THUNDER BAY – Business – Are you looking for a way to speed up entry into a new market, improve your productivity, gain a competitive edge or increase your range of products? A strategic alliance may be your answer. “There are no set rules for such partnerships; they are what the businesses involved want them to be,” says Erin Laine, Account Manager, BDC. For instance, a manufacturer might outsource distribution to a specialized firm, and benefit – and increase profits – by being able to focus on its core business. Or an Internet-based store could team up with an overseas courier company to accelerate delivery to clients in a specific market. “There are any number of strategic alliance options available; what’s important is to choose the one that fits your business profile,” Liane says.
Types of strategies
Join forces to achieve economies of scale. In general, an alliance can help a company achieve economies of scale. By joining forces, partners can obtain better purchase prices from suppliers and lower their cost per item. For example, a manufacturer of veneers and plywood joins forces with nine of its competitors to select a common transportation company. After guaranteeing the transportation company a minimum volume, these businesses convince the organization to give them a flat rate and to invest in equipment to protect their products during shipping. As a result, each business obtains better rates, and the new transportation company is guaranteed a certain volume.
Use a larger company’s distribution network
By striking agreements with distributors, you can invest more profits into your core business. However, it is crucial to profile potential distributors to ensure that they are aligned with your needs, match your company profile and represent you well. For example, the same company may convince a large local lumber company to handle its deliveries as their markets overlap. Both companies take advantage of this arrangement to simultaneously expand their basic market. The lumber company now promotes concrete products in lumberyards, and the manufacturer promotes wood products in superstores and renovation businesses where it already has a presence.
Pass useful knowledge down the chain
You can also create strategic alliances with suppliers to develop new products and share knowledge and training to improve your production process. For instance, you can coordinate your production schedule with theirs, reduce costs through size and timing of orders and increase your range of products and services. Keep in mind that you will have to update your partner on any changes in new products and share forecasts to develop accurate sales plans.
Choose the best partner
You should choose your partner based on how the company ranks according to your key criteria. It’s important not to be lured by sales pitches that don’t meet your demands. Take time to do your research, check the credit of potential suppliers and get firsthand advice from other companies that may have dealt with your prospective partner. Remember, that although the price is important, so are reliability and speed.
A joint venture for on-site production
Another type of alliance strategy is to set up a joint venture where an on-site partner is responsible for production and the distribution of products in a specific area. In general, your partner would transfer knowledge and know-how, and you would collect royalties in return. Your business gains from your partner’s specific market expertise and you get easier access to the market. For example, having developed an innovative product and the requisite machines for production, a company may decide to issue exclusive licenses in several provinces. This small business can now sell, install and maintain its equipment remotely and also collects royalties on the products sold.
That’s just a start. There are many other types of alliances you can consider, depending on your business needs. What is important is to select a strategy that will help you bring your business to a whole new level of growth.
The Business Development Bank of Canada is passionate about one thing: entrepreneurs. Helping them is our raison d’être. BDC listens and knows how to meet their needs. We have business relationships with 29,000 entrepreneurs across Canada. We understand the challenges they face every day, and we use our human and financial capital to provide the means to reach their aspirations. At BDC, we do everything to help entrepreneurs grow their business. BDC offers financing, venture capital and consulting services. BDC focuses on small and medium-sized enterprises (SMEs).
In Thunder Bay:
Thunder Bay, Ontario