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Forming alliances to grow one's business

Strengthen your competitive advantage--and grow your business!--by getting into quality partnerships
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There are several reasons why an entrepreneur would consider forming alliances or getting a business partner. In most cases, entering into an alliance is a move towards expanding the business.

The choice of a partner would depend on an entrepreneur's particular needs. For one, you might need a particular skill or talent that you don't have, which may be a reason to get a partner. Another reason is if you need extra financing. Or, perhaps you need a service partner, that is, someone whom you could outsource some functions of your business to, in which case, the service partner has no actual stake in the entrepreneur?s business.

In the case of MSI-ECS Philippines, a company that distributes top-of-the-line information technology products worth billions of pesos each year and employs about 300 people, the company had to form alliances with leading brands and products to succeed in this highly competitive business.

Jimmy Go, president and founder of the company, enumerates the brands, including 3Com, Acer, APC, Apple, Autodesk, Buffalo, Genius, HP-Compaq, IBM, Imation, Lenovo, Microsoft, NEC, Oracle, Sony, Targus, Samsung, and Trend Micro. "[These leading brands] would give our clients competitive advantage. You need to form alliances with them to be able to cater to different customers and markets," he says.

MSI-ECS currently sells such hardware and software products as LAN switches, laptops, desktops, diskettes, applications software, wireless devices, routers, UPS, storage devices, gaming devices, modems, the digital mouse, and other computer peripherals.

MSI-ECS started as a company called Microcircuits, which was established by Go right after finishing his electronics and communications degree in 1982. Microcircuits distributed computers produced by Apple and Fujitsu and, starting in 1986, by Hewlett Packard. In 1998, Microcircuits joined Digiland International, a Singapore-based IT distributor and regional partner of HP, to form MSI-Digiland, a joint venture for the production and distribution of the HP-Brio personal computer.

MSI-Digiland also got other brands including IBM and Genius. The partnership with Digiland, however, did not last long as Digiland got new shareholders who did not share MSI's way of doing business of selling at low markups and high volumes to remain competitive. Says Go: "They were no longer happy with a 1 or 2 percent margin for distribution. They wanted higher margins." So, in 2005, MSI and Digiland parted ways.

Just goes to show how important a factor compatibility is in choosing a business partner, as you must be able to work effectively with your partner in a professional manner.

By a stroke of good luck, ECS Holdings, another Singapore-based IT products supplier and solutions provider, came calling after MSI's split with Digiland. By 2006, MSI-ECS was born as a joint venture between MSI and ECS. It has remained robust since then despite the stiff competition. In fact, the company has been ranked by the Securities and Exchange Commission as among the country's top 300 corporations.

"Our business has been growing since the formation of the new joint venture. This is because we have a lot of synergy, a lot of things to share."

Go is not only intent on maintaining his excellent partnership with ECS, but continuously exerts efforts to maintain his alliances with the brands the company distributes.    

Go is always on the lookout for new solutions and products being introduced in the market both here and abroad. Indeed, by keeping tabs on emerging innovations, MSI-ECS is able to quickly inform its clients about new solutions and best industry practices.

Because the growth of the industry is so fast-paced, he explains, efficiency of distribution is key to continued success. "It?s all about managing cost, inventory, and accounts receivables," he says.

The company has invested P20 million for the computerization of its inventory system using the Oracle ERP (enterprise resource planning) system. This system, explains Go, ensures faster processing and generation of real-time information needed to monitor the sale and distribution of products.  
 
MSI-ECS now enjoys annual sales of P4 billion, a long way from when it started in the early 1980s with only P100,000 as startup capital and selling only five computer sets a month.

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-Based on articles by Lalah Varias and Kendrick Go previously published in Entrepreneur magazine.

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