What Is a Strategic Agreement?

First of all, what are strategic partnerships/alliances? Well, this is the type of business relationship wherein two or more companies utilize a common resource to help achieve a common goal. Usually, strategic alliances are entered by companies for the purpose of them expanding into a completely new market. Sometimes, they may even develop an edge over the competitors in the new market if the strategic agreement proves to be successful. The alliance formed is a partnership or collaboration that aspires for harmony, with each party hoping that the advantages of the alliance would outweigh the benefits of individual efforts.

A strategic agreement is a business document that is utilized by the businesses that enter a strategic partnership/alliance in order to solidify their collaboration plans by clearly spelling out the terms and clauses to be followed throughout the agreement. It is a contractual agreement between two or more organizations to pool resources in a certain project in order to gain a competitive advantage. The contract is frequently used to share products, distribution networks, production capabilities, project funds, capital equipment, information, skills, or intellectual property.

Key Elements of a Strategic Agreement

Listed and discussed below are the key elements that need to be written in a strategic agreement:

Services. This part of the strategic agreement lists and discusses the goods and services that the companies involved in the agreement will bring to the collaboration. It also states that the parties involved in the agreement are given a specific amount of time prior to termination to enter an extension or to enter an agreement with a completely different partner.Management. The key thing to note here is that the parties involved in the agreement should designate an individual who will be able to act on their behalf when it comes to matters concerning the strategic partnership. The individuals who are appointed are then designated as primary points of contact and representative managers.Partnership. This key element states in clear wording that the parties involved have agreed to enter a strategic alliance. It also states that throughout the agreement, the parties shall retain their status as independent contractors and will retain their rights and abilities as independent contractors.Intellectual Property. One of the most critical aspects of any type of business partnership or alliance is the protection of intellectual property. That being said, this part of the agreement should clearly state that all the parties involved retain full rights to their respective intellectual property at all times.Assignment. This section of the agreement says that neither party shall trade, delegate, or assign any element of the strategic agreement to any non-authorized third party entity at any time throughout the agreement. If any party is obligated to make a notification, it may be given physically or by legal letter to the intended recipient.Severability. This section of the agreement specifies that if any of the strategic agreement’s conditions are determined to be illegal or unenforceable, the parties will have the right to substitute the condition with an equivalent enforceable provision as considered appropriate. However, if any of the requirements in this agreement are substituted, the remaining terms will remain in full force and effect and will not be amended.

Types of Strategic Partnerships

Listed and discussed below are some of the different types of strategic partnerships:

Supply Partnerships. This is one of the most prevalent types of strategic partnerships. These are the suppliers and manufacturers who provide your organization with the products, services, and materials it requires. These are sometimes exclusive relationships, such as awarding exclusive contracts to businesses (for instance, having an exclusive paper supplier contracted for your office requirements).Integration Partnerships. Strategic integration is mostly about bringing disparate elements together. The purpose of this type of strategic partnership is to make a customer’s daily contacts with businesses easier, more convenient, and personalized. Finally, integration seeks to make a company’s product so simple and valuable that it becomes a part of its consumers’ everyday life.Marketing Partnerships. This is a sort of strategic cooperation in which two firms in the same industry help each other locate new consumers or clients. Larger organizations, such as manufacturers, may find partners in businesses that sell the manufactured items, with the agreement to make and sell products solely for each other.Financial Partnerships. If the company being operated is not active in the financial sector, it may be advantageous to collaborate with an outside organization to manage the company’s finances. The advantage of employing a financial institution to deal with things such as accounting is that they have the skills and competence to handle these concerns solely. This is especially true if it would require the deployment of important corporate resources to solve these issues.Supply Chain Partnerships. Multiple organizations collaborate to develop one end product through supply chain partnerships. It is effectively one giant manufacturing firm where each small business develops its own part, delivers it to the next company, and then adds it to a product. The procedure continues until the last firm completes the product. Because the completed goods are frequently proprietary, many supply chain agreements are exclusive.Technological Partnerships. Since the world has become more reliant on technology as time goes by and different evolutions are witnessed, it has become an important part of running a business in making sure that it has sufficient resources to maintain the technology it has. Finding the right technology partner can make the operations of a business even smoother and keep it on its track.

Why do Businesses Enter Strategic Alliances?

Listed below are some of the different reasons why businesses choose to enter strategic alliances:

It lets them set new standards. As companies enter alliances, new technologies get developed. And as new technologies get developed, new standards are set. And trying to be the first company to set standards with the new technology is a very risky process. Creating alliances is one method of developing industry standards. It also enhances the likelihood that the standards in which a firm invests will be approved across the industry. Standards create markets, and as a result, many high-tech businesses cannot afford to be absent from any form of alliance, consortium, or other collaborative efforts.It helps enhance competitiveness. Entering strategic alliances or partnerships will also enhance a company’s competitiveness in its market. Many international commerce ventures need the participation of experts from several sectors. Traditionally, businesses have attempted to create or keep all necessary talents in-house. Companies are realizing, however, that they cannot handle everything on their own as technical and administrative complexity grows. As an outcome, the most competitive firms are focusing only on their core capabilities.It helps form sales economies. Partnerships/strategic alliances can provide economies of scale, allowing participating enterprises to pool a diverse collection of resources and acquire the critical mass required for worldwide success. Companies with complementary talents can rely on one other’s established knowledge rather than investing time and resources in developing what has already been accomplished.It divides/shares risks. Risk-sharing through collaboration is most common in research and development. The expenses of research and development are always rising, and the rate of things getting invented means that items become obsolete quickly, raising the risks of investing in producing new products. Different firms form alliances in the business sector through collaborative marketing, which is another method of dispersing risk and improving profits. It is now quite usual for workers such as filmmakers, book publishers, toy manufacturers, and fast food restaurant operators to collaborate on simultaneous promotional efforts that share the risk of new initiatives and promote each other.It helps them enter foreign markets. Partners in a strategic alliance can contribute proven marketing and distribution infrastructure, as well as expertise of the markets they serve, by entering international markets, ensuring that products reach the market faster and are much more likely to be acquired. Strategic partnerships can also be beneficial when market circumstances or government regulations create obstacles to market entrance. Working with a local firm can help overcome these obstacles.

Steps in Establishing a Strategic Partnership/Alliance

Entering a strategic alliance with another company has a number of benefits, some of which include the prospect of expanding your business to new markets, therefore, giving more room to grow, and it also helps your company learn something new from the partnership. With that being said, here are the common steps to take if you want to enter a strategic alliance with another company.

  • 1. Establish the Things That you Need

    This serves as the first step to take prior to entering a strategic partnership. It makes absolutely zero sense if you don’t know what you’re doing or if you enter a partnership blindly. In other words, establish what you really need first. Have a particular aim in mind whether your company requires assistance with distribution, marketing, money, or anything else. The only way of knowing if you’ve accomplished is to recognize what you’re aiming towards. Whenever you understand what you want, you may hunt for a spouse that shares your values.

  • 2. Perform Sufficient Research

    After establishing the things that your business needs in the alliance, this is the step that will follow, which is to perform sufficient research about the needs you’ve established. You can search online, call or email individuals in your network, or phone businesses to ask a few easy questions, attempt to obtain information on which firms are most likely to assist your business reach its goals, and, more significantly, which organizations are most likely to get into a partnership with you. Additionally, attempt to ensure that the collaboration is beneficial to both parties by locating a firm that requires what you supply. In this manner, they are much more likely to provide you with what your firm requires in return.

  • 3. Develop an Agreement

    After performing sufficient research regarding your needs, this is the next thing to do. When you’ve identified a firm that would make an excellent partner and they’ve committed to a deal, suggest having a legal professional draft an official agreement. This is due to the fact that when collaborating together to form the agreement, you might discover that both sides have their own criteria that must be worked out before signing. This is why employing a lawyer or another legal representative is beneficial. They can also assist with the creation of contract wording to ensure that all parties are satisfied before signing.

  • 4. Honor the Agreement

    Once all sides involved have signed the agreement that was created, it would be good practice by honoring what was included in the agreement. Once you’ve formed a business relationship, it’s critical to keep your partner’s requirements in mind whenever you work. Keep in touch with your business partner whenever appropriate, continue to refer them or uphold the agreement by giving your services. Because the objective is to benefit both firms, ensure that your business partner benefits in the success and is satisfied with the terms of the agreement. If you keep your strategic partner satisfied and perform your bit, they may be more inclined to uphold their end of the bargain.


What is the role of strategic alliances in a standard product life cycle?

In a standard product life cycle, the firm produces a new product item every few years and may or may not be able to sustain its industry leadership position. Strategic alliances are then developed in a typical cycle to gain market share, force out rival corporations, pool resources for significant capital projects, achieve economies of scale, or get access to additional resources.

What is the difference between a joint venture and a strategic partnership?

A joint venture is a commercial arrangement in which two or more parties pool their resources to complete a specified activity or achieve a desired outcome. A strategic alliance, on the other hand, is an agreement between two or more parties to work on a mutually beneficial initiative while staying independent of one another. Fundamentally, it enables the autonomous parties to collaborate toward a shared purpose that benefits all parties involved. A joint venture’s goal is to reduce risks by working together to achieve a commercial goal. A strategic partnership, on the other hand, seeks to optimize returns and produce a profit.

What is the business model of a strategic alliance?

The business model of a strategic alliance entails chasing partners not just because they add value to your firm, but also because they may benefit from your organization’s goods, services, or brand awareness. In other words, a strategic partnership business model should be a mutually beneficial arrangement, not a one-sided agreement developed simply for the purpose of increasing income.

There are various reasons why a strategic partnership should be entered, by a startup or a growing company. At the minimum, it expands what the partners in the agreement have to offer to each other, thereby adding more value to their product or service. In this article, there are various sample templates of a strategic agreement that you can obtain as a sample when the time comes that you need to make one.