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Networking and Alliances


You Don’t Need to do it Alone


Although the success of your business ultimately rests on your shoulders, you do not have to do it alone. You can leverage the knowledge and resources of other people to improve your chances of success.

Always remember that other businesspeople are in a similar situation to you: they also want to succeed and thus can be interested in pooling information and resources for mutual benefit. This is the case even with direct competitors – you often have common interests with them based on your industry.

A business network is similar to a social network. Whereas a social network has people linked by friendship, a business network starts out as an association based on business interests. It can help you find reliable advice, pave the way to alliances and other beneficial relationships, and even help you find new customers. Similarly, if you are looking for a reliable business to act as a supplier or perform services for your business, you will often be able to find one through your network connections.
 
Tip

Māori business networks can be particularly beneficial. If you want to build your brand and point of difference around Māori factors, working together with other Māori businesses can amplify this. For example, a Māori business which sources all supplies from another Māori business creates a stronger brand than a Māori business which imports its supplies.

Being part of a group can make your business more effective. The principle ‘stronger together’ clearly applies. For example, if a group of businesses cluster together, they will be taken more seriously than if each operated completely alone.

These days, the ‘Māori brand’ has strong appeal internationally. When you pool your resources and product offerings with other Māori businesses, it becomes easier to reach and appeal to those markets.

Similarly, if businesses group together to try to influence government decisions about regulation, they are likely to be more effective than if each business went it alone. Smaller businesses can also partner together to secure large contracts that each business could not secure on its own.

As a business owner, your aim will be to become a well-known and trusted member of the business community. This might be your local business community, an industry community, the New Zealand business community as a whole, or the Māori business community, for example. You therefore need to get yourself out there and make you and your business visible — do not wait for others to come to you; you must be proactive.
 
Key Point

Many people who are highly successful in business owe some of that success to their skill at networking. Their strong business networks help them to solve problems and take advantage of opportunities quickly and efficiently.

Some suggestions for improving your business network include:
  • Join business or industry associations such as the Chamber of Commerce

  • Attend business related events, such as public lectures, openings, or seminars

  • Participate in public meetings or hearings

  • Give back to your community

  • Find and cultivate like-minded people. Do not miss the opportunity to make worthwhile friendships.

  • Help other businesspeople

  • Accept favours only if you will return them

  • Be active in the community and social media

  • Have business cards printed and always exchange them with other businesspeople

  • Attend trade shows

  • Develop a good reputation as an owner and employer

  • Deliver a public lecture about your business or your industry to other businesspeople

  • Follow up any contacts you make

  • Ask contacts to introduce you to new people

  • Be a giver, not a taker

  • Nurture your existing business contacts. Think of them as being like plants: without regular care they may wither and die.
Key Point

You must be patient: good business networks can take time to develop. Make sure to start work on your network before you really need it.

 
Factor to Consider

Keep in mind that, although a lot of modern networking is done through social media, nothing beats the effectiveness of face-to-face communication.


Benefits of Good Business Networking

In some cases, a business might be presented with an excellent business opportunity, but not have enough resources to take on that opportunity. In this case, joining together with one or more other businesses would allow the business to take advantage of the opportunity.

A good example of this would be two businesses pursuing an international opportunity together. For instance, many trade shows that are important to New Zealand businesses are held outside of New Zealand – you would need to attend these shows to meet with potential distributors. Having a stall at one of these trade shows can be quite expensive, due to the many costs involved. Partnering with another business is a way of sharing these costs and making it possible for both businesses to attend the show. Offering complementary products may also appeal more to potential buyers at the show.

Partnering with other businesses has many benefits. For example:
  • Share the risks.

  • Share the costs associated with large contracts.

  • You can seek partners who have complementary skills to yours.

  • Opportunities for growth – access to your partner’s distribution networks may help you gain market share faster than if you go it alone.

  • Access resources – your partner may be able to help you by giving you access to resources such as specialised staff, finance, and technology.

  • Access the target market – working with a local partner may be the only way you can access your target market.

  • They can provide support and motivation.
Keep in mind that while partnerships can be very beneficial, they can also create disadvantages. Although you should be open to partnerships that will benefit your business, do not hesitate to turn down any that look like they do not make business sense. Remember that the wrong partnership could risk your reputation as a competent businessperson or even risk your business!

Some disadvantages of partnerships include:
  • Disputes – if the relationship breaks down, ownership of intellectual property (IP) and jointly developed products can be an issue.

  • Cultural difficulties – working with other businesses can bring some cultural issues, even if those businesses are also New Zealand-based. Your ways of doing business and your values may be very different from those of others.

  • High level of commitment — to make a partnership work requires a high level of commitment both in terms of finance and time management.

  • Share profits – if you work together on a project or contract which has a set level of income, you will need to share those profits with partners.
You do need to be wary of joining forces with someone you do not know and are unsure of whether to trust. For this reason, businesspeople who have spent time building strong networks and developing a reputation as competent and trustworthy are much more likely to be able to find partners to take advantage of opportunities when they arise.

It is a good idea to always be on the lookout for opportunities to partner with other businesses, even if they are only small opportunities. If you can partner successfully with other businesses on a few small things, they will be much more likely to agree to partner with you on a larger business opportunity.

Do not wait for other businesses to come to you. Instead, be proactive when looking for partnership opportunities. Being proactive will gain you a reputation as a businessperson who is looking to get things done and who is willing to co-operate. This will, in turn, make your business more attractive to others who are seeking partners.

Strategic Alliances

A strategic alliance is an agreement between two businesses. In a strategic alliance, both businesses retain their independence and no new business entity is formed. Strategic alliances are often useful when two or more businesses offer complementary services. For example, a plumber could approach a builder, electrician, landscaper, concrete layer, architect, project manager, and interior designer and arrange for all parties to promote full house-building packages.
 
Tip

Remember that the greater the number of business entities in a strategic alliance, the harder it will be to manage. This is because the businesses retain much of their independence and there is no central authority to resolve disputes.

Each new member in the alliance creates additional relationships with all the other members – these increase rapidly as you add new members. For example, two members have one relationship, three have three, four have six, five have ten, and six have fifteen relationships. Given that a problem with any one of these relationships could jeopardise the alliance, it follows that you should think carefully about entering alliances with many members.

Joint Ventures

A joint venture is similar to a strategic alliance in that two or more businesses pool their resources towards a common goal. However, unlike a strategic alliance, a joint venture exists as a new business entity, separate from the members’ other business interests.

When two or more businesses enter into a joint venture, they typically have an agreement which sets out each partner’s rights and obligations, the purpose of the joint venture, and how profits and losses will be distributed.

An example of a joint venture would be two businesses which make different kinds of cosmetics joining together to create a new cosmetics brand for overseas export. By creating a joint venture, the businesses share the cost of brand development, brand promotion, and distribution, and at the same time create a valuable new business entity.