United States Department of
Foreign Agricultural Service
Ag Exporter Magazine, February 1996.
by Eric Trachtenberg, Forest Products Division, FAS
Taking the time and money to master the basics of exporting - learning about shipping, documentation, market research and creating relationships - while manageable for a large company, can be overwhelming to a small business. Many small firms lose the chance to export because they can't afford the costs and risks of doing business overseas.
One way to overcome this barrier is for small businesses to form an alliance that joins the forces of several organizations.
Strength of the Forest
Northwestern forest product manufacturers have profited from WoodNet, an organization that combines the efforts of more than 300 firms from five counties on
Networks Effective in Europe
Networks have been used effectively in
Overcoming the Hurdles
Despite the benefits, it is not easy to organize an effective alliance. There are a multitude of export business groups, including flexible networks, cooperatives, export trading companies and trade associations, offering benefits ranging from information sharing to profit sharing. It is important to know what type of organization to develop. Some types of alliances include:
* "Soft" non-profit networks to share
information between members.
* "Hard" networks to pursue business ventures for profit.
* "Vertical" organizations where each member produces different components or contributes a value or service along the marketing chain of the final product.
* "Horizontal" networks for firms that make similar or competing products and share information with each other.
* "Knowledge" networks that allow businesses in unrelated industries to share services and learn about other businesses.
It can be difficult to organize a group with members from a large region or for competing businesses to overcome a history of mutual mistrust. Another consideration is financing. To survive, a network needs a well-designed financial plan that accounts for initial startup costs and later day-to-day operations. When organizing alliances, it is critical that any network be developed with the members' resources in mind, and that the alliance be run by industry. Networks have failed because they have been underfinanced, too ambitious or unresponsive to member firms.
Another concern is antitrust. However, those working with alliances note
that they rarely have problems with antitrust issues as long as they do not
attempt to dominate a market by restricting membership or fixing prices. To
prevent any potential antitrust problems, consult with an attorney or seek
advice from a state department of commerce, agriculture or economic
Networks combine the efforts of small organizations, creating an economy of scale by spreading international marketing costs and export risks over many firms instead of just one. There are other possible benefits to working together. Uniting can allow firms to create a sufficient volume of products to interest a potential importer or can expand the range of products available to sell overseas. Alliances can also increase access to capital, aid in the development or adoption of new technology, spur innovation, strengthen strategic planning, increase leverage in purchasing and allow firms more control over their marketing. General guidelines for forming alliances are provided in the "Export Trading Company Guidebook" from the Government Printing Office at (202) 512-1803. Rules for permissible export alliance conduct are laid out in the "Antitrust Enforcement Guidelines for International Operations," which is available from the U.S. Department of Justice at (202) 514-2481