Strategic partnership

A strategic partnership (also see strategic alliance) is a relationship between two commercial enterprises, usually formalized by one or more business contracts. A strategic partnership will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship. Strategic partnerships can take on various forms from shake hand agreements, contractual cooperations all the way to equity alliances, either the formation of a Joint venture or cross-holdings in each other.

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. 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.

One common strategic partnership involves one company providing engineering, manufacturing or product development services, partnering with a smaller, entrepreneurial firm or inventor to create a specialized new product. Typically, the larger firm supplies capital, and the necessary product development, marketing, manufacturing, and distribution capabilities, while the smaller firm supplies specialized technical or creative expertise.

Another common strategic partnership involves a supplier/manufacturer partnering with a distributor or wholesale consumer. Rather than approach the transactions between the companies as a simple link in the product or service supply chain, the two companies form a closer relationship where they mutually participate in advertising, marketing, branding, product development, and other business functions. As examples, an automotive manufacturer may form strategic partnerships with its parts suppliers, or a music distributor with record labels.

Strategic partnerships also have emerged to solve many company business problems. The book Vested: How P&G, McDonald’s and Microsoft are Redefining Winning in Business Relationships profiles strategic partnerships in large scale business process outsourcing relationships, public-private infrastructure projects, facilities management and supply chain relationships. Contemporary strategic sourcing and procurement processes enable organizations to use Performance-Based or Vested sourcing business models for establishing strategic supplier relationships.

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