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Cooperative Strategy: a Game Changer for SMB’s

In a previous post I’ve discussed the business model of “John Lewis”, a UK based retail chain that has a unique outlook on the way the workforce should be viewed. At John Lewis every employee is a partner and as one, he also gets a share of the profit. Commitment between the company and its employees and between the employees themselves stands in the base of their success.

In this post I will focus on another model that has commitment at its base – The co-operative. By definition a Co-op is a non-profit community organization or business that is owned and managed by the people who use its services. But, what if you are in the making money business? How can you still use the co-operative approach to your advantage?

When people think about business, some view it as war- we need to crush the competition and conquer the market. But just like in real life – war is almost never the answer. However, peace isn’t the answer either – conflicts over price, cost and market share are inevitable and needed in the marketplace. All and all, it seems like finding the middle between competition and cooperation is where success lies.

The book “cooperative strategy” (published by Oxford University), mentions three ways in which cooperation and corporate combine. First, alliances are relevant when a company is trying to become more efficient or develop a new innovative product, yet it doesn’t have the technology or knowledge. Second, in time of economic uncertainty, creating an alliance can help companies share the resources but also the risk of new developments. And last, cooperation with other companies is sometime critical when you want to enter a new market, by using a new competitive advantage derived from the cooperation itself.

In order to assess the right configuration and constitution of future and current alliances, companies should evaluate the level of cooperation and competition in the relevant markets. If cooperation is high and competition is low, the market forces may pressure partnering companies to possibly merge. However, low cooperation and high competition may result in one partner acquiring the skills and knowledge of the other. If both dimensions are high, competition may eventually ruin the partnership but while it is going both companies would try to learn from each other as much as they can. Yet, if they are both low, both companies will lose interest in the alliance, and it will cease to exist.

Cooperative strategy could be highly relevant for big International Corporations, but for small and medium size businesses it could be a game changer. When resources, funding, knowledge and workforce is limited, and when acquiring new customers is so costly, looking for complementing businesses and cooperating with them is the key to success. This way small businesses create a dynamic network based on cooperation: a co-operative.

Based on: Child j., Faulkner D., Tallman S. “Cooperative Strategy”, Second Ed. Oxford University Press. 2005

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