Question

Assuming that you are the head of the finance department at Chengshi Refrigerator Company (CRC), who is participating in a meeting to negotiate a strategic partnership with the German Engineering Group (GEG). What are the financial aspects to be considered, financial offer/statement?

Answer 1

In a strategic partnership, two businesses intertwine their efforts in a certain area, such as marketing, supply chain, integration, technology, finance, or a combination of these. These categories should be carefully considered when looking at a partnering strategy.

1.Development Partnership

Conducting research into new or improved products and services requires monetary investment, time, worker capacity and, in some cases, specialized equipment. To conserve resources and therefore mitigate the risks associated with R&D investments, some businesses choose to partner around shared research objectives.

For example:

• 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 rights

2. 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.

For example:

• Computers shipping with pre-installed third-party software
• 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

3. 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.

For example:

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

4. 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.

5. Supply Chain/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.