Strategic Alliances and Joint Ventures
There are few if any companies that perform all tasks required within their industry extremely well. Yet in today’s marketplace, two factors are pushing companies toward adoption of the dangerous “Jack of all trades” mentality:
1. Demands from customers for one-stop shopping;
2. The inability to maintain volume without expanding outside of current expertise or market niches.
In today’s uncertain economic times, internal expansion to address these two factors may not always be wise. A viable alternative is the formation of a strategic alliance or a joint venture with a company or companies that provide complementary products or services.
Working with you and your staff, we can determine if a strategic alliance or joint venture is the right solution, and if so, help locate the right partner.
Any successful strategic alliance or joint venture starts with a detailed plan and a well drafted and comprehensive legal agreement. Our unique combination of legal and technical expertise offer an advantage to companies considering entering into marketing or manufacturing ventures or alliances.
A “Strategic Alliance” is an excellent vehicle for two companies to work together profitably. Unfortunately, in the last several years, it has become very fashionable, and as a result, companies are announcing strategic alliances on a daily basis. Most of these “strategic alliances” do not result in additional business, capabilities, or profitability for either of the companies involved, because they have not been well planned in the first place, and/or because implementation has been left to someone else.
A true strategic alliance is a written arrangement between two companies that complement each other in a particular identified area. It is not a partnership, and neither company has legal power to control or obligate the other. Instead, it is a commitment by the two companies to provide capabilities or cross servicing in certain identified areas. By properly utilizing a strategic alliance, companies can expand their product and service offerings substantially, without the usual corresponding investment in staff, equipment, and facilities.
A strategic alliance generally is a broad based agreement that will cover a number of customers and a number of situations over an extended and identified period of time.
Joint ventures are often confused with strategic alliances or partnerships. In fact, a joint venture is more like a partnership – with one major distinction: the joint venture is generally formed for the purpose of completing a single goal or a related series of goals in a business project. Depending on the agreement, the joint venturers may have the power to obligate each other and each may be liable, within defined limits, for the actions of the other on the project in question.
Joint ventures are commonly used on government and private sector contracts where two or more companies form a joint venture for the purpose of quoting, bidding, and performing a contract which would be too large or complex for any one of the of the joint venturers. Because of the nature of the joint venture and the potential liability, a detailed plan and a well drafted agreement are essential.