Strategic alliances: an effective growth strategy in a challenging economic environment

With the current tough economic climate in South Africa, new approaches are required for local businesses to survive and thrive. This is the opinion of Kuben Rayan, Group Sales Director at RentWorks, South Africa’s largest independent asset rental company. He believes that creating strategic alliances with other businesses is one valuable means of accessing new markets, as well as leveraging each partner’s core strengths and skills.

“We have found this to be true in our own business,” says Rayan. “By focusing on creating partnerships with suppliers, both parties have enjoyed the benefits of new business streams, as well as being able to pass along value-add to the end user.”

Rayan notes that with fluctuating exchange rates and pressure from a hedge perspective, many businesses are finding their cash-flow is affected. “We, as a leasing partner, have been able to assist our suppliers in providing an additional option to their customers who may not currently be able to afford to buy assets, while also ensuring that the supplier does not have to take the risk. We act as the financier. The supplier is therefore guaranteed payment and doesn’t have to negotiate payment terms or take on the financial administration. This improves suppliers’ cash-flow and offers them another finance option when seeking to close the deal with a customer.”

Candace Bronner, Channels Sales Manager at RentWorks, adds that the partnership also streamlines the sales process because suppliers no longer need to wait on a customer’s third party funder. “When suppliers have their own finance partner, it also minimises the need for the supplier to manage client engagement,” she explains. “With the financier taking the risk and handling customer liaison, the supplier is free to focus on core business activities.”

Developing strategic alliances

Rayan’s advice to other businesses looking to explore strategic alliances is to ensure that the partnership will be mutually beneficial and that there is a clear agreement in place.

“Make sure that the potential partner business has a proven track record and an established reputation,” he says. “You want a professional partner that will not damage your own brand. Depending on your industry, you also need to consider the type of after sales service and value-add that the partner can provide. In our case, for example, RentWorks is able to assist our partners with both financial and operational efficiencies. We enable suppliers to offer customers a one-stop shop because we will also take on the asset insurance, tracking and disposal if required. Because customers are not limited solely to their current cash budget, there is also potential to up-sell. ”

Bronner notes that it’s important to pick a partner that values transparency and accountability. “Carefully draw up agreements around each partner’s roles and responsibilities, and what happens at each stage of the sales process,” she advises. “For example, at RentWorks, we will inform our partner when a customer’s lease term is drawing to a close and will ensure that the supplier that originated the deal is given the opportunity to engage with the customer regarding renewal. You don’t want a partner that will take your clients to other suppliers, but you do want a partner that can bring potential new leads to you.”

Another possible benefit of strategic alliances that businesses might want to explore is whether or not the partner is willing to develop white label solutions where the scale merits customisation of the product or solution. This allows the company to seamlessly integrate partner offering into its own customer solutions.

“Effective strategic partnerships should give both parties growth opportunities, as well as a measure of comfort,” says Rayan. “You want to know that you are dealing with a company that will help you to protect your margins, gain an increased share of wallet, access new markets and support and grow your brand, as well as a business that is an expert in the field and understands the industry and its regulations very well. These, in my opinion, are the core elements you should look for when considering developing a strategic alliance with a partner business.”