A Strategic Alliance is NOT a Joint Venture

In a 2010 Inc. post, “How to Build Business Alliances,” I was surprised to read the very first line:

The basic logic of the strategic alliance – a joint venture between two companies – is often irresistible: It’s difficult to break into new markets, and a partnership can bring instant access to new customers. 

What? A strategic alliance is not a joint venture. Yes, a joint venture is technically a strategic alliance. However, the reverse is not true.

Specifically, a joint venture occurs when two companies invest finances to create a third, jointly owned company. The new subsidiary is a joint venture. This action is generally beneficial for sheltering the two partners from potential financial losses in case the new company fails.

On the other hand, a strategic alliance allows two companies to agree to share access to new areas of expertise, new markets, or new technology without forming a new company or fear of financial risk.

Deciding which is right for your particular situation all depends on what you want to accomplish. Both actions form a partnership that allows you to transfer technology, assets, and knowledge. However, a strategic alliance is usually done to enable you to pursue a new market, product, or strategy you cannot do on your own. The intent is not to form a business, but to share resources in an effort to strengthen each partner.

A recent example of a strategic alliance happened in 2011 when Facebook and Skype (owned by Microsoft) joined forces. This allowed Microsoft to venture into social networking, while Facebook had the opportunity to leverage Skype’s technology for video chat without the huge financial investment required to build their own system. Moreover, there are plenty of other examples of famous strategic alliances including Starbucks/PepsiCo and Hewlett Packard/Disney.

We can help you determine which move is right for you and then help guide you toward finding the best strategic alliance partners for you and your business. Contact us to learn more about strategic alliances or for a free Partner Audit today.


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