Strategic Business Partnership

Printer Friendly

Forming strategic business relationships is a way to enhance the competitive advantage of a minority-owned firms and increase success in securing business that might otherwise go to another supplier.  Business relationships take on many forms, from simple contractual relationships to acquisitions. But overall, these relationships are enduring business arrangements falling somewhere on the spectrum between these two extremes.

MBDA Minority Business Development Centers can guide your business into the right arrangement based on your company’s direction, core competencies, and opportunities based on industry. 

The types of strategic alliances include:

• Simple Contract – This is a basic transaction occurring when a business offer is accepted, and something of value is exchanged.  The contract is specific about what is expected by each party and does not obligate the businesses to any future deals.

• Open-ended Contract – This arrangement is specific about the terms on which the companies will do business, but perhaps not specific about how much business will be done or when.   

• Joint Contract – A company can contract with two or more entities to supply goods or services. Typically, two suppliers work very closely together and the contract's primary purpose is to communicate what the client expects of them.   

• Mentor-Protégé Relationship – Just as in personal mentoring, business mentors provide information and advice to other companies in their early years.  The best relationships provide meaningful guidance and result in a successful business relationship.

• Supplier Development Relationship – Today, competition is between rival value chains struggling for a share of rapidly-evolving global markets.  Competitive advantage, therefore, rises from various points in the value chain and makes it important for minority-owned firms to develop into strong value chain partners.

• Strategic Partnership – Two or more suppliers coordinate their strategies so they either become dependent on each other or else have a binding agreement to seek business together.

• Joint Venture – this is a legally independent business entity that is owned by the strategic allies.  It operates entrepreneurially, drawing on resources as needed from the parent organization.  It is distinct from a strategic partnership in that a new organization is created to achieve competitive advantage that neither parent organization could accomplish alone.

• Acquisition -  This type of relationship occurs when one company legally acquires the other.  The term “merger” is sometimes used to describe the relationship in order to portray the two former companies as being equals.