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Strategic partnership

24 February, 2015 - 17:30

A strategic partnership is a long-term business relationship in which the partner organizations make significant investments to improve the profitability of both parties (Mohr, 1994). Strategic partnerships are created to uncover and exploit joint opportunities while minimizing joint weaknesses. Both parties will contribute financially, and consequently take significant risks in order to provide the partnership with a strategic advantage. This type of partnership is founded on the basis that both members are dependent on each other. The partners will have the same goals, as well as agree on the best course of action to achieve those goals. In order to achieve the target objective, partnerships must be based on an open-door policy; the partnership cannot be successful if information is kept confidential or there is a lack of willingness to accept risk equally.

An example of a strategic partnership was evident in 2007 when Time Warner’s AOL strengthened their strategic partnership with Google. Google invested one billion dollars for a five per cent stake in AOL. The agreement created a global online advertising partnership, which has made more of AOL's industry leading content available to Google users. These strategic partnerships tend to be very successful because products and services are created that are not offered by competitors.

Before entering into any particular type of partnership, each company should consider all of the potential benefits and consequences. The next section of this chapter will help weigh the various costs and benefits related to choosing a relationship.