Strategic partnership

A strategic partnership (also see strategic alliance) is a relationship between two commercial enterprises, usually formalized by one or more business contracts. A strategic partnership will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Strategic partnerships can take on various forms from shake hand agreements, contractual cooperations all the way to equity alliances, either the formation of a Joint venture or cross-holdings in each other.

Typically, two companies form a strategic partnership when each possesses one or more business assets or have expertise that will help the other by enhancing their businesses. Strategic partnerships can develop in outsourcing relationships where the parties desire to achieve long-term “win-win” benefits and innovation based on mutually desired outcomes.

One common strategic partnership involves one company providing engineering, manufacturing or product development services, partnering with a smaller, entrepreneurial firm or inventor to create a specialized new product. Typically, the larger firm supplies capital, and the necessary product development, marketing, manufacturing, and distribution capabilities, while the smaller firm supplies specialized technical or creative expertise.

Another common strategic partnership involves a supplier/manufacturer partnering with a distributor or wholesale consumer. Rather than approach the transactions between the companies as a simple link in the product or service supply chain, the two companies form a closer relationship where they mutually participate in advertising, marketing, branding, product development, and other business functions. As examples, an automotive manufacturer may form strategic partnerships with its parts suppliers, or a music distributor with record labels.

Strategic partnerships also have emerged to solve many company business problems. The book Vested: How P&G, McDonald’s and Microsoft are Redefining Winning in Business Relationships [1] profiles strategic partnerships in large scale business process outsourcing relationships, public-private infrastructure projects, facilities management and supply chain relationships. Contemporary strategic sourcing and procurement processes enable organizations to use Performance-Based or Vested sourcing business models for establishing strategic supplier relationships.[2]

There can be many advantages to creating strategic partnerships. As Robert M. Grant states in his book Contemporary Strategy Analysis, "For complete strategies, as opposed to individual projects, creating option value means positioning the firm such that a wide array of opportunities become available".[3] Firms taking advantage of strategic partnerships can utilize other company's strengths to make both firms stronger in the long run.

Strategic partnerships raise questions concerning co-inventorship and other intellectual property ownership, technology transfer, exclusivity, competition, hiring away of employees, rights to business opportunities created in the course of the partnership, splitting of profits and expenses, duration and termination of the relationship, and many other business issues. The relationships are often complex as a result, and can be subject to extensive negotiation. The University of Tennessee has done significant research into strategic partnerships, especially in the area of strategic outsourcing relationships.[4]

See also

Strategic alliance

References

  1. ↑ Vitasek, Kate, et. al. (2012). Vested: How P&G, McDonald's, and Microsoft are Redefining Winning in Business Relationships (1st ed.). New York: Palgrave Macmillan. ISBN 0230341705.
  2. ↑ Keith, Bonnie, et. al. (2016). Strategic Sourcing in the New Economy: Harnessing the Potential of Sourcing Business Models for Modern Procurement (1st ed.). New York: Palgrave Macmillan. ISBN 978-1137552181.
  3. ↑ Grant, Robert M. (2010). Contemporary Strategy Analysis (8th ed.). Chichester, UK: John Wiley&Sons. ISBN 1118634853.
  4. ↑ Vitasek, Kate, et. al. (2013). Vested Outsourcing, Second Edition: Five Rules That Will Transform Outsourcing (2nd ed.). New York: Palgrave Macmillan. ISBN 1137297190.


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