A strategic partnership is a an agreed-upon collaboration between businesses with common missions. Although partnerships can take on a number of objectives and levels of formality depending upon the nature of the agreement, the overall goal of strategic partnerships is to share resources in a way that promotes growth for all partners.

Below find Partnerships can such as take place between businesses in the same industry or even across industries.

Types of Strategic Partnerships

TypeFunction
HorizontalBusinesses in the same area (i.e. competitors) agree to collaborate in a way that will improve their market position.
VerticalA business collaborates with companies in its supply chain (its suppliers and/or distributors). Vertical partnerships often allow businesses to minimize risk in the supply chain and obtain lower prices in exchange for long-term commitment. Also known as channel partnerships [LINK] or supply chain partnerships.
IntersectionalBusinesses from different areas agree to share their special knowledge for the advancement of all partners.
Joint VentureTwo or more businesses form a new company. The new company is its own legal entity, and its profits are split according to terms spelled out in a formal contract.
EquityA company acquires a minor equity stake in another business in exchange for a monetary investment. Such exchanges can accompany other types of collaboration and, to a certain extent, agreed-upon access to decision making.

Strategic Partnerships According to Purpose

Whether initiated between businesses in the same industry segment or businesses in completely different industries, partnerships can also be classified according to their purpose. Below find a few examples.

Development Partnership

Conducting research toward new or improved products and services requires monetary investment, time, worker capacity and, in some cases, specialized equipment. By nature, R&D is a risky but potentially advantageous undertaking with unpredictable results. To conserve resources and therefore mitigate the risks associated with R&D investments, some businesses choose to partner around shared research objectives.

Development partnerships can take on many forms; here are a few examples:

  • Joint research & development departments
  • Co-application to government research grants
  • A financially secure company offering funding to an organization with specialized research capabilities in exchange for intellectual property [LINK] rights

Strategic Integration and Referral Partnerships

Strategic integration and referral partnerships generate passive channels of customer acquisition. Through such arrangements, businesses agree to refer customers to their preferred partners. In many cases, especially today in the digital age, these partnerships are accompanied by integrations that allow customers to transfer their information between the business’s offerings.

Examples of such partnerships:
  • Computers shipping with pre-installed third party software
  • Discounted airport transfers offered by airlines
  • A customer relationship management software offering integrated access to a conference calling service
  • A movie theater offering popcorn and refreshments branded by their integration partner

Cobranding

Through cobranding, two or more manufacturers or sponsors produce an original product or service that is then offered under all of the partners’ names. Cobranding allows businesses to expand their brand recognition to new customers while offering existing customers a new way to experience their products or services, hopefully deepening their dedication to the brand.

Examples of cobranding:
  • Dual-branded Betty Crocker-Hershey’s cake mixes
  • Corporate event sponsors
  • The Chase/United MileagePlus Explorer credit card

Strategic Sales Partnerships

Similar to referral partnerships, strategic sales partnerships exist between manufacturers and businesses with the capacity to resell goods and services. What differentiates strategic sales partnerships from referral partnerships is that a resell partner receives payment in exchange for their referrals, typically as a percent of the revenues generated or on a flat, per item sold basis.

Supply Chain and Channel Partnerships

Supply chain partnerships, also known as channel partnerships, occur between buyers and sellers at every level of the supply chain. Participants in supply chain partnerships include manufacturers, distributors, retailers, raw goods suppliers and more.

Through channel partnerships, businesses move their relationships beyond one-off buying and selling transactions and develop methods of collaboration to create more stable and efficient supply chains that lead to increased sales. Channel partnership agreements allow for the open sharing of sales information, pricing data and best sales strategies. For example, just in time inventory allows retailers to communicate in real-time with their suppliers to maintain inventory of hot items.