Strategic Partnerships – Part 1 of 3
What is Partnership?
A partnership is a kind of business where a legal agreement between two or more people is made who agree to be the co-owners and distribute the responsibilities for running an organization while sharing the income or losses that the business generates.
Features of Partnership:
- Agreement Between Partners: A legal association between two or more individuals with a written agreement.
- Two or More Partners: There must be minimum of 2 people to form a partnership.
- Sharing Profits and Losses: Partnership as an association where the gains and losses of a business are shared, either equally or by the division agreed upon, by the partners.
- Mutual Business: Any act performed by one partner can affect other partner and business.
What is Strategic Partnership?
A strategic partnership is a business partnership that involves the sharing of resources between two or more individuals or companies to help all involved succeed. Strategic partners are usually non-competing businesses and often share both the risks and rewards of the decisions of both companies. 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. One example would be when one firm is helping another firm to expand their market by helping with some expertise
Strategic Alliance Example
· Uber and Spotify
| Uber’s partnership with Spotify lets Uber riders easily stream their Spotify playlists whenever they take a ride. This makes the Uber experience feel more personalized and encourages Uber riders to subscribe to Spotify Premium to access music both inside and outside Uber. |  |
Uber’s rivals don’t have a similar personalized music experience, so this gives the rideshare giant a competitive advantage over Lyft and other similar services. And since not all Uber riders have Spotify, and not all Spotify users ride with Uber, both brands gain access to new, broad audiences in this business alliance.
Reasons 1 & 2 Why Strategic Partnership is Important for Business Success |
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1. Attract New Customers and Expand Market Coverage
The most important reason for venturing into partnerships is access to new customers and markets. By forming a strategic partnership, businesses can serve larger territories without investing more infrastructure or expanding their distribution network. They can use new partner’s infrastructure and market territories. For example, Starbucks and Barnes & Noble and Uber and Spotify.
2. Overcome Business Fears
Many entrepreneurs fear change and they worry about its impact on their businesses. These changes can either be market-driven, industry-specific. Implementing business solutions with the help of a strategic partner can help reduce the impact of changes that might inhibit business growth.
Please check “part 2 of 3 ” for more information on Strategic Partnerships.