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A
feature from Dynamic Small Business Magazine,
February / March 1998.
Building
a strong relationship with another business is often the best way
to grow and develop your own small business.
Strategic alliances are a joining of forces, a combination of resources.
Both parties should benefit from the co-operative aspects of an alliance.
"You scratch my back, I'll scratch yours."
You may be able to utilize the extensive resources or distribution
range of a larger business. In turn, your business may be able to
provide special personalized service or have a unique skill or product
that the other business can use.
Often the way to strengthen your own successes is by building on the
success of others. An alliance might be an agreement to cross-promote.
You might join forces to advertise or distribute product. First and
foremost, an alliance is a relationship. This relationship must be
nurtured and there must be benefits for both parties for it to continue
successfully.
One Australian business is finding out the benefits of building alliances.
Chef clothing company, Chef Revival, is set to become a big name in
the Asian hospitality market having obtained a distributorship with
Eurochef-Asia, one of the world's biggest international distributors
of hospitality products.
"Asia
is currently the growth centre for the hospitality industry so we're
very excited to be able to carry the Chef Revival clothing range in
Hong Kong and are very keen to expand it throughout Asia", says Bradley
Caine, managing director of Eurochef-Asia.
Chef Revival was founded by Tim Grubi on a kitchen table in Noosa
ten years ago. The clothing is of very high quality and is made in
Australia from Australian fabrics.
Grubi carefully nurtured his relationship with Eurochef-Asia, having
first introduced himself to Caine at a trade show in Asia. "They were
under the impression we were an American brand", he says. "Eurochef
was looking for the best brands for the brand-conscious Asian market".
They were also looking for a relationship with us. We have been careful
to establish good initial liaisons with them. "We recommended they
didn't carry more than a select part of our range at first until they
obtained more confidence and their staff were trained."
Grubi plans to spend a lot of time in Asia building this relationship
in 1998. He plans to spend time personally meeting staff and training
with them to see how they do things.
Eurochef-Asia is based in Hong Kong but plans to expand within Asia.
"And where-ever they go, I'll go too", he says. Big Blue Thinks Small.
Small business can learn about working co-operatively from some innovative
thinking taking place deep within corporate giant, IBM.
IBM's Small Business Division is run like a small, separate entity.
As a department of one, marketing manager Jeremy Pollard experiences
the same rewards, frustrations and accountability as small business
owners.
This first hand experience has resulted in Jeremy instigating a co-operative
program aimed at educating and supporting its dealers ("business partners"),
so the interface with the customer can embrace the positive aspects
of small business; local knowledge, personal service and rapid responsiveness.
IBM backs this with its reputation, quality products and competitively
priced finance.
Nine
Steps to Building A Strong Alliance
How
IBM did it ...
Step
1 -
Piloted IBM offers through a co-op of dealers nationwide
Step
2 - Obtained feedback on what worked for the dealers
Step
3 - Held a planning session where dealers contributed benchmarking
information. This resulted in potential competitors sharing information
for the common good. Although dealers were initially territorial,
most realized they had areas of weakness and strength, and were receptive
to strengthening their business by listening to other ways of operating.
Step
4 - People informally networked to join forces and offer better
solutions for customers. Brainstorming of problems they are experiencing
individually.
Step
5 - Documented results of the planning sessions. The pilot
was scaled up to include large numbers of dealers.
Step
6 - Jeremy went on the road, shared the information and gave
marketing advice on how to sell IBM goods and services.
Step
7 - Held business functions with speeches by marketing expert
Michael Kiely and motivator Patrick McNally, along with marketing
templates individual dealers could implement. IBM offers bulk buys
of media that can be broken up for individual resellers. Some of the
best ideas are actually generated by the enthusiastic audience! The
major message of the marketing seminars is to work with existing customers
and be active in the local community.
Step
8 - Once people had met personally and trust had been established,
communication between dealers continues in an electronic forum (email,
messaging, notes). This negates the isolation experienced by small
business owners. Functions are also organized occasionally to give
IBM a human face.
Step
9 - IBM is forming associations with large industry bodies,
finding out their particular requirements, then matching them with
dealers. "Our vision of this is that somebody should be able to ring
up our switchboard and say "Hi, I'm in this suburb. Who's my local
IBM small business dealer?" And they say "Well you have a choice.
Were you after basic desktop, do you want networking, where you after
accounting or some web capabilities?" After getting the number for
the most appropriate people, the customer knows that the person at
the other end has been inculcated with the values of what we are trying
to do, using IBM tools and ideas, so there is some consistency of
service."
"One
of the reasons we work with associations is to encourage business
planning, because where businesses plan, they use more technology.
Why? Because if you know where you want to go, it's easy to buy the
tools to help you get there. Then we teach our business partners the
same thing." Distribution Is The Vital Link
by Lowell Tarring
It doesn't matter where your business is or what it is, if you make
the right connections you can make it work. Peter Storey's cheese
business is an example of how this theory works in practice.
Take an industrial designer and a quaint little cheese factory in
a country town. It may not sound like a recipe for a thriving small
business and one that is about to move on from small to something
much bigger.
But this is what happened to Peter Storey when he aligned his business
with experts in the field. The ABC Cheese Factory in Tilba NSW, had
been in business for 106 years. It employed four people as a quaint
tourist attraction until owner, Peter Storey forged a strategic alliance
with distributor, Menora Gourmet Products.
Now you can buy Tilba Club cheese Australia-wide: in David Jones,
Myer, Woolworth's and independent delis. Even though Peter Storey
is a pretty good business man, he could never have achieved all this
on his own.
The breakthrough year for the ABC Cheese Factory was 1987. Although
Peter had been running it for four years, his shop was really little
more than a curiosity. The factory was of historical significance
because it was indeed a cheese factory and the source of employment
for a few residents of this little country town.
Peter is an industrial designer by profession, and his family resides
close to Tilba. Seeking to make a living in these parts, he rented
the disused factory. As he developed the business he came to understand
that cheese was an upcoming product, attractive not only to tourists
but also to a wider market nationally.
The brand is Tilba Club. When you taste any of the 15 lines, you're
entering the world of cheese through Peter's tastebuds. But it took
more than that to create a successful small business that is rapidly
becoming medium-sized.
What really put Tilba Club on the map was also his distributor's advice.
It really was a case of small business linking with bigger business,
and 10 years later both are in a much stronger position.
Win-Win
Peter forged
his alliances with various distributors, who eventually gave him first
class advice, leading to big wins for both parties. How does a small
country-based business forge such an alliance? In Peter's case it wasn't
through any personal contacts, introductions or short cuts.
He simply knocked on the front door, by ringing up the supermarkets
and asking them who they would recommend as the best distributors.
Peter then rang those distributors, travelled to their premises and
interviewed them. Ten years ago, Menora Gourmet Products, who Peter
now describes as "family", gave him the following advice:
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Change your portion size - 500gm is either too big or too small.
-
Introduce product differentiation through different wax colours
and labels.
-
Develop a vintage cheese, and in doing so, challenge the middle
ground.
"They gave
me their expertise because they wanted my product to wholesale," says
Peter. "That advice fitted very nicely with the way I was thinking but
I needed that advice to help crystallize my thinking."
Shortly after the distributor won Woolworth's listing and just as
sales of Tilba Club were beginning to rise, the supermarket changed
there requirements.
It was a time when Woolworth's was leading its competitors and businesses
that got aboard the Woolies train were to share in its success. "Woolworth's
rang up our distributor and said, "If you want us to continue to stock
Tilba cheese we want it presented in vacuum packed portions of random
weight.
"I
wasn't sure if I could do that. I'd never originally intended to supply
supermarkets, and here I was facing a huge marketing opportunity!"
So he bought a vacuum packing machine, learned how to use it and taught
his staff, and began to look at his market as being potentially much
bigger than just the tourists who stopped to look at this quaint little
town. Although money was very tight, the decision to conform to Woolworth's
request was the real launch of the Tilba Club brand.
There are now 18-20 people on the ABC Cheese Factory payroll, more
than half are part-time or casual. The factory has the equivalent
of 10 full-time workers.
Since 1987 annual growth has been 30%-50%, which Peter admits was
very hard to control. Although the output was 160 tonne in 1997, he
says the ABC Cheese Factory is still a small business compared with
the main players.
Middle Ground
It was his
distributor's idea to continue the niche flavours, while also challenging
the middle ground. Peter says, "When we first went to Melbourne looking
for a distributor we had only four varieties and they were all flavoured.
Our distributor said we had to have a vintage cheese. I said, "Everybody
else has got a vintage cheese, why should we bother?" "But we developed
one and because I don't like doing anything the same as anybody else,
we had to create this vintage cheese that was noticeably different
to everybody else's. It quickly became our bestseller and remained
so until we introduced Sun Dried Tomato which keeps nudging Vintage
now, for No 1 honours."
Sharing Resources
"A lot of
small manufacturers hate the thought of using a distributor because
the distributor adds a margin which adds to the price," says Peter.
"But it's difficult for a business to survive and thrive without good
strategic alliances.
"A
lot of small manufacturers don't like that, they feel the increased
price makes them less competitive, and they also feel the distributor
is getting something for nothing. But everyone has limits to their
own expertise and the distributor offers a highly professional service
in the alliance. The distributor also offers a sales and a delivery
team. They contribute to promotions, and we're stronger because of
them."
The Whole Story
Every good
relationship thrives when the parties are stronger for having linked
arms, and when the whole is greater than the sum of its parts. Peter
Storey runs a small business in a tiny town, and he might have asked
himself, "Why would a corporation be interested in boutique cheese?"
Instead, he picked up the phone and tracked down the best distributor
around, forged a strategic alliance, and then another with the best
supermarket chain in the country.
He certainly has a good product, but so do many other small businesses
that never extend their reach. Peter believed in himself as well as
his product. He backed himself, and had the confidence to know that
just as he needs them, those bigger businesses need him.
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