A strategic partnership can be defined as an agreement between firms to conduct business beyond the normal company dealings for their common benefit. For a company concerned with hospitality, real-estate development and lifestyle, a partnership with local markets would go a long way in marketing the company internationally. Since the global economy is growing at a very fast rate, companies do not have time to establish new markets. Therefore, a partnership with other local companies would be an appealing alternative and of immense value.
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A company aiming to enter the international market within the hospitality industry can enter into various strategic partnerships. The various ways in which strategic partnerships (having experience in local market) can be of importance in the global expansion of such a company include:
Enhancing growth strategies and entry into new markets
Formation of partnerships with existing companies which are familiar with local markets is quite a great idea since the company can make its expansion into an unfamiliar territory easier. Consequently, the company would gain a large market share locally due to the qualities and established reputation of the companies it is going into partnership with have won themselves in the local market. For example, Los Angeles-based SBE is a leading company in the hospitality and real estate development with a mission of redefining standards of excellence as well as innovation. The company draws experts with great innovative ideas rich in originality, with an aim of providing their clientele with the most unique and innovative brands. As such, strategic partnerships with such a company would be of invaluable benefit.
Obtaining best quality at a cheaper cost
Since technology is growing at a fast rate, obtaining it would be an expensive undertaking for any individual company. Therefore, partnerships with other already established companies would help the company reduce its operational costs while trying to adopt new technology. A study by Stuart shows that teaming up with other companies would help a company market itself both locally and internationally by outsourcing business functions, including marketing and sales, thus improving on its quality in service delivery (Stuart, 1995).
Reducing financial risks throgh cost-sharing in research and development
The cost of pursuing a new design to attract customers and investors may be overwhelming for a single company to handle. Through partnerships with other already established companies in the local market, a company within the hospitality, real-estate development and lifestyle can reduce the cost of gaining skills in service delivery, and thus minimize financial risk by spreading it among all partners (Pride, Hughes & Kapoor, 2011).
Strategic partnerships between companies can conduct a global examination of the world market trends, opportunities, threats and competitors and thus equip a company with the necessary information required before venturing into the global market. For instance, all industries operating under the SBE umbrella in Los Angeles have opportunities for mutual advantage which encompasses lifestyle experience.
Ensuring competitive advantage
Partnering with other companies can help a company whose target is to reach the international market to gain the required tools to make it competitive both locally and abroad. For instance, a list of the top ten kitchen gadgets and products, as released by HIS in Chicago, included a microwave potato chip maker, a solar grill, and a retractable peeler among others. Such information is vital for a company aspiring to venture into the international market.
Potential Foreign Market
A foreign market can be defined as one that is unfamiliar or new to a business firm (Rugman, 2002). For a growing hospitality, real estate and lifestyle company, a potential foreign market would be one in which foreigners are interested in their services, ideas and skills. One of the advantages of such a market includes a possibility to discover a new “window of opportunity” for the services being offered.
After venturing into a foreign market with a large number of foreigners being interested in the company’s services, a foreign partner might provide the company with vital information regarding possible areas of investments, technology or quality of services being offered in the foreign market, and thus empower it with numerous opportunities to compete better in the home market or even grow and expand in a third market. This will help the company to maintainn its leadership in the industry as is the case with Los Angeles based company SBE.
The most appropriate strategy for a hospitality, real-estate development and lifestyle company to use while entering a foreign market would be to form alliances with other companies with the same common understanding of goals, high quality service levels and developing formal statement of obligations. For instance, CLEO, Gladstones, Bazaar among other restaurants under the unified umbrella of SBE in Los Angeles.
Challenges from Competition in the Local Market
The various challenges arising from competition in the local market which may face a growing company in hospitality industry include:
a)Invasion of the local market by foreigners making the company lose some of its clients to the foreigners. As such, the company is forced to come up with new ideas to ensure that it competes effectively with other companies.
b)Low income due to service delivery at low prices by competitors. This forces the company to explore other ways of maximizing profit by considering both revenue and cost of operation.
c)Rugman considers collusion on the part of real-estate professionals as a major challenge to stabilizing prices as brokers within the industry offer services at low prices so as to maintain a large number of clients (Rugman, 2002).
Strategic response to such local competition may include the introduction of services and products in the foreigner’s home market so as to pull them out of the market and ensure that they are kept under pressure to avoid unsolicited orders from overseas (Wiklund, 1987). In addition, providing quality services at relative prices can be a better way of ensuring that the company remains highly competitive in the market.
In conclusion, for any company to grow and expand into the global market, partnership with other companies is essential. Such strategic partnerships help reduce the cost of entering the global market as an individual company through cost sharing and development of innovational ideas of which, both play a key role in developing significant objectives that are of mutual benefit to the partnering companies.