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The Advantages of Strategic Partnerships

There are many approaches in which the formation of a strategic partnership may help a company grow. In fact, just a few strategic partnerships with larger companies may immediately propel a business and drives its growth level significantly. Many companies place a tremendous emphasis on the introduction and development of consumer level marketing or enterprise business development. Yet, those that seriously consider the advantages of strategic partnerships and what they bestow upon both companies will realize the importance of constantly and actively seeking them out. There are many methods of strategic partnerships that may be formed by a company at any given time. This article will provide insights into the various types of strategic partnerships and how they may be advantageous to a company at any stage.

 

 

Affiliate Relationships

 

The advantages of affiliate relationships are very strong in that they deliver value across many angles from the benefit of both parties. Some affiliate relationships may be arm’s length transactions in which the affiliate is combined with a pool of other companies and some may be more engaged where the company has an exclusive agreement or the parties do not typically engage in any sort of affiliate type situation. Many affiliate companies may be found on networking platforms designed to be connected with affiliate marketing companies. However, the best affiliates often come from other companies that are not frequently engaged in affiliate marketing. For instance, a company along another vertical which has access to customers that also require your products and services.

 

 

White Label Relationships

 

In general, products and services are fulfilled by the company that produces them. However, many manufacturers and service providers have white label programs which they offer to third-parties which enable them to have a mark-up on their products and services. This is different from an affiliate program in that it provides the other party more flexibility over the pricing and the capability to build their own brand in the market. However, it can also be harmful for the company that is performing the white label service, particularly if the product is not heavily commoditized. For instance, a white label manufacturer of a beverage product may lead to later stage cannibalization if the other party does not effectively manage to maintain their distinctive positioning.

 

 

Cross-Promotion

 

When it comes to cross promotion of products and services, the idea is that marketing efforts may be shared if synergistic products and services are promoted in combination with one another. This is often effective if the companies will both benefit from a particular marketing campaign that would otherwise be too expensive for them each to individually engage in. For instance, a marketing campaign for the state of New Jersey may promote focus the Atlantic City casino area and collaborate with a specific casino in order to showcase that one in the marketing campaign. This will help both parties to benefit from increased exposure and shared marketing expenses in a synergistic way that they both benefit. However, there are methods in which this does not make sense. For instance, if the products and services target a different market segment or the messages they communicate are not consistent. It is also possible that the cross-promotion could lead to risk from being associated with another party that has a negative reputation in the market. For instance, the state of New Jersey promoting a particular casino may imply that it collectively promotes gambling. Therefore, parties should be aware of the potential disadvantages of negative connotations being associated with other companies.

 

 

Resource Sharing

 

When it comes to large investments in fixed assets, such as the acquisition of a supercomputer or a piece of heavy machinery, it is possible that the company may not use it all of the time. It may not make sense to lease the equipment out and form contracts, but if the parties may share in the costs or agree to use the resources of one another from human capital to fixed assets and intellectual resources, it may be advantageous for reducing expenses and benefiting from the economies of scale of other firms. Therefore, resource sharing can be effective if the relationship is properly managed. However, one should consider the disadvantages of such as relationship in that any shared assets could lead to valuation problems later in in terms of who has ownership if a company is sold to a third-party.

 

There are many ways in which companies may benefit from the formation and maintenance of strategic partnerships with other firms. The development and sustenance of such relationships can not only help each party to increase sales, but also to reduce expenses and lower their operating risk. However, it is important to consider the party that the partnership is being formed with and what the implications are of entering into an agreement with a firm that may have a poor reputation or cause problems later on. It is also helpful to still clearly outline in contractual agreements what the strategic partnership entails so that confusion may be avoided in the future and the companies may come to terms without having litigation problems from misunderstandings at the onset.

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