The recent announcement of an intended change of business strategies for a Hong Kong television broadcasting company has captured many news headlines. One of the major strategies proposed is to transform the role of the company's core asset - its television broadcasting station, into a platform for strategic co-operation with the company's anchor advertising customers. The proposed move has prompted some interesting thoughts for business operators and investors.

How often do we sit back and take a fresh look at what really is the full potential of our core asset? What we really should do is to expand our horizon and reassess from time to time the opportunities that are available, not just based on internal management's assessment, but also from the perspectives of our potential strategic partners who can help maximize our business value. So who can potentially be our strategic partners? They include our customers, our suppliers, our co-workers, our competitors, our investors and our bankers, just to name a few. To work towards building the optimal value for our business, we need to think out of the box and make visualizing our potential a top priority. You will not know how valuable your resources can become until you team up with the right partners.

This need to be imaginative will be particularly valuable to China's OEM (Original Equipment Manufacturer) factory owners. While most factory managers, and the investors behind them alike, are focusing their attention on how to run an ever more efficient operation when in fact the marginal rate of return is diminishing, it should be time to take a fresh look at the opportunities in front of them and us.

The opportunity is about changing our role in the hierarchy of the production chain. OEM operators are often positioned at the bottom of the production chain where profit margin is thin and competition is fierce. The dilemma is, as we become ambitious and get our hands on high-margin processes such as product design, R&D and commercial deployment, we will be entering into direct competition with our customers, which is politically incorrect.

And this is when we need to be imaginative and reassess how we can re-package our resources to impress our OEM customers. Should we not transform our business into a platform for strategic co-operation? Should we not consider talking our customers into becoming strategic business partners with us? This way, we will get around the issue of causing direct competition.

Building strategic partnerships is an art. It involves maintaining the status quo, a mutual appreciation of value and a delicate arrangement for sharing rewards. This certainly goes far beyond technical knowledge and expertise.

To impress our OEM customers, let us revisit what we may potentially contribute to a partnership with them to gain their respect:

1. We have a better sense of the China market and are closer to the customers.

2. We can perform on-the-spot product localization and customization, and thereby shorten the time required to catch up with market demand.

3. We have stronger ties with the local workshops and can perform product re-engineering more efficiently.

4. We have better networking with the local merchants and can help build more effective sales channels.

5. We know the local media and can organize effective marketing campaigns.

6. We have a more thorough understanding of the local regulatory framework.

7. We are more up-to-date on available government grants and subsidies for which we are eligible.

8. We know which local universities and research institutions can help improve our product or production process.

In the end, whether the relationship is going to last or not will very much depend on the mindset of the industrialist. The typical psychological hurdles to be overcome include:

1. Are you really willing to leave your "comfort zone"? For once you move outside of the OEM-type business environment, you will no longer be able to enjoy the same degree of control you can normally exercise in your own factory, or as a major OEM player in your field.

2. How willing are you to listen to your professional advisors on the structuring of partnership terms? Are you ready to recognize value and contribution from your strategic partners? Would you hesitate to give away part of the future profits to your partner in exchange for intangibles that he brings to the partnership?

We must appreciate that strategic partnership is never about taking advantages of your partners. It will therefore not work for the selfishly calculating minds. On the contrary, the discipline to maintain a win-win relationship and the willingness to address your partners' needs will surely navigate you through a successful strategic partnership experience and open up a new world of business opportunities.

Francis Mak is a director of Corporate Finance at Grant Thornton. Opinions expressed are entirely his own.

(HK Edition 03/25/2010 page2)