Strategic alliances are business arrangements between two companies that involve themselves in a mutually beneficial project while retaining their independence. Strategic alliances are less binding and offer exceptional options for the business to expand into new markets and enhance its product lines. Strategic alliances offer a competitive edge for businesses and allow two businesses to work towards a common goal that benefits both their operations.
Strategic Alliances and Joint Venturing – How Do They Benefit the Business
The primary objective of joint venturing in most industries is to venture into new markets and use unique technology to uplift their process. It has been estimated that more than 40% of the companies venture into strategic alliances to customize their legal, governance, and operational design. There are a number of reasons why a company may choose to enter into a strategic alliance, and they are as follows.
- To improve their short-term finances:
Joint ventures are for those organizations who are waiting to make immediate financial impacts by leveraging the resources of another company. This way, they are also able to improve their short-term position in the market.
- Easing entry barriers:
Some companies may not have the capital to enter new markets. But, they can take advantage of other companies that already have a market in those fields and ensure to take advantage of their investments faster and cheaper.
- Seek better business insights:
Businesses that have no idea how a certain business model performs can go for strategic alliances to test the waters. Instead of having to build an entire business model from scratch and self-fund a business experiment, they can go for joint ventures. They can gain first-hand experience with these business models before starting their own ventures.
- Lower financial risk:
In joint venture business models, businesses have a very low financial risk. This is because both the companies in the ventures contribute towards paying for those losses. Also, both companies can get assistance from the other company as part of their joint venture agreement.
- Opens scope for innovation:
Joint venture partnerships open new paths for innovation. For example, in the Tesla/Panasonic joint venture, their partnership created an innovative and cutting-edge agreement, putting the experts in the field of electric vehicles on the same team.
Advantages of a Strategic Alliance in Federal Contracting
Federal contracting is one of the best ways for small businesses to take government businesses and improve their competitive advantage. Joint ventures are always favorable for businesses seeing federal contracts. It helps them to embark on opportunities that they are otherwise not able to embark upon. Joint ventures help businesses to engage in different markets and sell different products. In short, it also helps to increase the revenue and profitability of the company.
Strategic alliances also help to diversify the revenue stream of the company and generate different opportunities for it. This, in turn, helps mitigate the company’s financial risks and fosters it to accept and solve unique and new challenges. Also, by maintaining strategic alliances with federal contracting agencies, the SMEs would be able to operate differently than they normally would. They will start using the resources that they don’t have, including physical goods, expert labor, and access to the market. The company would be able to leverage the market presence of another firm to gain popularity in the business world.
Federal contracting is one of the best ways for small businesses to take government businesses and improve their competitive advantage. Joint ventures are always favorable for businesses seeing federal contracts. It helps them to embark on opportunities that they are otherwise not able to embark upon. Joint ventures help businesses to engage in different markets and sell different products. In short, it also helps to increase the revenue and profitability of the company.
Strategic alliances also help to diversify the revenue stream of the company and generate different opportunities for it. This, in turn, helps mitigate the company’s financial risks and fosters it to accept and solve unique and new challenges. Also, by maintaining strategic alliances with federal contracting agencies, the SMEs would be able to operate differently than they normally would. They will start using the resources that they don’t have, including physical goods, expert labor, and access to the market. The company would be able to leverage the market presence of another firm to gain popularity in the business world.
Strategic partnerships and joint ventures to seek federal contracting have a number of advantages for both businesses. Together, the company can grow as an organization and create brand trust and recognition in the competitive market space.