Small Business Consortia Law and Legal Definition

Business consortia are alliances of individual business enterprises. Businesses involved in these sorts of consortia 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. By forming a consortium, the member companies that are involved are usually admitting that for the tie being competitive pressures are so great that the member businesses' ability to survive as completely independent entities 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.

SEE ALSO Cooperatives

BIBLIOGRAPHY

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. 3 March 1995.

U.S. General Accounting Office. Small Business: Workforce Development Consortia Provide Needed Services. Available from www.gao.gov/new.items/d0280.pdf. Retrieved on 13 June 2006.

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

Hillstrom, Northern Lights

updated by Magee, ECDI