SME CONSORTIA
1. SMEs usually have difficulty in exporting to foreign markets: they may lack the necessary knowledge and financing, may not meet foreign regulatory requirements, or may produce products in quantities or quality that are not adequate for foreign buyers, among many other potential problem.
2. However, these problems can often be overcome through cooperation among SMEs.
3. By combining their knowledge, financial resources and contacts within an export consortium, SMEs can significantly improve their export potential and reduce the costs and risks involved in penetrating foreign markets.
EXPORT CONSORTIUM
1. We can define it as a strategic alliance between two or more companies with the objective of addressing and developing a joint strategy to access foreign markets.
2. An export consortium is a tool for small producers to facilitate the export of products, which due to their reduced size, lack of experience and inability to fulfill large orders, they could not carry out by themselves.
3. An export consortium is a formal organization to promote medium- to long-term strategic cooperation among firms, and it organizes joint activities to facilitate access to foreign markets.
BENEFITS OF EXPORT CONSORTIUM
1. Primarily, companies that join this initiative due so to gain initial export access so as to increase their exports and strengthen their supply and commercial image.
2. We can affirm that export consortia enable access to new marketing channels and grant closer proximity and enhanced direct relationship with customers by indirectly achieving a synergy effect that benefits all participating companies, through training and rendering them more competitive in both domestic and international markets.
3. Likewise, the buyer is offered greater value through an increased product portfolio than if the company had presented itself individually.
4. In general, a small or medium-sized enterprise beginning its foray into international markets only has the financial capacity to participate in two or three international promotional activities a year.
5. With the consortium, the company’s international visibility increases in addition to its proximity to the customer.
6. The main advantages for small and medium-sized enterprises entering a consortium can include the following:
-Sharing of expenses / reduced costs for the company
-Willingness to hire competent professionals
-Increased bargaining power in relation to the customer (increase of product portfolio)
-Possibility of accessing difficult markets
-Mutual learning from companies as regards internationalization
-Utilization of business synergies
TYPES OF COMPANIES FOR CONSORTIUM
1. For suitable joint participation, companies joining this type of association must meet the following characteristics:
-Homogeneous companies / complementary products or services
-Products with similar exportability
-Medium term goal mentality
-Identical marketing channel / market segment
-Cooperation/joint strategy mentality
2. As to size and profile, companies tend to be family/small-sized companies where decision making is concentrated at the management level with little experience in international markets.
CHALLENGES OF CONSORTIA
1. Likewise, consortia face certain challenges or difficulties with respect to the following:
-Difficulties in defining a joint strategy
-Competition
-Commitment decisions
-A company´s sense of loss of freedom
-Possible economic and financial constraints among participating companies
OPERATING A CONSORTIUM
1. As to operating requirements, it is very important to have a manager whose duties have been defined by the group of participating companies itself.
2. In general, his or her functions should be tied to activities such as product sales and promotion, organization of trade missions and attendance at international fairs, advertising material, client account management, etc.
3. The manager’s salary usually consists of fixed contributions from each company in addition to a sales commission percentage.
4. In this regard, note that each participating company maintains its financial, legal and commercial autonomy.
5. Most consortia are non-profit entities, and members retain their financial, legal, managerial, and commercial autonomy.
6. So, despite their participation in the export consortia, member firms do not give up any control over their business to others. This is the main difference between consortia and other types of strategic alliances.
Source:
https://connectamericas.com/content/export-consortia-practical-solution-exporting
https://www.unido.org/our-focus/advancing-economic-competitiveness/setting-and-supporting-export-consortia/what-are-sme-consortia
