As An Entrepreneur, Think Of Strategic Alliances.
It doesn’t matter how small your business is, strategic alliances are important. While growing up, despite my young age, I observed an obsession with sole proprietorship for quite a large number of individuals. To them, it was better for their businesses to be down on their knees rather than think of merging or even partnerships. It is something I still observe among most startups and small businesses.
I was compelled to write about this after I had a discussion with a University don turned entrepreneur I met on Wednesday last week in town. The discussion took us almost two hour but we came to a single conclusion that it is important for businesses to start thinking about strategic alliances at the earliest stage possible.
There is a quote I love that says, “Alone you can walk far, together we can walk farthest.” Definitely we agree that no man is an island and for that reason we need to learn to cohabit. Business is treated the same way. To walk that farthest, cooperation is needed.
Strategic alliances are partnerships in which two or more enterprises mutually agree to work together to achieve a set goal or objectives. Margarita Isoraite in a 2009 paper titled; Importance of Strategic Alliances in Company Activities, defines strategic alliance as an agreement between two or more organizations to cooperate in a specific business activity, so that each benefits from the strengths of the other, and gains competitive advantage.
According to the paper, strategic alliances are critical to organizations for the following reasons:
- Organic growth alone is insufficient for meeting most organizations’ required rate of growth.
- Speed to market is essential, and partnerships greatly improve it.
- Complexity is increasing, and no single organization has the required total expertise to best serve the customer.
- Partnerships can defray rising research and development costs.
- Alliances facilitate access to global markets.
We can all agree that any business starting today be it in manufacturing, technology, construction, retail, tourism and agriculture is competing on a regional and global scale. For example, Safaricom recently came up with Masoko, and we can all agree that it has to battle it with Amazon, Alibaba, Jumia and many more e-commerce businesses.
Last year, I had an opportunity to visit FunKidz factory in Kikuyu. They do very nice standard furniture for kids and even offices. Who are their competitors? They span from local furniture businesses to lots of imported furniture from Asia, Europe and America.
Remember as an entrepreneur or business person, you are competing globally and to make it you need to enter into strategic partnerships especially in the manufacturing sector, construction, retail and commerce. That is how some businesses get to have sole distribution rights for some coveted products.
So many people ask about what they can do to raise capital for their startups and one of the possibilities could be strategic alliances. To me, the simplest form of strategic alliances is a simple partnership. If for instance I am a good technical individual, I might enter into a partnership with a proficient person who is a good marketer and sales person. On board we might bring someone who is good in finance. When we pool up our resources you realize it is easier to begin before you can start thinking of strategic investors.
Another form of strategic partnerships is joint ventures whereby two or more parties agree to form a single entity to undertake a certain project with each entity having a stake. If you are a manufacturing, retail and commerce person, you could look in the direction of Outsourcing, affiliate marketing, licenses, distribution rights and franchises.
Among global players in ICT, there are several strategic alliances especially between such companies as Apple, IBM, Toshiba, Microsoft, Samsung and many more. There are other several strategic alliances between players in pharmaceutical, beverages, agriculture and entertainment sectors.
One of the reasons strategic alliances don’t work with small businesses is the issue of trust which often breeds ground for uncertainty in terms of fear of dominance and foul play. In this case then, like minded parties ought to be partners. Integrity should be sound from individual level. Among mSMEs, I find it easier for the individuals to partner to leverage on shared resources and satisfy consumer needs.
The age of ‘selfishpreneurs’ where it was me alone is no longer feasible. We better start thinking on how together we can leverage on partnerships so that there can be shared information, research and development technologies, markets and even innovations. This helps cost cut on operations and leverages on such partnerships shared vision and resources.
Let us go strategic partnerships way.
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