In the reality of today market, there is a need for a firm to be ready to change course and its traditional processes in order to take advantage of new business opportunities. One of the processes by which a firm can do this is through strategic partnership. A strategic partnership was defined by David Teece as a web of agreements whereby two or more partners share the commitment to reach a common goal by pooling their resources together and coordinating their activities. Robert M. Grant (2005) also put it that strategic partnership makes “a wide array of opportunities become available”.
For example, Atlas Copco in Nigeria is in a strategic relationship with two companies which are R. T. Briscoe Plc and United Technical and Allied Services Ltd (UTAS) which is a division of chellarams Plc. These two companies are given service and customer support and of course credit facilities by Atlas Copco while they in turn help to promote the sales of Atlas Copco products and at the same time improving their own business. “The business synergy between besides giving UTAS and “R.
T Briscoe” the franchise to market products from Atlas Copco across the country also equip them with the necessary International technical training and knowledge needed to serve growing Atlas Copco clientele in Nigeria”. One of the basic advantage Atlas Copco Nigeria is enjoying from this relationship is the few sales people on its pay roll because in the absence of this relationship, Atlas Copco will need to have a great number of sales people on its pay roll (increase in cost) to cover the markets where R. T. Briscoe and UTAS are helping to cover.
The Advantages of developing close, long-term relationships with a small number of strategic partners can be said to be the following; Trust: Having a long term relationship builds trust among the stake holders and this makes the partners to behave in the interest of others. Success is beneficial to the parties: The partners have more to gain through the success of the partnership than would be achieve on individual ground. Slack & Lewis (2008) stressed this by stating that the belief in shared success “helps to prevent individual partners from acting against the interest of the other”.
Lack competition: The Partnership enhance the parties to act on behalf of others thereby giving no room for competition. Problems are jointly solved: Since the partnership success is seen as a joint issue, problems militating against the business are also seen as a shared issue. Therefore, solution to problems is provided as a central case with the contributions of all parties. The partners dedicate their asset to the partnership: As I mentioned in the case of Atlas Copco, R. T. Briscoe and UTAS above concerning the use of sales people, the asset of the partners are usually utilized for the benefit of others.
Knowledge is jointly shared; For example, Chanda Ghosh, the general manager of UTAS explained in 2006 that his company’s “relationship with a global group of companies like Atlas Copco would provide his company the technical and training support for the staff of UTAS who are expected to pass the knowledge acquired to the clients”. Cost and risk are jointly shared: Long term partnership gives room for the Cost and the Risk in business to be shared and this enables a company to indulge in an agreed huge business project eliminating the fear that the failure of such project may affect one individual partner.
In-house maintenance of Customers: Customers are kept for a long time within the partnership. To buttress this point, there was a time a customer was angry with Atlas Copco Nigeria. The customer therefore decided to be dealing with R. T Briscoe not knowing he is still within the web of Atlas Copco business strategy. The Disadvantages of developing close, long-term relationships with a small number of strategic partners include the following;
Loss of Control: No partner has a sole authority on strategic decision, technology and position in the market Loss of time: Time is usually lost in taking decisions and responsibilities because they are subject to negotiation and due process. Lack of compatibility with core interests – e. g. locking the firm into a product/service standard that may not be in its best interest, References: David J. Teece (2000) Managing Intellectual Capital: Organizational, Strategic, and Policy Dimensions; Oxford University Press Inc; New-York. Nicholas S.
Vonortas: (2009) STRATEGIC BUSINESS PARTNERSHIPS 6th Annual VEF Fellows and Scholars Conference, Center for International Science and Technology Policy& Department of Economics, George Washington University Robert M. Grant (2005). Contemporary Strategy Analysis. 5th ed. Blackwell publishing limited Slack, N. & Lewis, M. (2008) Operations strategy . 2nd ed. Harlow: Financial Times and Prentice-Hall. Businessday (2006); Atlas Copco, UTAS seal partnership deal (online). Available from http://news. chellaramsplc. com/atlas. html (Accessed: 19 June, 2010)