B2B | Small Business

What Are the Basic Elements to a Strategic Partnership?

Author: Melanie J. Martin
Publish Date: 
Sharing of Assets
The assets each firm contributes to the strategic partnership can be tangible or intangible. One firm's prestige may benefit the other, for example. Firms may also contribute resources such as finances, expertise, infrastructure, labor and equipment. Furthermore, they may share their access to markets. Firms located in different regions of the world sometimes unite in a global strategic partnership that allows each firm to reach a new market. By sharing their assets, firms may increase their capabilities, save money and broaden their market base.

Designation of Responsibilities
For a strategic partnership to function effectively, each party's contributions must be clearly stated in a written contract. "Use of Company X's image" does not specify exactly how that company's image will be used. "Distribution of Company Y's product by Company X" and "Use of Company X's trademark" are more specific.

Related Reading: What Are Some of the Key Elements That the Private Sector Brings to a Partnership?

Legal Structure
The parties in a strategic partnership can opt to create a separate entity of which they share ownership. This entity is termed a joint-equity venture. The parties decide what percent of the venture they each own. They typically sign a memorandum of understanding and joint-venture agreement outlining each party's role and stake in the joint venture. The joint-venture agreement, a legal contract, is particularly important because it tends to carry more legal clout. If the parties don't create a joint-equity venture, their agreement typically has a more limited time frame, but should still be outlined via a legal contract. Their agreement might outline the time frame of their partnership as well.

Complexities
The intricacies of strategic partnerships can become quite complex. Debate about which party owns intellectual property can result, for example, unless contracts clearly spell out such agreements. Negotiations and adaptation are inevitable aspects of working in a strategic partnership as well, as Jean W. Ross, et al. say in "Enterprise Architecture as Strategy." Each firm aims to improve its practices and success level through the partnership, and the business environment may change as the firms share resources.

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