Alliances key to entrepreneurship development

ENTREPRENEURSHIP and business has never been a lone journey. Those who thought they can go the journey alone found their flowered way to the business graveyard. Unless otherwise, strategic entrepreneurship and business alliances are key to the growth and sustainability of organisations.

A strategic alliance is an arrangement between two companies to undertake a mutually beneficial project while each retains its independence. The agreement is less complex and less binding than a joint venture, in which two businesses pool resources to create a separate business entity.

The major aim of these two organisations is to make an impact in the market through the production of goods and services for their particular target market. An organisation may enter into a strategic alliance to expand into a new market, improve its product line / service provision, or develop an edge over its rivals. The arrangement allows these two businesses to work together toward a common mutually beneficial goal.

You might also have heard of a number of organisations who went into strategic alliances that only lasted for a season. An alliance is like a chain. It is not made stronger by adding weak links to it. In your quest to find strategic alliance partners, there are salient issues that you need to look into lest you become one of the unfortunate statistic.

Why strategic business alliances? When corporations collaborate on a project, they frequently trade non-for-sale talents. One partner usually has technological expertise and the ability to keep up with quickly changing technology breakthroughs. Capital, big distribution systems, marketing skills, service networks, and market credibility are what that partner need from the other partner or partners. As a result, each partner contributes critical resources to the other and leverages the relationship to expand its skill set into other areas.

Strategic alliances have numerous of economic and commercial benefits to the partners concerned. Mobile phone companies are a typical example or organisations utilising strategic alliances. This company specialises in the manufacturing of the hardware while the other concentrates on the software issues and by so doing production and quality is maximised.

I have discussed six key benefits of strategic business alliances.

Economies of scale

Alliances can help organisations attain economies of scale, allowing them to pool a diverse range of resources and acquire the critical mass required for international success. Companies with complementary skills can rely on one other’s established expertise rather than wasting time and resources developing what has previously been accomplished individually. This has a tendency of lowering production costs while at the same time boosting production.

Boosting competitiveness

Strategic alliances necessitate the participation of experts from other organisations into the operations at hand. Companies have always attempted to create or keep all essential talents in-house. As strategic alliances continues to bear results, organisations are realising, however, that they cannot handle everything on their own as technical and administrative complexity grows. As a result, the most competitive businesses have adopted a strategy of focusing solely on their core strengths. Gaps in the skill bases are then filled by forming a partnership with a company that possesses the required talents. This technique eliminates the need to spend resources and take the risks associated with in-house skill development.

Dividing business risk

Risk sharing through collaboration effort ushered in by alliances is most common in research and development. Research and development expenses are always rising, and the rapid pace of invention implies that products quickly become obsolete, posing a high risk of investing in new product development. Sharing expenditures and facilities for research and development is cost-effective,

Companies with complementary skills can rely on one other’s established expertise

and sharing knowledge can speed up the process. Partnering can be utilised to share risk in a variety of situations. Companies can, for example, pool transportation and distribution infrastructure, saving money and allowing for speedier product delivery. Another strategy to spread risk and increase rewards is through joint marketing. It is currently incredibly difficult to do so.

Setting new standards

New technological advancements open up totally new market prospects. Because it is the first to develop a new technology, the first firm to do so may set the benchmark for its industry. Several competitors, on the other hand, may develop similar technology at the same time. It’s difficult to foresee which technology will set the industry standard, thus being the first to market with a new technology can be quite dangerous. One method of developing industry standards is to form strategic alliances. It also enhances the likelihood that the standards in which a company invests will be approved by the industry as a whole. Standards shape markets, and as a result, many high-end products are based on them.

Taping into new foreign markets Strategic global business alliances are a good method to break into new markets. Partners can help by providing established marketing and distribution networks as well as market knowledge, ensuring that items reach the market faster and are more likely to be purchased. Foreign partners might help a corporation change a product to comply with local legislation and market preferences. They can assist with document translation, conversion from metric to imperial measurements, conversion of power requirements, and compliance with packaging rules, among other things. When market conditions or government regulations create market entry obstacles, strategic partnerships might be beneficial.

Overcoming unnecessary competition Companies often co-operate in marketing or distribution to overcome competition. A well-conceived alliance can mean a head start in a market, possibly even preventing other competitors from entering. Forming an alliance with an established, major company can reduce the influence of other companies. However, companies should be careful that alliances do not form a cartel or otherwise breach anti-competition laws in the target market.

Strategic business alliances are central the growth, survival and the ultimate success of organisations.

Determined to engage, inspire and transform generations

◆ Dr Kudzanai Vere is the founder of Kudfort, Transformational Mindset Institute, Premium Business Network International and the Institute of Entrepreneurs Zimbabwe. He is an entrepreneur, author and transformational speaker in the areas of entrepreneurship and personal development. The transformational speaker has trained more than 5000 entrepreneurs globally in the areas of innovation, organisation development, practical business management and ideation. You can contact him on +263719592232 or email kudzanai@kudfort.co.zw