What is a Consortium?
A business-to-business consortium is where two or more organisations work together to meet a specific purpose. They can be formal or informal. Regardless, each partner commits to the consortium by providing either money, business assets, or people.
Organisations would typically create a formal consortium, if the companies involved decide that it is best to actually setup a separate legal business entity to deliver the shared objectives. The founding companies comprising the consortium provide the financing and initial set of resources needed. Thereafter, the consortium acts as an independent organisation responsible for seeing to its own corporate identity, team, customers, and business accounts.
Informal consortia are more like partnerships, where the organisations involved in the joint venture do business together without creating a new business entity.
Why Create a Consortium?
A consortium is typically formed when multiple organisations have a shared vision to gain competitive advantage, in order to provide greater efficiency and/or effectiveness to its customers. As such, they can be comprised of companies of different sizes, from different industry sectors, and from different countries or regions. In addition, depending on the aims of each, a consortium may require either a short partnership (e.g., to bid for a public contract), or a longer partnership (e.g., to deliver real value to customers).
More specifically, consider the use of a consortium in delivering your products and/or services if you need one or more business partners for reasons including the following:
- Your business lacks the credibility or relationships needed to win new business;
- Your business does not meet the minimum turnover requirement needed in order to bid for a public tender contract;
- Your team, on its own, does not have all the skills, expertise and/or experience required to provide a competitive advantage;
- Your organisation does not have all the equipment and other technical resources you need to meet your strategic objectives;
- You do not the funds or inclination to obtain the resources you need; and
- Your company does not have the geographical reach required to pursue any new customers you’ve targeted.
Supporting the Consortium
When creating a consortium, businesses would typically use a Memorandum of Understanding to formally solidify the mutual understanding of all members of the consortium, without using a legally enforceable contract. Thereafter, consortium members can discuss and update the Memorandum of Understanding as needed to ensure that it continually reflects the joint perspective of all its members.
For a consortium to work there must be clear terms of reference with the roles and responsibilities of each member clearly defined. Each member of a consortium will trust that the others will proactively work together as they except so that the partnership will meet their joint objectives.
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