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What Is a Business Alliance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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A business alliance is a working arrangement between two or more companies that typically involves the sharing of resources as a means of reducing the costs of operation while enhancing the ability of each partner business to serve its clientele. In many instances, this type of business agreement also provides opportunities to cross-sell goods and services to the current customer base of each partner in the alliance, a strategy that can ultimately help increase the sales volume for everyone concerned. The duration of the business alliance may be short-term and structured to accomplish specific goals connected with a project, or be an ongoing relationship that endures for a number of years.

There are several different approaches to the concept of a business alliance. Within the scope of a sales alliance, two or more companies may enter into an agreement that allows all parties to offer goods and services to the customers of the member businesses, often with some sort of discount. For example, a long distance company may partner with an satellite television provider, with the understanding that the clients of each company will have access to the services offered by the partner as a specific discount off the standard rates. Sometimes known as a solution-specific alliance, this approach can often generate additional business volume, based on the name recognition of the partners and the degree of trust that customers have in both companies.

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At other times, the business alliance may have to do with creating a partnership to sell products within a given geographical location. This kind of geographic-specific alliance makes it possible to relate the product lines of the partner companies to one another as a means of gaining a greater market share within that community. A basic example may be a hot dog manufacturer that chooses to enter into an alliance with a bread maker, and focus on promoting the sale of hot dogs and buns as a package deal at grocery stores located within the geographically designated area.

A business alliance may also come together as a means of pooling resources for investment in a specific project. Sometimes called an investment alliance or a joint venture alliance, this strategy allows several companies to pool resources as a means of providing funding to a venture that is likely to earn significant returns over time, or even as a means of investing in certain securities that help to create revenue streams for all parties that hold membership in the alliance. Combining resources can often allow the member companies to take advantage of opportunities that would either require more capital than the businesses would be willing to commit individually, or ventures in which assuming the entire risk would be unwise.

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