A strategic partnership is a relationship between two commercial enterprises, usually formalized by one or more business contracts. In a strategic partnership the partners remain independent; share the benefits from, risks in and control over joint actions; and make ongoing contributions in strategic areas. Most often, they are established when companies need to acquire new capabilities within their existing business. Strategic partnerships can take the form of minority equity investments, joint ventures or non-traditional contracts (such as joint R&D, long-term sourcing, shared distribution/services).
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. This can also mean, that one firm is helping the other firm to expand their market to other marketplaces, by helping with some expertise. A considerable in-house expertise which complements the technology activities of its partner is a necessary condition for a successful exploitation of knowledge and technological capabilities, outside their boundaries. Strategic partnerships can develop in outsourcing relationships where the parties desire to achieve long-term win-win benefits and innovation based on mutually desired outcomes.
Quite often strategic partnerships are formed to address the competitive threats of imitation and substitution, yet while the threat of imitation should be addressed in the value channel area, the response to substitution should lie in strategies at the business model level. In general, companies that decide to pursue strategic partnerships should introduce changes at the strategy level, including organizational structure, processes, and most importantly – commitment at all levels.
Strategic partnerships raise questions concerning co-inventorship and other intellectual property ownership, technology transfer, exclusivity, competition, hiring away of employees, rights to business opportunities created in the course of the partnership, splitting of profits and expenses, duration and termination of the relationship, and many other business issues. Another risk of strategic partnerships, especially between manufacturer and key supplier, is the potential forward integration by the key supplier. Also different developments or development plans can lead to a broken strategic partnership. The relationships are often complex as a result, and can be subject to extensive negotiation.
One of the common mistakes businesses make when looking for possible partners is to consider only a few options instead of looking at the whole ecosystem of strategic partnerships.
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