Are there any benefits for my business to create alliances with other businesses?

Does this help or hinder competition?

Ever notice how everywhere you stumble upon a McDonalds, somewhere nearby you’re likely to find a Burger King as well? As counterintuitive as it might seem, this is actually done intentionally. And it’s not as a competitive response to one chain dominating a location, but in fact creates an accretive environment where client acquisition efforts by one chain work to the benefit of the other, and vice versa, and in result creating combined client attraction more powerful than the sum total of each chain’s individual efforts.

So too is the case with alliances in general. In today’s interdependent business world, no individual business can do well on its own. It needs to collaborate with partner companies, set up domains of client acquisition, co-market its products or services and yes, create alliances with its competitors.

Now this is not to advocate any anti-trust behavior, which of course is illegal and quickly is met with a legal response. Alliances are formed to capitalize on the individual efforts of its members such that a more cost-efficient structure can form that draws on the capabilities of each partner to its benefit as well as its partner’s.

Here’s an example. Two grocery stores operate within a block or two of each other. Both carry similar products but source them differently. It is not unusual that on occasion the supplier of one of the stores may be deficient in certain items while the other store’s supplier has ample product to offer. An alliance between the two grocery stores to cross-share supply in these situations benefits each partner, keeps consumers shopping in the area of the two stores, which in turn assures continued future business for both.

Alliances do not stifle competition because each company, in normal circumstances continues to strive to offer products or services better than the other, thereby acquiring a larger share of the local market and improving their performance. And here’s the next counter-intuitive benefit of alliances. Assisting a competitor in times of distress, and by so doing making sure it does not exit the market, incentivizes the well performing business to continue to perform, grow, improve and offer better products and services. Competition is good for both the well performing as well as for the impacted business.

Of course, you know your market better than any advisor you may be working with – it’s how you’ve reached your current operating performance. But at the same time, you may discover that using our deep business immersion approach with your organization, an external, agnostic pair of eyes may detect opportunities in the market that you may be missing or haven’t considered, ones which create value and accelerate your business.

If you feel you haven’t fully capitalized on these opportunities, please come talk to us.