Whether going into business for yourself or taking over an already well-established company, it’s good to know the different types of partnerships, when to use them and how beneficial they can be to your brand. There are certain types that may not make sense for your business model, but it’s a good idea to at least have an understanding of their function. You never know when you may need one of these types of business partnerships in the future as your company grows.
1. Tactical Partnerships
Tactical partnerships are generally more of a commercial relationship based on a shortened time period or cycles of time. The business deal is often negotiated in advance and involves distribution channels designed to push products. These partnerships are normally focused on short time spans and quick revenue growth with perhaps no thought of continuing the partnership. These partnerships are non-strategic and more convenient or logistical, and they focus more on short-term revenue goals.
Tactical partnerships can be quite useful in pushing certain new products to a new or unfamiliar market. It’s important to constantly re-evaluate your tactical partnerships. They can be quite useful in the short term, but may prove detrimental in the long run.
EXAMPLE: PepsiCo and Lucasfilm
Back in the mid-1990s, Lucasfilm negotiated a $2 billion promotional deal with PepsiCo to promote their “Star Wars” movie series. The deal went on to help PepsiCo sell not only its beverages, but also its Frito-Lay snack foods as well as advertisements and promotional merchandising at KFC, Taco Bell and Pizza Hut.
2. Strategic Partnerships
Strategic partnerships are often referred to as strategic alliances. These alliances are formed in mutual benefit to aid both companies in reaching goals that tend to supersede the immediate capabilities of each respective organization. A strategic partnership seeks to combine the strengths of two companies in order to enter a new market or gain wider market reach. For example, if one company specializes in innovative engineering, and the other has access to a large number of distribution channels, the two can form a strategic alliance to leverage the specialties of each. These partnerships can also be designed to bring about new concepts and innovation through collaborative ideation.
With many strategic alliances, the purpose is to bundle products and services in new ways to present something unique to the client or customer. This normally comes about by trading “secrets” of the industry to help one another out and to perform at a higher level. In these cases, there is almost always an agreement to some form of exclusivity in an attempt to minimize the competition.
EXAMPLE: Apple and AT&T (formerly Cingular Wireless)
In 2007, Apple released the first iPhone on AT&T. The phone’s release marked the beginning of a four-year exclusive partnership between the companies. In the course of the phone’s development, Apple gained access to AT&T’s voicemail system in order to support the phone’s “visual voicemail” feature, and AT&T benefitted from selling the first modern smartphone. Each company gave up something important to serve a larger, shared goal.
3. Operational Partnerships
Operational partnerships can be very similar to strategic partnerships. A company that is expanding to a new area might need an operational partner in order to establish a foothold in the new region or the new market. The job of the operational partner would be to provide operating capabilities that the entering company does not possess. In China, for example, many foreign companies need to find an operating partner in order to be allowed to do business in the country. In the same vein, disaster relief and non-profits use operational partners to enter and be more effective in host countries.
EXAMPLE: Northwest Airlines and KLM Airlines
In 1997, Northwest and KLM of the Netherlands created a joint venture that helped both airlines operate with greater ease in their respective continents. KLM gained access to the United States, while Northwest gained greater access to European routes where KLM had a strong position. These alliances are now the norm for many airlines. Ones you may have heard of are SkyTeam, Oneworld and Star Alliance.
4. Channel/Sales Partnerships
A channel (or sales) partnership is a relationship between two companies in which one company provides services or creates products, while the other company markets that particular product, service or technology. This type of partnership is one of the more common formations. Sometimes it starts out of convenience or tradition, but ultimately most businesses want to build that bond to form better business practices within their companies.
Channel partners can be used most effectively when a strategic alliance forms. This is one of the most beneficial partnerships to both parties, where the partnership brings companies together and creates new value on both sides of the spectrum. When companies strategically align channels, this can bring a convergence of profitable business with social responsibilities, all while creating higher value and improved business relationships.
EXAMPLE: EA and Square Enix
In the 1990s, video-game publishers EA and Square Enix were principally located in the U.S. and Japan, respectively. Each wished to sell video games in each other’s territory, but did not have the resources to do so. In 1998, the two companies formed a partnership in which EA would sell Square Enix games in the U.S. using two new joint companies called Square EA and EA Square. This arrangement led an increase in sales of Square Enix games, but EA games failed to find a market in Japan.