From the NBMBAA Entrepreneurial Institute®: Ally Versus Foe – Successfully Leveraging Your Competition
When Sylvester Hester learned that his small injector motor manufacturing company was losing its contract with its major client in the mid-1980s, he quickly discovered that the businesses he considered allies were now competitors as they each struggled to replace lost business, and companies he once considered competitors, now become allies as he re-invented his company. Hester – now vice chairman and chief operations officer for Global Automotive Alliance and president of ARD Logistics and Key Logistics Solutions – joined Adam Walker, chief executive officer of Homestead Packaging Solutions, and Oje Aboyade, founder and managing partner of GDP Capital Partners, at the NBMBAA Entrepreneurial Institute® Wednesday to discuss the different types of partnerships an entrepreneur can use to leverage the strengths of other companies to benefit both businesses and create sustainable success. The first step is to understand who your competitors are, says Aboyade. While many businesses define competition as other companies that make exactly the same product, using the same processes and materials, Aboyade points out that a narrow definition of competition don’t provide a true understanding of the market. For example, Coca-Cola considers all beverage makers competitors, so their marketing strategies are designed to differentiate Coca-Cola products from all other beverages, he says. The three steps to successful competition include: 1. Understand the competitive market: What are the macro trends and how do competitors position themselves in the marketplace? Partnerships with other businesses can also provide a competitive advantage for entrepreneurs. Whether the partnership is informal and relies on referring customers to each other for services not provided by one company, or more formal with agreements to work on a single project together, enter into a joint venture, or acquire another company, it is critical to evaluate a potential partner carefully, says Walker. In addition to performing due diligence to ensure the business is ethical, is financially sound and is led by people with the same work ethic as you, be sure to evaluate the company culture, says Hester. "Cultures of both organizations must work well together to ensure a long partnership. For example, I have successfully joint ventured with a firm that shares my personal and professional values of integrity, a belief that the customer is always right and an understanding that the most important asset of a business is its people." The panel of experts also recommends that any partnership include written agreements that clearly define scope of work and responsibility – and be reviewed by legal counsel. |
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