Insurance Strategic Alliances Series : Part Five, Benefits and Challenges
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Strategic Alliances in the insurance industry can be extremely advantageous for the companies involved in the partnership. At the same time, there are some challenges that must also be addressed if the alliance is to be successful. In this part of our Strategic Alliance series, IAS will explain what the main benefits, the challenges, and offer some advice for handling these challenges.

BENEFITS

Ability to Offer Additional Services
One of the most attractive benefits of an alliance with another business is the opportunity to offer supplementary services to clients that they would not be able to offer otherwise. An alliance allows a company to offer its clients a new spectrum of services without losing focus on its core competencies and unique services.

Opportunity to Access New Markets and Customer Base
The companies share expertise, technology, skills, and resources that they did not have on their own prior to entering into a strategic alliance. As a result, the companies are able to enter new markets and increase their client base.

Increased Company Exposure
The strategic alliance also creates the ability to increase the company exposure and brand awareness. By increasing the company’s market size, a broader audience is able to be reached without additional investments in time, resources and capital.

POTENTIAL CHALLENGES

Selecting the Right Partner
When considering a company to form a strategic alliance with, it is very important to select a partner that will add value and help grow business. One also should choose a company who has a positive reputation, and has similar dedication, honesty, and integrity. Choosing the wrong partner can be damaging in many ways, from wasted resources to tarnishing company reputation, and possibly legal implications.

Building and Maintaining a Mutually Beneficial Alliance
In order for the alliance to benefit all of the companies involved, the people involved need to think and act in the best interests of the alliance, rather than their respective companies or individual interest. Commitment and communication are also important to keep the alliance mutually beneficial throughout its duration.

Having Diverse Expectations and Values
A strategic alliance needs to have a firm foundation in order for it to work well. Troubles can arise from conflicting operating practices, objectives, strategies, corporate values, ethical standards. Therefore, it is very important for the companies to communicate and set their expectations clearly at the onset of the partnership. Another important thing to discuss is potential issues down the road and how they will be addressed.

Over Dependence
Another challenge is becoming too dependent on the other company for critical expertise over the long term. This could potentially be very detrimental, especially if the alliance dissolves for whatever reason.

Dealing with Changes Down the Road
Change is inevitable, and the initiatives that worked at the onset may need to be adjusted later on. The aim of the alliance is to mutually benefit all parties. The alliance may need to be re-assessed or re-structured. It is a good idea to reassess the strategic alliance to make sure it is still working as intended.

Stay tuned next week on more ways of forming a strategic alliance and tips on forming a successful partnership!
 

Insurance Strategic Alliances Series : Part Four, Reasons for a Strategic Alliance
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Strategic Alliances are becoming increasingly more common and an integral part of successful business strategies for companies in the insurance industry. In the current environment, it is critical for companies to leverage their core competencies, maintain or gain a competitive advantage and enter leading market segments. In this part of our Strategic Alliance series, IAS will briefly look at some reasons companies decide to enter a strategic alliance.

Leverage Core Competencies
Every company has certain core strengths that they excel in and others they fall short. Strategic alliances between companies who posses different yet complementary core competencies allow them to truly utilize their strengths more effectively and efficiently. With the help of an experienced partner, a company can accelerate building skills and experience in important areas.

Establishing a Competitive Advantage
In a strategic alliance partnership, the participants share resources such as technologies, expertise and capital, resulting in greater resources than just what they have in-house. By pooling their resources, they are able to create a competitive advantage. Additionally, they can also block competitive threats. The companies’ reputations can also be strengthened by partnering with reputable and well respected industry leaders.

Entering Leading Market Segments
Developing strategic alliances also serve as a means for companies to expand and develop into new (and often lucrative) markets. The combination of the resources and expertise of the involved parties increases their speed of entry into the new market. They are also able to extend product offerings and fill product gaps more cost-effectively and reduce risk.

Some other reasons that compel firms to undertake strategic alliances are to:
• Innovate in the industry
• Establish a Unique Position in the Market
• Boost Market Presence
• Provide Added Value to Customers
• Expand Customer Base
• Increase Sales and Profitability
• Reduce Overhead through Sharing Costs – Economies of Scale
• Provide Marketing
• Set up Distribution Networks

So as you can see, there are a number of factors that lead a company to consider, seek, and enter a strategic alliance. The next part of this series, we discuss the benefits and challenges of strategic alliances. Be sure to visit us next week!