18. Leveraging Consortium Principles

The meaning of the word ‘Consortium’ is as follows - an association, typically of several companies.

I am proposing the use of the principles of consortium to convert the current business landscape from being a ‘dog-eat-dog’ world into a ‘live-and-let-live’ world.

This is how I see the development of a Consortium.

A consortium is created to cover the advertisement, promotion, sales, distribution and marketing functions of several companies that compete in the same marketplace with the same or similar product ranges especially where the input resources, production capabilities, assembling capabilities, labour skills/techniques are complex or technologically advanced or costly or all of the mentioned parameters and more.

For example, If you consider a car production facility, we can understand how complex and costly it is to set an advanced plant of that nature. On the other hand, if we consider the forces or sales and marketing and think about how such thought-forces can decimate an entire production line or facilities or companies, we can really appreciate the need for a consortium arrangement to protect and promote the use of our rare natural resources and costly investments.

What can a consortium do?

• Homogenize the sales and marketing functions in its entire spectrum across the consortium participants while acknowledging due regards to the brand and model popularities

  
  

• Create goals and objectives that meet the common requirements of the entire consortium and not just any one participant company. For example –

  • Distribute revenue generation across the participants with appropriate strategies and in-depth market knowledge

  • Provide advice on leveraging common production costs

  • Provide advice on energy costs

  • Provide advice on labour costs

  • Provide advice on input resources

  • Provide advice on sharing the R&D costs

  • Provide advice on plant locations and logistics network

  • Handle bulk purchases with the revenue distribution in mind

    
    

• Consortiums can also specialize in only the luxury segment if needed.

• Handle unsold inventories of the participants

• Handle recyclable components of the contributing products

• Promote sustainability/ESG goals of the participant companies

• Be the thinktanks and lobbyists of the participating companies

• Guard reputation risks from materializing for the participating companies

• Insulate the production companies from legal tangles as much as possible and let them focus on one thing that they are good at – produce top quality products and outcomes.

• Handle any feedback/customer satisfaction surveys to generate metrics (like NPS) that can help in making important decisions.

• Help in M&As as needed.

  
  

What products can be considered to form a consortium?

The general considerations for creating a consortium for similar products may include the below:

• The products should have the same or similar functions (cars, laptop, mobile phones etc.,)

• The products should compete in the same or similar market segments

• The products should be produced, distributed and serviced in the same homogenized trade blocks or geographies. (to avoid cost/price related skew the comes from imports that can introduce undue cost advantages)

• If imports are must, the import parameters including the source/costing etc, should be from the same homogenized trade blocks or geographies.

I hope that the advantages of using consortiums is properly understood and implemented to protect our rare economic resources from getting exploited by reckless consumerism.

Hari Om!