|There is a growing trend among industrial distributors to strengthen their businesses and improve their bottom line performance by joining forces with other distributors in an alliance.
Industrial Distribution recently reported the results of its
54th Annual Survey of Distributor Operations which revealed the following: 22 percent of respondents belong to a buying/marketing group, with an additional 15 percent belonging to an alliance or consortium. Among those respondents who are not presently affiliated with a group or alliance, 16 percent are considering joining a buying/marketing group and 28 percent are considering joining an "alliance, consortium or similar multi-distributor cooperative."
Dorothy Langer of Langer and Company, the move toward alliances among distributors is only an extension of what they are already doing in the way of partnership with their suppliers and customers.
There are some fundamental principles, she said, which should guide any business considering joining an alliance:
- Know your objectives.
What do you want out of this alliance - increased revenue, higher profits, enhanced market presence? Do you want to learn something?
- Understand what value you bring to you partners.
What does "the other guy" get if you join the alliance - a brand name, a unique presence in a particular market, etc.
- Identify the risks and obstacles.
Could your company become too dependent on the alliance? Might you lose some control over your business? It is important to understand what the risks are and what they might mean for your business. Once the risks and obstacles are understood, said Langer, "talk about how you can minimize the risk or remove the obstacle" to make the partnership a successful one.
- Establish boundary conditions.
Decide what you are willing to do and not do as a member of the alliance. Will you share proprietary information, use a logo, etc.?
If distributors create such a partnering strategy or plan, said Langer, it should give them the information they need to say, 'Who's right for me?' when reviewing the list of potential alliances.
That way, the distributor's decision becomes a proactive one. In reviewing the list, he should be able to answer these questions: which one of these fulfills most of my objectives for my company; which one needs my value; and will I be able to minimize the risk that might deter me from entering into this alliance.
According to Langer, with those answers, you can take a long list of possible partners and make a short list of likely partners.
She firmly believes that disadvantages to forming an alliance are "incredibly out-weighed" by the advantages. "Companies today cannot exist without partnering. The world is too complex. You need partners because you can't do it all by yourself," said Langer.
Twenty to 30 years ago, the question was 'Should we make or buy?' Today, she said, "The question is no longer make or buy, but make or partner. If there's a good way to do it with another and minimize the risk, do it. It's too expensive to do it all yourself. You don't have the expertise. You don't have the time to market."
She offered the example of Polaroid's entry into the digital camera market. Rather than taking time it did not have to engineer a digital camera, Polaroid opted to partner with other Japanese companies to get the camera into its own product line. Now, said Langer, Polaroid can apply its own technology to improve the product.
For More Information, Contact: Dorothy Langer at (617) 367-0657 or e-mail
Reprinted with permission from Distributor's & Wholesaler's Advisor.
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