SMALL BUSINESS CONSORTIA



Business consortia are alliances of individual business enterprises. These firms are often in the same broad field or industry, though they are rarely in direct competition with one another. Instead, members usually offer products or services that are complementary to those available through other consortium members. Unlike associations and other similar organizations, which engage in efforts to shape legislation and present a unified industry front, business consortia ally themselves for basic business functions, such as marketing. These alliances are not commonplace, but some analysts indicate that in the future, increasing numbers of small business owners may investigate consortiums as a way of sharing common costs, increasing purchasing power, and competing with larger companies.

Business consortia that do form usually come into being for specific reasons, such as competitive threats from a common enemy (whether another business or an unwelcome economic trend), changes in competitive structures, or deregulation. Writing in Acquisitions Monthly, John Eric Bigbie observed that by forming a consortium, the companies that are involved are usually admitting that—for the time being, at least—competitive pressures are so great that the business's ability to survive as a completely independent entity is in question.

Participants in business consortia admit that striking such alliances can sometimes curb a firm's ability to act independently, since it's words and actions will reflect on other consortia members. This can be difficult for some entrepreneurs to handle. Moreover, consortia can become crippled if their membership grows too large and unwieldy to make quick decisions, or if individual members fall victim to squabbling or worse as a result of personality conflicts, similar customer bases, or other business disputes. But proponents point out that a business consortium can provide several meaningful advantages to members as well. These include:

Increased clout. Whereas individual small businesses sometimes do not enjoy the same name recognition or respect as do larger companies, the collective bargaining and purchasing power of a consortium as well as the individual marketing efforts of members can provide individual businesses with increased recognition and stature in the community.

Savings of time and money. Joint marketing and advertising efforts save members money because they can pool their resources for better rates; they also save member businesses time because they do not have to undertake as much work themselves.

Expanded customer base. Membership in business consortia can provide participating businesses with increased exposure to new revenue streams.

FURTHER READING:

Bigbie, John Eric. "Consortia Back in Business." Acquisitions Monthly. April 1994.

Doz, Yves L., and Gary Hamel. Alliance Advantage: The Art of Creating Value Through Partnerships. Harvard Business School Press, 1998.

Smith, Jerd. "Strength in Their Number." Denver Business Journal. March 3, 1995.

Vaanderdorpe, Laura. "Capitalizing on Consortia: Cooperation Bolsters Research." R&D. October 1997.



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