How Small Businesses can benefit from Strategic Alliances

In the fast-paced and complex world of business, carving a successful name for your small business is a challenge. As the owner of a small enterprise, you may have to take certain decisions for the sustenance and growth of your business that appear to be intimidating. One such decision is entering into an alliance with another company. While there may be many apprehensions and insecurities that evoke second thoughts about partnerships in your mind, the move to enter into an alliance with a suitable partner may actually prove to be quite beneficial for your small business. Here are some of the significant advantages of strategic alliances for small businesses that we believe would help you ease your anxiety and take a decision for the success of your small business.

Stability and Growth

Most small and medium enterprises constantly struggle to acquire adequate funding for operations and expansion. An effective solution to this problem is forming a strategic alliance with a larger, more financially stable company that can provide the much needed cash infusion necessary for growth. A partnership with a well-known and reputed organisation can also prove to be a game-changer for a small business that is relatively new or uninitiated in a new industry. Such an alliance would lend legitimacy and credibility to the small business, making things relatively easier for the company. Also, a well-established alliance partner can provide access to a huge customer base that small business may not be able to reach alone.

Sharing of Knowledge and Resources

There is a proverb that says “Two heads are better than one”. This rule applies perfectly to small businesses in strategic alliance with another organisation. When two businesses pool their resources, they are bound to benefit each other. A business alliance provides the golden opportunity to businesses to exchange technical know-how or different skill sets that can be helpful for both. By partnering with bigger companies, small businesses can learn and utilise new technologies, giving them an edge over other rival firms. Since many small businesses operate with limited capital and resources, an alliance can prove to be extremely beneficial in terms of economic and intellectual sharing. Therefore, it is important to analyse the core competencies and culture of an organisation before entering into a partnership with it.

Expansion in New Territories

Entering a new market has its own set of risks and challenges. The best way to overcome those hurdles is by establishing an alliance with a local player in the targeted market, especially in developing countries or countries with limited experience in dealing with foreign businesses. A strategic alliance with a local business can be a huge advantage because the local partner will have a better understanding of the local laws, customs and the cultural climate of the target market. The experience and knowledge of the local partner can cause a smoother expansion of businesses. However, it should be kept in mind before entering into a partnership that the portfolios of the partners should complement each other and not compete.

Economies of Scale

Small businesses can achieve greater economies of scale by entering into alliances. By gaining access to the partner’s operational facilities or reducing the costs by sharing the expense on domains like research and development, businesses can have many cost advantages. An alliance may also provide access to wider marketing channels to the company, which they otherwise might not be able to afford outside the partnership.

Competitive Advantage

In today’s era of tough competition among start-ups, a strategic alliance with a rival to co-operate instead of competing can turn out to be a great advantage. Such a partnership would help the small business to strengthen its position in the market when other firms are dealing with the intense competition alone.

While the above advantages are convincing enough, it is important to analyse the requirements of your business to assess which type of alliance would suit you and your business needs. Once you know what would work best for you, you can go ahead with a partnership that can change the trajectory of your business venture.

– Swati Sinha

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