Business Networks
Business Networks

DESCRIPTION
Business Networks occur when a range of businesses comes together for mutual advantage. They enable easy, efficient and timely communication that breaks down the isolating factor of being a small owner operated business as well as combining expertise, skills and resources to achieve together what would not be possible singularly.

USES
The benefits include:
•    shared expertise and resources improving economies of scale;
•    better development of import replacement and export development activities;
•    better communication and information flow;
•    improved management and breadth of skills;
•    development of synergies;
•    collective sales and marketing.

HOW IT WORKS
Networks are often formed to target new markets and gain some competitive advantage. Businesses come together to:
•    share information and expertise;
•    improve performance and efficiency;
•    share market intelligence;
•    share costs of market investigation, research and development, and production;
•    share costs involved in breaking into a new market, often impossible to meet for a small firm alone;
•    improve capacity to meet demand for products and services;
•    improve capacity to supply large markets;
•    increase range of products and services;
•    strengthen negotiating power and purchasing power;
•    reduce costs by group training.

The mechanism is normally based around meetings (more often than not breakfast meetings), newsletters and facilitation of small groups of businesses.

PREREQUISITES
You will need a group of people or organisations that see benefits in coming together to share information and build upon their current capacity by pooling resources. Businesses within the community need an understanding of the benefits of networking.

HOW TO START
Like most forms of community development a network will need a champion to drive and coordinate the network.
Issues to consider include:
•    who should be involved;
•    how many members;
•    the need for a secretariat and who can provide it;
•    what type of structure is best;
•    what if any legal and accounting requirements are necessary;
•    goals of the network;
•    funding strategies;
•    business and marketing strategies; and
•    monitoring and evaluation strategies.

STRENGTHS
  •  Economies of scale:
  •  lower administrative expenses as a percentage of income;
  •  electronic interaction;
  • research and development;
  •  centralised administration—invoicing accounting etc;
  • building management expertise;
  •  shared marketing materials; and  development of common policies.
  • Critical mass for: purchasing; attracting professional support services; and development of a collateral base for future expansion/contingencies.
  • Credibility:
  •  lobbying strength; and increased credibility through operating across a larger area.

WEAKNESSES
•    Suspicion of network members who were previous competitors.
•    Fear of disclosing commercial confidences.
•    Fear of takeover and loss of independence.
•    Lack of control of the project.
•    Additional time commitments.

WARNINGS
Without open and honest communication between members the process can be undermined. It should be accepted as part of the participating business’s everyday activities, not an additional chore. There may be a tendency to focus on meetings as the main outcome without reviewing business outcomes.

INDICATIVE PRICE/COSTS
For start-up, $2,000 to $20,000. The start-up costs would focus on a person to get the network going and some infrastructure if needed. Volunteers can be considered. On going costs should be met by 'cost recovery’ at events and breakfasts.

FUNDING RESOURCE OPTIONS
Some initial start up funding may be available from state government departments concerned with business development, however this will differ from state to state.

Alternatives can be determined when developing the sales and marketing strategies. They include:
•    initial contribution from members;
•    membership fees;
•    a levy on sales through the network;
•    in-kind contribution i.e. time and expertise of members;
•    fee for service training;
•    user pays workshops and functions.

MONITORING AND PERFORMANCE EVALUATION
There is a need to set goals and establish milestones for the network so as to enable monitoring against them.
They could include:
•    number of members;
•    number of meetings per year;
•    increased level of sales;
•    broader areas of distribution and number of new markets;
•    increased skill base for members.

INFORMATION RESOURCES


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