Collaborations, Mergers and Partnerships

Partnership is a collaboration and may result in a win-win situation to both the partners and is a strategy that is based on how to compete with other companies. An alternative approach to beat the competition which can result in collaboration or partnership between two or more (normally two) parties or companies. In some situations, companies can achieve competitive advantage by cooperating with other firms rather than competing. Partnership strategies are becoming increasingly popular as firms in all industries join with other organizations to promote innovation, expand markets, and set joint goals to achieve and beat competition.. Partnering was once a strategy adopted primarily by small firms that needed greater marketing muscle or international access. Today, however, it has become a way of life for most companies, large and small. The question is no longer whether to collaborate but rather where, how much and with whom to collaborate. Competition and cooperation often exist at the same time. For example, Time Warner Cable, for instance abruptly dropped Disney’s ABC network in several major cities because of a dispute over fees for the Disney Channel. The companies engaged in all-out war that included front page headlines and intervention of the Government Commission. This conflict however, masked a simple fact: the two companies can’t live without each other. Disney and Time Warner are wedded to one another in separate business deals around the world. Disney’s ABC network, for example is a major buyer of shows produced by Warner Brothers, while Time Warner’s WB network carries Disney produced programs. The two organizations will never let competition in one area upset their larger cooperation on a global scale.

The Internet is both driving and supporting the move toward partnership thinking. The ability to rapidly and smoothly conduct transactions, communicate information, exchange ideas, and  collaborate on complex projects via the Internet means that companies such as Citigroup, Dow chemical and other well-known companies have been able to enter entirely new businesses by partnering in business areas that were previously unimaginable. Many companies are gaining a stronger online presence by partnering with a stronger company (fiscally). In one case one company maintains the site and processes orders, while the retailers fill the orders form their own warehouses. The arrangement gives a new source of revenue and frees the retailers to focus on their bricks and mortar business while also gaining new customers online.

Mutual dependencies and partnerships have become a fact of life but the extent of collaboration differs. Organizations can choose to build cooperative relationships in many ways, such as through preferred suppliers, business partnering, joint ventures, or mergers and acquisitions. Major types of  strategic business relationships according to the understanding of collaboration involved. With preferred supplier relationships, a company such as Reliance Fresh for example, develops a special relationships with a key supplier such as Procter & Gamble that eliminates middlemen by sharing complete information and reducing the costs of sales people and distributors. Preferred supplier arrangements provide long term security for both organizations, but the level of collaboration is relatively low. Strategic business partnering requires a higher level of collaboration. Five of the largest hotel chains have partnered to create their own Web site, to combat the growing power of middlemen. Accordingly the hotels felt a need to take back our room product and sell the way to maximize revenues. At the same time some business chains are striving to build more beneficial partnership with the third party brokers.

A still higher degree of collaboration is reflected in joint ventures which are separate entities created with two or more active firms as sponsors. For example, a Network company was originally created as a joint venture of a communications firm and equally reputed firm in the late 1970s. In a joint venture organizations share the risks and costs associated with the new venture. It is estimated that the rate of joint venture formation between US and international companies has been growing at 20 to 25 per cent annually since 1985.

Mergers and acquisitions represent the ultimate step in collaborative relationships. Global business has been in the midst of a tremendous merger and acquisitions boom.

Using these various partnership styles today’s companies simultaneously take over competition and cooperation. Few companies can go it alone under a constant onslaught of international competition changing technology and new regulations.