Strategic alliances, partnerships and joint ventures are relationships with other individuals or businesses. Resources, ideas or capital are shared to establish a competitive advantage that does not exist when the businesses operate independently.
The keys to these successful alliances are:
- support of senior people
- a high level of trust
- openness of communication
- promotion to staff of the benefits of the alliance or partnership.
Strategic alliances are formal relationships which often involve a short-term arrangement between startups and other groups to capture a niche product or market. Your business may have numerous strategic relationships with different players for different products or services.
Strategic alliances differ from partnerships in that they are:
- more specific in business focus
- strategically focused on winning or gaining a market
- more aggressive in intentions
- more time-consuming - the strategic partners actively work together to serve a need, or solve a problem, better than their competitors.
Partnerships are typically set up for the longer term and most use a written agreement. There are legal risks that may arise and it is important to get advice from your lawyer and/or accountant.
Read more about partnerships.
A joint venture is when 2 or more businesses combine resources, knowledge and skills to achieve a goal. Joint ventures share the associated risks and rewards of a project between businesses.
Advantages of a joint venture
- Your business can develop quicker, reach a wider market and earn more money.
- You can grow without borrowing money or seeking outside investment.
- You can access new markets and distribution networks.
- You gain access to additional resources, such as technology and specialist staff.
- This structure offers protection by sharing risks with your venture partners.
- Only a temporary commitment is required, as joint ventures often only last for a particular project or goal.
Disadvantages of a joint venture
- It can take time to build a strong and trusting relationship between you and your business partners, taking into account different work cultures and management styles.
- Time must be spent clearly communicating the goals of the venture to avoid problems with business partners.
- There is the risk of conflicting objectives between the business partners.
- Partners may commit uneven levels of investment, assets or expertise to the project.
- Equal leadership, direction and support may not be provided by the partners at the beginning of the venture.
Joint ventures can vary depending on your business goals and the level of commitment you want to give to a project.
Before entering into a joint venture agreement, you should seek professional advice to minimise risk. It's important to negotiate the right levels of profit and tax sharing, and the management and liability of a project with your business partners.
Learn more about negotiating successfully.
- Last reviewed: 18 Jul 2017
- Last updated: 28 Jun 2016