Starting a business from "scratch" is challenging. Equally as challenging is keeping the business operating profitably. Even more challenging is taking the business to the next level or growing your business. How can you grow your business externally?
This is done by using resources available outside your company. Those resources include: joint ventures, strategic alliances, licensing, franchising, mergers and acquisitions. We call them resources because they are "tools" or something useable to take your business to the next level.- Joint Venture: This is a temporary arrangement in which two or more companies join to undertake a project. The joint venture typically disolves after the work is completed. The benefits of working with another company are sharing technology, marketing and management expertise, costs, profits and risks. As an example - you receive an auditing contact from a large local company and you enter into an agreement with another accounting firm to help you complete the project.
- Strategic Alliances: This is a partnership between two or more companies established to assist each other in building competitive market advantage. Typically a company will have a product or service in one industry and another company in a differnet industry will have a product or service that makes an asscoiation of the two companies mutually beneficial i.e hotels and airlines or airlines and rental cars. Companies generally do not share costs, risks, profits or management. Like joint ventures, it is important to have a clear understanding of the partnership.
- Franchising: This is a strategy whereby you sell the rights to others to use your business name, product or service, and business system. The development of your business into a franchise operation is a complex operation. To do this it is best to engage the services of a franchise management consulting firm or attorney.
- Licensing: This is a strategy that allows another firm use your intellectual property rights and produce the product or deliver the service in exchange for compensation (royalty). The licensee usually bears the costs of producing and marketing the product and the risk of any potential profit or loss.
- Merger: This is the result of two firms forming one company. Firms merge when they want to diversify or expand their product line or wish to diversify business operations.
- Acquisitions: This is the result of one company purchasing the assets and liabilities of another. In purchasing another organization, expert legal advice should be sought and careful study of all aspects of the potential sale must be performed as a part of your "Due Diligence."
Whatever tool you decide to use requires due deligience on your part. Investigate each one thoroughly. In most cases it may require the use of a business professional such as a lawyer, an accountant,or consultant skilled in the specific tool you decide to use.
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