At times, two companies or even more might enter into a business partnership agreement. The objective here is to accomplish certain goals that are common for both. However, each one is considered to be a separate entity. Instead of combining their businesses, they may prefer to collaborate to work on a project until completion. To ensure project success, they may share their informational and financial resources. Often such alliances are stated to be informal with each one defining its goals. Each one is also aware of what the other company has been striving for! The agreement terms may clearly outline duration of the alliance and responsibilities that each is to bear.
Pros and Cons of Strategic Alliance
1. Improved revenue and business opportunities:
It allows businesses to work outside their geographical location. It also helps create brand recognition and public awareness in new regions.
2. Earn new clients:
Working together can expand existing clientele list and derive high profits. It also creates mutual trust in both parties thus sharing clients between them. A public relations and marketing agency, for example may form an alliance to boost a popular brand.
3. Avail different types of projects:
Companies with low credit score can get the opportunity to improve it and also get more work by collaborating with a well-established company.
4. Limited risks:
The alliance can help limit each company’s risks since they are able to deliver superior quality services working tougher. Also the final product created will have both their expertise that is sure to have a positive impact upon the target consumer.
5. Attain diverse income sources:
Such Business venture does enhance resources, thereby scaling a company as well as replenishing services offered to the partner. Working together requires sharing profits from the campaign. It also assures deriving other avenues to make income.
6. Change public perception:
Such alliances do help improve the smaller company’s reputation and credit score. It also leads to enhanced brand awareness, thus receiving more valuable leads and enjoy increased conversions.
7. Gain new resources:
Working together allows companies to train their employees to use new technology and essential resources. It also helps enhance communication among partner company’s key members. Also are highlighted employee responsibility and best practices, thus allowing them to complete their work on time and ensure high quality.
1. Unequal benefits:
In business partnership, it could be that one company might enjoy more benefits than the other. Besides this, if one company fails to keep its promise, then the other is likely to experience loss. Hence, fairness should be maintained by creating proper strategies.
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2. Communication challenges:
There are chances of one company having issues with sharing vital information with the other company. It even might be that communication provided is different from what the other company practices. It will only make both to lose their market reputation and clients.
3. Encounter conflicts:
There may arise conflicts between both the companies. This can be due to challenges arising from combining two diverse work cultures with numerous workflows and personalities. It only causes team members to experience frustrations and unwanted disruptions.
4. Risk company reputation:
Improper execution of the project, some mistake committed by the team members of the other company can be harmful. It will only risk reducing public perception of the company. In the Business venture, if one company experiences challenges while trying to maintain its agreement, it is bound to affect the other one negatively.
Although there are a few issues with forming a Strategic Alliance, the fact is that carefully devised strategies can help reduce the risks. Also, it can help optimize profits and brand reputation, thus making it a win-win situation for both.