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5.4 Strategic Alliances Questionnaire

What are Strategic Alliances and how can they be helpful to a small business like Central Plumbing & Heating Inc.?

Every business needs friends. Alliances are friendships and alliances that are formed strategically to help a small business like Central Plumbing & Heating Inc. promote itself and help to get the word out there in the community and market place, so as to bring it more business. A strategic alliance is struck when a small business owner like Felix Gonzalez feels that the alliance or relationship will directly fit into the larger strategy they have for the firm. For example if you are an online website selling children's toys, an alliance via a link and shared content with a website that provides children's safety information to parents may be extremely beneficial to you strategically - on the other hand an alliance with a gambling site will not be in your strategic best interest because it will conflict with your message and what you are trying to achieve.

What are more examples of Strategic Alliances?

One of the most common suggestions that we give our small business owners like Felix Gonzalez, especially those starting out in a new business is to establish a relationship with the local chamber of commerce. This is an extremely important and often overlooked alliance that can give the business an almost instant boost in terms of presence in the local business community. Local chambers of commerce are most often non-for-profit organizations that have been formed with the explicit purpose of promoting the businesses of their chamber members in the local market place. They hold mixers and events where local businesses like Central Plumbing & Heating Inc. that are part of the chamber, are able to participate and promote themselves to each other via networking.

Another great example of a strategic alliance is partnership with a local business to offer your products and services at a discount to clients of that business. Thus if you are a mortgage broker and you decide to form a strategic alliance with the local PBA by offering mortgage services to police officers at a discounted application fee, you may be able to secure a steady list of police officers who come to you at the recommendation of their local PBA - you may even get the opportunity to advertise in the local PBA newsletters and websites.

If you are a restaurant in Mecklenburg County, North Carolina you may offer a free desert to anybody from a local church in the same target market on Sunday afternoons to get some extra flow of traffic to your restaurant on a tradionally quiet afternoon. We recommend however that when you do set up these alliances, that you make sure that you are getting enough in return for the discount that you are offering to the clients towards your products or services.

Factors that should be considered by small business owners like Felix Gonzalez when setting up a strategic alliance:

A business owner like Felix Gonzalez will have to balance the possibility of returns from the strategic alliance against the differences in culture and philosophy of the partner with whom the alliance is being structured. We always recommend that our small business owners take the time to understand the work ethic, client service and overall operating philosophy of the prospective alliance partner before they move forward to set up the alliance. For example, if you have a prospective alliance partner that does not maintain the same high standards that you have in dealing with clients, the alliance could actually have a negative impact on your business.

The challenges arise when you have to send business and leads to your strategic alliance partner to reciprocate the business that they have sent your way. If your clients are used to being served by you at a very high level of personalized attention and integrity and they don't get the same level of attention and integrity from your strategic alliance partner - you will suffer the consequences of the negative customer experience. If you don't feel comfortable with the philosophy of the alliance partner, you should not set up the alliance or look for other potential partners.

Another very common strategic alliance is the local business networking group (BNI) - both offline and online. Business Networking Groups are a collection of local business owners that have come together with the specific strategic purpose of helping each other promote their respective businesses. This form of networking is very common amongst dentists, lawyers, real estate professionals, and other local service oriented small businesses. Here again, one has to be very careful with the kind of partners they choose - sometimes you have no choice and you have to refer to business partners of the BNI even though you may not be happy with all of them and the way they treat your referrals.

You can always start your own Business Networking Group where you choose who you do or do not give business - these tend to take a longer time to put together but have the benefit of having very like minded folks that you have had prior experience with and are comfortable with.

Quick Links:

  1. Go to the Corresponding Business Plan section for this industry.

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