cross Licensing Agreements
     -     Business Partners, Affiliates, Franchises
     -      Value Added Remarketers and Resellers, Value Added Dealers, Distributors, OEM Suppliers and Customers, VAD, Distribution Relationships, National Accounts

The most common type of partnering continues to be the traditional Junior/Senior partnering.

Here a Junior Partner has a new product or technology - but poor distribution and limited capital.

The Senior partner has superior distribution and/or access to capital.

Each partner has what the other needs. Each improves its competitive position by exchanging the resources it has for the resources it needs.

Few companies have everything that they need. You may need money, customers, or product. No matter what you need, there is someone who has it. You can either buy what you need or partner for it. Partnering is frequently quicker and less costly.

While avoiding difficult and time-consuming internal changes, partnering allows you to:
     -     Rapidly move to decisively seize opportunities before they disappear.
     -     Respond more quickly to change with greater flexibility.
     -     Increase your market share.
     -     Gain access to a new market or beat others to that market.
     -     Quickly shore up internal weaknesses.
     -     Gain a new skill or area of competence.
     -     Succeed although your company lacks otherwise key resources.

In most instances they fall into five categories.
     -     Capital. Capital is a resource that is either loaned out in exchange for interest or invested in exchange for equity. Within limits, you can use it to alleviate shortages of other resources.
     -     Technology and Expertise. You can convert technology and the expertise of your employees into a marketable product.
     -     Existing Product. Once you convert technology and expertise into a fully developed product, you have something you can sell to a customer. Most products require reasonable manufacturing economies of scale in order to be produced and sold at acceptable prices.
     -     Manufacturing. Manufacturing requires skill and resources if it is done with the quality and efficiency often demanded by customers.
     -     Marketing and Distribution (Customers). Without marketing and distribution (i.e. customers), you have no one to pay you in exchange for your product. This is usually the most important resource.

Identify the key resources you need, but lack. This can include customers, additional capital, new products, better products, new distribution channels, expertise, additional facilities, increased production capacity, or more personnel.

Look for someone who has what you need.

Then ask them for it. But before you ask, you must do one very important thing. Make sure that you have something they need. If you don't take this last step you will end up wasting their time as well as yours. # What are some of the key resources that people often partner to obtain?

While this will vary substantially from case to case the most frequent resources are new products, better products, marketplace or product expertise, personnel, capital, distribution channels, production capacity.

The most important resource people partner to obtain are customers. You can never be too rich, too thin or have too many customers.

Information on How to Partner
The Basics || Alliance Advantages/Disadvantages || Questions and Answers || Partnering Quotations
Dangerous Dozen Mistakes (summary) (full text ) || How to Find a Partner || Partnering With Your Customers