A partnership is among the best ways to expand your company, as it allows two businesses to share risk and ideas. Here’s when to partner up offensively, or defensively.
Looking for a business partner is a strategic move that can be either ‘offensive’ or ‘defensive’. The difference is your level of bargaining power; this will influence the pressure that will inform your strategy.
In an offensive partnership, you are able to negotiate the terms on a fair level (unlike in a defensive partnership, where your partnership is dependent on the other partner). So when exactly should you form an offensive partnership?
You have something unique that sets you apart from your partner.
If you have marketing strength, then you can partner with a company that has production strength. You contribute a pool of resources to the partnership and negotiate the terms.
Your business is growing.
This will equip you to attract only the best because you are doing so well. This can be a strategy for growth, but you must show your partner you have the potential to grow.
You want to combine forces to compete against an industry player.
It is possible to partner with a similar business to ensure you can compete against big industry players. It not only saves you money, but it ensures you have significant market share that will give you sufficient industry presence to control market trends.
Sometimes, businesses enter into defensive partnerships, which can be costly as they often do not have sufficient bargaining power. In other words the other partner has more say in the partnership. A wise man knows when to swallow their pride to save a legacy. If you are approaching the decline stage of the business, and you realise that you are losing more money, forming a partnership with a stronger alliance can offer a healthy alternative to shutting down operations. The secret in such a partnership is that you may set the time the partnership agreement will end. This time must be sufficient enough to enable you to make money to re-strategise.
Source: By Crecencia Chauma for BusinessTrade.org