Strategic Partnership Agreement
Meta-description: A strategic partnership agreement is a contract between two or more businesses to establish a mutually beneficial relationship. The businesses share resources to maximize on the economies of scale.
Definition of a strategic partnership agreement
A strategic partnership agreement is a business partnership that entails the sharing of resources between two or more companies or individuals. Strategic partners are normally non-competing individuals or businesses. Further, they have common rewards and risks of the decisions of both companies. A band partnership agreement is also known as an alliance agreement.
In a strategic partnership agreement, two businesses agree to combine efforts in a specific area. Such areas include supply chain, marketing, technology, integration, or a combination of all. Strategic partnership agreements are common between graphic designers, web designers, database management firms, internet service providers, and email providers.
The role of a strategic partnership
There are various reasons for establishing a strategic partnership based on a band partnership agreement. Some of the areas that benefit from such partnerships include:
- Accessing of important technology.
- Development of novel outlets of distribution.
- Tapping into the marketing resources of companies.
- Collaboration on an advancement or business product, service, or concept.
- Driving of revenue or reduction of costs.
- Increasing of customer awareness.
- Driving of brand development.
- Gaining of access to more sales.
- Broadening of the market base.
- Permitting companies to attain global markets.
Whether a startup or established company, there are many reasons that merit entering into a strategic partnership agreement. A strategic partnership agreement adds much value to one’s product or service through the expansion of what has to be offered. A strategic partnership could even be a proverbial ‘match made in heaven’ in the event the involved parties reciprocate each other well.
Why a strategic partnership agreement?
A strategic partnership is recommended since it is mutually beneficial. Further, the companies or individuals involved do not compete with each other. For a long time, companies have been engaging in strategic partnerships to enhance their offset costs and offers. The main idea is that the more the better and through pooling of resources, companies maximize the economies of scale.
Further, in a basic partnership, one benefits not only from adding value to the customers but also by lowering the costs. Hence every strategic partnership serves as an attempt to leverage costs and returns. Before joining a partnership, the parties should evaluate the intended partners and consider the risks and benefits of entering into the agreement. If one can satisfy the profit goals and customer expectations through a partnership, then it would be advisable to enter into one.
Things to consider in strategic partnership agreement
As marketing continues to a significant part of business, a strategic partnership agreement comes in handy in businesses that have limited resources. Further, there are no rules that prevent small businesses from partnering with large companies. A small business that is performing profound research could compile a list of companies that could aid in forming partnerships. Whether one signs a strategic partnership agreement with a large or small business, the agreement should serve as a legally binding contract. The agreement specifies the obligations and financial stakes of every partner.
Further, a strategic partnership agreement that overlooks and fails to include the basics could become problematic. This could be linked to every party’s perspective on the significance of the agreement. Hence, what is strategic to one partner may just be a standard procedure of operation for another partner. Bothe partners, however, do not have to attach a similar level of significance for the strategic partnership to be successful.
Drafting a strategic partnership agreement
A strategic partnership agreement should meet all the participants’ needs. To ensure this, the decision makers of the businesses and their advocates ought to work together. Some of the areas they will work on include:
- Intellectual property protection.
- Shareholder agreements.
- Marketing and distribution methodologies.
- Rules linked with several business entities.
Basic components of a strategic partnership agreement
- Sharing assets
A strategic partnership agreement provides that both companies could contribute to intangible and tangible assets. Every firm could also contribute to expertise, equipment, labor, finances, and infrastructure.
- Designation of Responsibilities
For a strategic and successful partnership to run seamlessly, every partner’s contribution to the agreement should be expressly stated in a written form.
- Legal Structure
The partners of a strategic partnership always have the choice of establishing a separate entity where each partner shares ownership. In such a situation, an entity is referred to as a joint-equity venture.
In a joint-equity venture, every partner decides the percentage of the venture’s ownership. The agreement is often outlined with the role of every party. Further, the stake in every venture is stated along with every partner that signs the memorandum of understanding.
- Complexities
Forming a strategic partnership could be complex owing to several intricacies that entail aspects such as intellectual property and negotiations. For such reasons, it is crucial to have a clear strategic partnership agreement.
Marketing partnership strategies
It is important to define objectives or goals before entering into a strategic partnership agreement. Further, there are various areas to consider in the promotion of long-term success in a partnership. The first thing is identifying a suitable partner. This entails performing due diligence to clearly understand the goals and resources of every potential partner.
Additionally, establishing a marketing plan with objectives and then classifying each into a controllable activity is another positive move. It also helps in organizing and managing the basics before signing a strategic partnership agreement. When one is scheduling marketing operations for strategic partnerships, the aim is to establish programs that will benefit every partner.
Measurement and reporting of the marketing outcome are also a significant part of the marketing process. Such reports provide data that reveals the success of the marketing initiative. Without such feedback, the marketing team struggles in identifying the activities to pursue and which to discontinue. So as to optimally benefit from the accurate and timely reports of marketing results, every partner should have a timeline. Such enables the partners to know where and how the reporting will be done.
Strategic partnership business model
A strategic partnership agreement is based on a strategic business model. Such a model is founded on pursuing partners not only since they are valuable but also for them to benefit. As earlier stated, a strategic partnership agreement is mutually beneficial hence the other party could benefit from the company’s services, brand recognition, and services.
When establishing a strategic partnership business model, one should consider the value they can provide and the resources required. The model should also adopt a structure that is mutually beneficial. Hence it should not be a relationship that is benefitting only one party out of the desire of extra profit. One should also look for partners they can trust to market the common brand name.
Strategic partnership agreement and growing of a business
Every company has at least one strategic partner. However, if a company or individual can perform all the in-house activities effectively, then a strategic partnership agreement would not be necessary. However, there is always an opportunity to reduce the column of costs or increase a business’ bottom line. It is ins such instances that a strategic partner comes in handy. In the event an improvement opportunity presents itself, there are chances that a helpful partner exists.
Further, strategic partnerships can aid in mitigating risks. For instance, selecting a partner in the manufacturing industry and insures its employees, one is saved from operating a similar facility. Similarly, the majority of the financial advisors and accountants are insured and bonded. By partnering to fulfill such roles, one removes the need too incur operations costs of such businesses individually. Eventually, two are better than one.
Types of a strategic partnership agreement
There are various types of strategic partnership agreements that include:
- Strategic marketing partnerships
This form of partnership benefits small business with restricted services and products to offer customers.
- Strategic supply chain partnerships
Such partnerships are notorious in the film industry. They are also common in the technology sector. Further, a supply chain partnership only becomes effective of every involved party meets with the customers’ expectations for price and quality.
- Strategic integration partnerships
These forms of partnerships are common in the contemporary world. This is because in the digital age, it is great to have to applications work together. Strategic integration partnerships could entail agreements between software and hardware manufacturers. They are also part of agreements between software developers that partner to ensure their technologies work efficiently.
- Strategic technology partnerships
This form of partnership entails working with Information Technology (IT) companies to keep the business afloat. This may be in form of a partnership between the web design firm and precise computer repair service.
- Strategic financial partnerships
Majority of the modern companies outsource accounting services to strategic partners. Strategic financial partnerships are helpful since it eases monitoring of revenue while focusing on in-house activities.
References
https://smallbusincess.chron.com
https://investmentpolicy.unctad.org
https://www.globalnegotiator.com
http://www.business-in-a-box.com/partnerships
https://www.topwebanswers.com/bestanswers/topwebanswers
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