Business Partnership : Advantages & Disadvantages

Business partnership has advantages and disadvantages as you know. By doing partnership one side you get financial and resource support which ultimately boost your business. In another side, you are no longer free to take decisions. There may be conflict of interest at any point.

Mergers and collaborations are a common feature among businesses worldwide. They offer many benefits for companies depending upon the exact manner in which companies decide to work with each other. However, they can also carry a lot of disadvantages as well. This depends entirely on the terms set between the two or more parties. Here are a comparative list of benefits and drawbacks that you can get from entering into business partnerships:

5 Essential Pros and Cons of Business Partnerships

1.     New Market New Potential

Business partnership advantages and disadvantages

Entering a new market is not an easy task. It is very likely that companies would find that securing a reliable market segment is easier said than done. This is even bigger when the new market is in another country or segment where the company has no experience. In such cases, companies can collaborate with other businesses which already have a pre-existent presence in the market. However, this can also work against the company if they choose any partner unwisely. If the company has a negative reputation or does handle collaboration on marketing, then it can lead to major problems.

2.     A Piece of the Old Block

Business Partnership : Advantages & Disadvantages

Companies with a pre-existing reputation can help new companies acquire a better market presence In a short time. This is, of course, also impacted by the company’s previous history and other related factors. However, even without an active participation, companies with prior operational history can help newer companies establish their niche operations. For example, by becoming a silent partner offering consulting agents or simply loaning our industry experts, businesses can collaborate effectively. This does open up the chance for redundancies if the other company creates hurdles in ongoing collaboration.

3.     The Best of Branding

Business Partnership : Advantages & Disadvantages

Business partnership

Brand development under mergers benefits from the brand name of both partner companies. The same goes for virtually all collaborative endeavours. This is an ideal marketing strategy, even if the company is not well-known in a specific market. For example, an international automobile concern can collaborate with a local company and only supply them their brand name for negotiating profit shares. With that said, companies looking to formally enter the market later may find it difficult especially if the agreement holds them liable for working conditions, environmental responsibility, etc. In that country or other national markets they serve.

4.     Pooling Resources

Resource pooling is a great asset for smaller companies, especially when they do not want to be outdone by the competition. When collaborating with a bigger but less technologically leveraged companies, they can benefit from the fact that their partner can provide a more solid financial backing. This allows companies to take bigger leaps in growth and also deliver a better product to their audience. The catch here is that many smaller companies can get picked up by big businesses and not choosing partners wisely can put them on the firing line sooner than they might like to.

5.     Mutual Growth

Mutual Growth

Growing along with a collaborative partner is a great move for any company for many reasons. Chief among these is reliability. When a company, showcases stability and a collaborator profit orientation, it generates a greater interest in the shareholder market. So, if and when the company wants to enter the market solo or even take their collaboration, business public, there will be a ready market on offer. Further, companies working together and holding a respectable history can also find it easier to secure loans and manage their finances better. So, it largely benefits a company to grow mutually with their business partners. However, it can also be a liability if the partner is not willing to keep to their end of the process. For example, financial liabilities at the partner side can become a hassle for their other company even if they do not bear any direct responsibility.

Business Partnership :Advantages & Disadvantages

Conclusion

 Making business collaborations and choosing partners are all about finding the possible angles where things can go wrong. You can focus on the good bits rather easily since any collaborative venture offers a lot of business growth potential. However, covering the margins and ensuring that the liabilities are shared in proportion of the profits generated and capital invested makes collaborations successful. Making the right choice will require consultations, market analysis, reports and ultimately a keen eye for long term potential based on mutual interaction. Choose wisely!

 

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