Thursday, April 10, 2014

The Competitive Benefits of Business Collaboration

Organizations collaborate for a number of reasons that range from necessity to strategic enhancement. Smaller organizations may collaborate to develop stronger responses to collective problems (Sowa, 2009) while larger organizations collaborate with smaller organizations to incorporate new competencies. Collaboration is an exercise of hedging the different knowledge and skills of each organization to compete together on the global market.  Without collaboration businesses may suffer for a lack of resources and abilities to meet new market pressures.

Organizations collaborate due to internal and external drivers resulting from changes in the environment (Yankey & Willen, 2005). These organizations do not have the current internal or external abilities to meet the new demands of global change. Collaboration gives them an opportunity to work together to face market pressure (external drivers) or share abilities and knowledge to lower operational costs (internal drivers).

The collaborative efforts between businesses and various suppliers create greater interactivity which leads to economic and functional advantages (Hughes, 2008). Collaboration helps suppliers understand the needs of their customers and work together to create better operations to enhance their services. Both the purchaser and the supplier work together as a unit and become co-creators in the process of development.

Companies that need to improve certain areas of knowledge may want to work with other businesses to speed up the process of information transference (Rodriguez & Nieto, 2012).   The gaining and use of new knowledge can help both companies learn to compete better on the market. It is this learning and development that lends itself to industry innovation (Cox, 2012).

Companies rarely work well in isolation from one another. They need access to shared resources, knowledge, and human capital. Not all companies can be everything to everyone. Some will naturally have abilities in one area while others have abilities in different areas. For example, collaboration between e-commerce businesses and distribution businesses may raise the functionality of both (Kuo-pin & Graham, 2011).

There are many different ways in which companies can work together that range from collaborative projects to full integrations. They can formalize these efforts in contracts and service agreements or work with third-party vendors on shared projects. Regardless of the type integration, organizations that hedge their skills and abilities regularly find competitive advantages on the global market.

Cox, P. (2012) Strategies for collaboration agreements focusing on innovation. Journal of Commercial Biotechnology, 18 (1). 

Hughes, J. (2008). From vendor to partner: Why and how leading companies collaborate with suppliers for competitive advantage.  Global Business & Organizational Excellence, 27 (3). 

Kuo-pin, C. & Graham, G. (2012). E-business strategy in supply chain collaboration: an empirical study of B2B e-commerce project in Taiwan. International Journal of Electronic Business Management, 10 (2). 

La Piana, D. (2010). Merging Wisely. Stanford Social Innovation Review, 8 (2). 

Rodriguez, A. (2012). The internationalization of knowledge-intensive business services: the effect of collaboration and the mediating role of innovation. Service Industries Journal, 32 (7). 

Sowa, J. (2009). The collaboration decision in nonprofit organizations: views from the front line. Nonprofit and Voluntary Sector Quarterly, 38 (6).

Yankey, J. & Willen, C. (2005). Strategic alliances. In R&D. Herman & Associates (EDS). The Jossey-Bass handbook of nonprofit leadership and management. San Francisco: Jossey-Bass

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