CHOOSING THE RIGHT

PARTNER
Before you even start looking
for a business partner, the first
thing you must ask yourself is
why you want to have a
partner.?
This applies whether your
business has yet to be
launched or is already
operating.
Here are some good reasons to
take on a partner:
Wanting to have a teammate with whom
to share the day-to-day stresses,
decisions and annoying details.
Needing someone to share the financial
risks involved in the business.
Having someone with skills you dont
have to establish a firm management
foundation for the business.

Now here are some reasons that do not
justify taking on a partner:
Youre lonely and you want company.
You need capital.
You want someone to lighten your
workload.
You hope to make useful new
business contacts


Several Partnership
Methods
Strategic Alliance
Is a voluntary, formal
arrangement between two or
more parties to pool resources
to achieve a common set of
objectives that meet critical
needs while remaining
independent entities.
Strategic alliances involve exchange,
sharing, or co development of
products, services, procedures, and
processes.
Stages of Alliance Formation
Strategy Development: involves studying
the alliances feasibility, objectives and
rationale, focusing on the major issues and
challenges and development of resource
strategies.


Partner Assessment: involves analyzing a
potential partners strengths and
weaknesses, creating strategies for
accommodating all partners management
styles.
Stages of Alliance Formation
Contract Negotiation: involves
determining whether all parties
have realistic objectives, defining
each partners contributions and
rewards.


Alliance Operation: involves
addressing senior managements
commitment, finding the caliber of
resources devoted to the alliance,
linking of budgets and resources with
strategic priorities.
Alliance Termination: involves
winding down the alliance, for instance
when its objectives have been met or
cannot be met.
Types of strategic alliances
Global Strategic Alliances working
partnerships between companies across
national boundaries and sometimes formed
between company and a foreign government,
or among companies and governments.
Equity strategic alliance is an alliance in
which two or more firms own different
percentages of the company they have
formed by combining some of their resources
and capabilities.
Non-equity strategic alliance is an alliance
in which two or more firms develop a
contractual-relationship to share some of
their unique resources and capabilities.
Advantages
Disadvantages
Allowing each partner to
concentrate on activities that
best match their capabilities.

Learning from partners &
developing competences that
may be more widely exploited
elsewhere.

Adequate suitability of the
resources & competencies of an
organization for it to survive.

share risk between the
companies.
Significant differences between the
objectives


Irreconcilable differences in business
culture and management styles.


Opportunistic behavior by any
participant.


Loss of control over such important
issues as product quality, operating
costs, employees, etc.

Starbucks
Starbucks partnered with Barnes and
Nobles bookstores in 1993 to provide
in-house coffee shops, benefiting
both retailers.
In 1996, Starbucks partnered with Pepsico
to bottle, distribute and sell the popular
coffee-based drink, Frappacino.
A Starbucks-United Airlines alliance has
resulted in their coffee being offered on
flights with the Starbucks logo on the cups.
Apple
Apple partnered recently with Clearwell in order to jointly develop Clearwell's
E-Discovery platform for the Apple iPad. E-Discovery is used by enterprises
and legal entities to obtain documents and information in a "legally
defensible" .
Hewlett Packard
and Disney
Hewlett-Packard and Disney have a long-standing alliance. Disney
wanted to develop a virtual attraction called Mission: SPACE, Disney
Imaginers and HP engineers relied on HP's IT architecture, servers and
workstations to create Disney's most technologically advanced
attraction.

Joint venture is the co operation of
two or more individuals or business
in which each agrees to share profit,
loss and control in a specific
enterprise.
FEATURES
Joint venture is a short duration special purpose
partnership.
Joint venture does not follow the accounting
concept 'going concern'.
The members of joint venture are known as co-
ventures.
Joint venture is a temporary business activity.
In joint venture, profits and losses are shared in
agreed proportion. If there is no agreement
regarding the distribution of profit, they will share
profit equally.
Joint venture is an agreement for polling of
capital and business abilities to be employed in
some profitable venture.

INTERNAL FACTORS TO STYLE A JV
Spreading prices

You and JV partners can share prices associated
with advertising, product or service improvement,
and other expenditures, reducing your monetary
burden.
Accessing additional financial
resources:
Sharing the economic risk with co-
venturer
Widening economic scope fast
Tapping newer methods, technology,
and approach you do not have
Building relationship with vital contacts
Shared profit Since you share
assets, you also share the profit.
Diminished control over some
important matters - Operational control
and decision making are sometimes
compromised in joint ventures.
Undesired outcome of the quality of
the product or project.
Uncontrolled or unmonitored increase
in the operating cost



Mergers happen when two companies
agree to legally combine into one
company, melding their management.


Mergers and acquisitions are often
confused. An acquisition involves one
company buying a controlling interest
in the stock of another company and
managing both companies under one
management team, which might
consist of a mix of managers from
both companies or only the managers
from the surviving company.

MERGER
ACQUISITION
COMPANY A COMPANY A COMPANY B COMPANY B
Company A and Company B
together form the new
Company C
Company A buys Company B
Company A

Horizontal mergers: It takes place when the two
organizations producing a similar product combine. E.g.: GAP
Inc. control three distinct companies, Banana Republic, Old
Navy and the GAP itself.

Vertical Mergers: It takes place when the two organizations
working at different stages in the production of the same
product, combine. E.g.: Carnegie Steel company, it control
the mill, iron ore mines, coal mines, the ships, the rail roads,
the coke ovens.

Conglomerate Mergers: It takes place when two
organizations operate in different industries. A conglomerate
is a large company that consists of divisions of often
seemingly unrelated business. E.g.: Tata group, Reliance
Industries etc.
Friendly Acquisition: In this generally poorly
performing organizations board od directors willingly
sells its shares to the acquiring organization.

Hostile acquisition: In this generally poorly performing
organizations board of directors opposes to sell of the
company. In this situation the acquiring organization has
two options:
1. A tender offer: It represents an offer to buy the stock
of the target organization either directly from the
shareholders or through secondary market.
2. Proxy fight: the acquirer solicits the shareholders of
the target organization in an attempt to obtain the right
to vote their shares. The acquiring organization hopes
to secure enough proxies to gain control of the board
of directors and in turn replace the incumbent
management.
To provide improved capacity utilization
To provide better use of the existing
sales force
To reduce managerial staff
To gain economies of scale
To smooth out seasonal trends in sales
To gain access to new suppliers,
distributors, customers, products and
creditors
To gain new technology
To reduce tax obligations
MERGER:
Merging of two organization
into one.
It is the mutual decision.
Merger is expensive than
hostile takeover.
Through merger
shareholders than merger.
can increase their net worth.
It is time consuming and the
company has to maintain so
much legal issues.
Dilution of ownership occurs
in merger


ACQUISITIONS:
Buying one organization by
another.
It can be friendly take over or
a hostile takeover.
Acquisition is less expensive
than merger.
Buyers cannot raise their
enough capital.
It is faster and easier
transaction.
The acquirer does not
experience the dilution of
ownership

MERGERS AND ACQUISITION
DEALS
LICENSING &
FRANCHISING
Franchising

Definiton

Franchising is a business model in which many
different owners share a single brand name. A
parent company allows entrepreneurs to use the
company's strategies and trademarks; in
exchange, the franchisee pays an initial fee and
royalties based on revenues. The parent company
also provides the franchisee with support, including
advertising and training, as part of the franchising
agreement.

http://www.wikinvest.com/concept/Franchising
Franchising is a faster, cheaper form of expansion
than adding company-owned stores, because it
costs the parent company much less when new
stores are owned and operated by a third party. On
the flip side, potential for revenue growth is more
limited because the parent company will only earn
a percentage of the earnings from each new store.
70 different industries use the franchising business
model.

http://www.wikinvest.com/concept/Franchising
How Franchising Works

The franchising business model consists of two
operating partners: the franchisor, or parent
company, and the franchisee, the proprietor that
operates one or multiple store locations.
Franchising agreements usually require the
franchisee to pay an initial fee plus royalties equal
to a certain percentage of the store's monthly or
yearly sales. Initial fees vary significantly across
each industry.

http://www.wikinvest.com/concept/Franchising


Advantages of the Franchising
Model
Franchisees require less initial capital than
independently starting a company and can use proven
successful strategies and trademarks.
Franchisees are provided with significant amounts of
training, not common to most entrepreneurs.
The franchisor benefits because it can expand rapidly
without having to increase its labor force and operating
costs, using much less capital.
Franchised stores have a higher margin for the parent
company than company-owned stores because of
minimal operating expenses in maintaining franchised
stores.

http://www.wikinvest.com/concept/Franchising





top 10 franchises
LICENSING
Is a form of foreign market entry based on a contractual
relationship, where a company (the licensor) grants rights to
intangible property to another company (the licensee) to use in a
specified geographic area for a specific period time and the
licensee ordinarily pays a royalty to the licensor.

ELEMENTS
Contractual relationship
Licensor
Licensee
Rights
Intangible property
Payment (Royalties)
Specified geographic area and specific period time
Contractual relationship
Is the relationship that exists between
parts to sign a contract, establishing
rights and obligations

LICENSOR AND LICENSEE
Licensor: Is obliged to furnish technical
information and assistance, agrees to make
available to another company abroad, use of
its patents and trademarks, its manufacturing
processes, its trade secrets, and its
managerial and technical services
Licensee: Is obliged to exploit the rights
effectively and to pay compensation to the
licensor, agrees to pay the licensor a royalty
or other form of payment according to a
schedule agreed upon by the two parties

RIGHTS
May be exclusive (the licensor can give
rights to no other company) or
nonexclusive (it can give away right)

INTANGIBLE PROPERTY
Include any item of worth that is not
physical in nature.
Patents, inventions, formulas, processes,
designs, patterns
Copyrights for literary, musical, or artistic
compositions
Trademarks, trade names, brand names
Methods, programs, procedures,
systems
Manufacturing techniques

PAYMENT (ROYALTIES)
The amount and type of payment for
licensing arrangements vary. Each
contract tends to be negotiated on its
own merits. For example, the value
will be greater if potential sales are
high.
THE SELECTION PROCESS
If, after careful thought, you conclude that taking on a partner is
the way to go, your first rule of thumb is:
Dont choose a partner who is like you. A truly effective partner is
someone with abilities and skills that complement your own and can
expand what you can do as a team.
If youre both engineers or have financial skills, for example, who
will manage the sales and marketing?

On the other hand, both partners must share the same business
goals. After all, youre each going to be putting in considerable
amounts of money, time and effort. You need to know that you
agree on where youre trying to go for bvoth the short term and
long term.

If your partners idea of business is to get rich quickly and that
doesnt jibe with your ethics, better to find out now before
finalizing any kind of partnership agreement.


Dont be too quick to make a decision about taking a partner.
You should discuss everything in great detail.

Unless the prospective partner is a longtime acquaintance or a
family member, it will take a while to truly understand the
person you may be working with. The wrong partner is worse
than no partner at all.

Difficult as it may be to discuss certain things about your life
such as health or personal problems nothing should be off
limits in a pre-partnership discussion.

Two seemingly perfect partners each had money to invest in a
gourmet-food business, had different areas of expertise and
shared common goals. Despite having a great idea and
working well together, their partnership dissolved because on
partner became distracted by a recent divorce. This partner
had conveniently failed to mention the divorce during
discussions about the new business.

Caution: An old friend or family member does
not necessarily make a good business
partner. Old friends have the advantage of
being known entities, but being buddies for
many years may make you too casual about
formalizing the business arrangement. That
could mean that you would leave critical
details about responsibility and
accountability unmentioned in the planning
process.

Similar difficulties arise when husbands and
wives go into business together. In this case,
success comes down to how well the
partners skills complement each other and
how well they can separate their marital and
business roles.

THE PARTNERSHIP
AGREEMENT

A well-thought-out and formally executed
partnership agreement is a must for a
successful, long-lasting partnership. Get the
help of a good attorney who will write the
contract in understandable English. Ideally,
both partners should have independent legal
representation in drafting or at least
reviewing the agreement.
The partnership agreement should
include
Full description of each partners responsibilities in operating the business
including who has responsibility for such matters as hiring and firing tax
issues purchasing, etc.
Clear language about each partners initial financial contribution and how
profit/loss will be divided.
Provisions that spell out the timing of withdrawal of partnership profits.
Clear, easily understood buy/sell provisions in the event that one partner
wants out. Spell out how the value of the business will be determined in this
situation, and how a buyout will be executed.
Provisions for continuing the business in the event of death, disability or
withdrawal of one of the partners.
A prohibition against either partner becoming involved in another competing
business.
Finally, in a two-person partnership, it is essential to add to the agreement a
plan for resolving disputes. A fifty-fifty partnership creates stalemates when
disagreements arise. Having each partner take 49% and giving the remaining
2% to a mutually trusted outside individual can solve this. This person, then,
can cast the deciding vote and avoid a deadlock.



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