A strategic partnership is a situation whereby two or more firms from different countries come together to work as a team. They pool their resources or skills to provide better products or services. Furthermore, they reach a broader audience through teamwork. Firms bond in global strategic corporations because they think the joint venture will lead to increased profitable remunerations.
Hence, for a firm preparing to go international, it must plan to liaise with a firm from another state. This planned partnership depicts a dynamic role in corporation growth taken on by a key section. With a peripheral strategic affiliation, one looks for a balancing relationship where both sides see benefits. A domestic strategic corporation can assist to form a managerial structure that encourages enlargement.
Strategic corporations that have knowledge in limited will help make international expansion possible in the following ways:
Enable firms reach wider customers. Firms are able to reach a wider audience than when the firm is working alone. Each firm relies on the other's reputation in its main area of operation. Clientele may not even recognize the firm in their domicile country has partnered up with an inside firm. They only know they are getting a wider range of services or improved products (Lientz & Rea, 2001).
Strategic corporation’s assist firms enlarge by facilitating a firm get its products into a foreign market since a company in the overseas market knows the commerce culture of the area and can facilitate faster, more resourceful expansion. In exchange, the growing company offers its planned business associates a portion of the income generated by the expansion.
Firms are able to share resources through planned corporations to help one other develop their employees, and assist one other in mounting a periphery in the market. Both companies share information on the technology desired to do the work, and they help to train one others' employees to develop and sell the technology. Both partners profit from the new expertise that advances their position in the market (Coakes, 2003).
Strategic partnership increases the exposure of each partner in the marketplace. Two harmonizing industry leaders that merge forces can create an advertising effect that influences the business. When entering into a foreign market, some of the strategies that can be used include exporting; licensing, Joint Venture and Foreign direct Investment. Exporting involves marketing and direct sale of domestically-produced goods in another country. It is a well-established method of reaching foreign markets. This mode requires coordination among exporter, importer, transport provider and the government.
Licensing, on the other hand, permits a company in the target state to use the chattels of the licensor. Joint Venture’s ordinary objectives comprise market entry; threat or return sharing, technology sharing and joint product development, and conforming to government regulations. Foreign direct Investment; is the express ownership of amenities in the marked country. It involves the transfer of resources including capital, technology, and personnel.
In the implementation of the strategic partnership, companies experience several challenges. These challenges include: Resistance to change by some firms in executing on strategy is a serious challenge since it involves adopting a change in approach and new ways of doing things. This also means that members of the firm and partners have to be convinced that the need for change and the chosen approach is the right one.
Political and legal influences also play a great deal in a local firm’s efforts of trying to go international in its strategic plans. The political relations amid a firm’s state of headquarters and one more may, through no responsibility of the firm’s, turn out to be a main subject. Particular matters in the political surroundings are predominantly important. Some states, like Russia, have comparatively unstable rule, whose policies may change radically if new influential come to power by independent or other ways. Some nations have little customs of equality, and thus it could be difficult to execute (Jeong, 2005).
One severe setback in some nations is a restricted access to the lawful systems as a way to remedy grievances alongside new party. Whereas the U.S. may depend exceptionally on proceedings, the inability to efficiently hold contractual associates to their accord tends to restrain business contracts. When rules of two states vary, it may be promising in a contract to spell out before hand which laws will be relevant, though this accord may not be constantly enforceable (Brewer, 2007).
Another challenge is that the strategies might be weak or inappropriate. This implies that there is thelack of a realistic and honest assessment of the firm which might lead to the growth of a weak, unsuitable or potentially unattainable plan. A weak plan may also result from excessively aspiring or impractical firm influential, or partners who adopt an ill-fitting policy with respect to the firm's current position, or market competition.
Ineffective leadership is another challenge. It affects planned corporations when firm leaders are unable or unwilling to carry out the difficult decisions agreed upon in the plan. To amalgam the setback, partners within the firm frequently fail to hold leaders responsible for driving implementation, which ultimately leads to a loss of both the firm's speculation in the plan growth process.
Insufficient leadership attention is another challenge as the firm's Managing Partner and Executive Committee members may find themselves immersing in other firm matters, mistakenly believing that writing the plan was the majority of the work involved.
Insufficient partner buy in, whereby, partners who may not see the need for change in the business, and without understanding the background and rationale for the chosen strategy may never buy in to the strategic plan.