Often we hear the following questions: “Do I have enough capital to meet the order?”; “Is it worth trying to tackle a small operation involving logistics costs that are too high for my company?”; “If I don’t accept the order, will I lose a prospective customer?; “Is my product portfolio too small to be of interest to the importer?”.

We’ve learned from experience over these past few years that a company can benefit from commercial synergies derived from coordinated participation and enhance its access to international markets by means of an export consortium.

Each participating company preserves its financial, legal and commercial autonomy

What is an export consortium?

We can define it as a strategic alliance between two or more companies with the objective of addressing and developing a joint strategy to access foreign markets. An export consortium is a tool for small producers to facilitate the export of products, which due to their reduced size, lack of experience and inability to fulfill large orders, they could not carry out by themselves.

What would motivate a company to join a consortium?

Primarily, companies that join this initiative due so to gain initial export access so as to increase their exports and strengthen their supply and commercial image. We can affirm that export consortia enable access to new marketing channels and grant closer proximity and enhanced direct relationship with customers by indirectly achieving a synergy effect that benefits all participating companies, through training and rendering them more competitive in both domestic and international markets. Likewise, the buyer is offered greater value through an increased product portfolio than if the company had presented itself individually.

In general, a small or medium-sized enterprise beginning its foray into international markets only has the financial capacity to participate in two or three international promotional activities a year. With the consortium, the company’s international visibility increases in addition to its proximity to the customer.

What characteristics should consortium companies have?

For suitable joint participation, companies joining this type of association must meet the following characteristics:

• Homogeneous companies / complementary products or services
• Products with similar exportability
• Medium term goal mentality
• Identical marketing channel / market segment
• Cooperation/joint strategy mentality

How big should companies be?

As to size and profile, companies tend to be family/small-sized companies where decision making is concentrated at the management level with little experience in international markets.

The main advantages for small and medium-sized enterprises entering a consortium can include the following:

• Sharing of expenses / reduced costs for the company
• Willingness to hire competent professionals
• Increased bargaining power in relation to the customer (increase of product portfolio)
• Possibility of accessing difficult markets
• Mutual learning from companies as regards internationalization
• Utilization of business synergies

Likewise, consortia face certain challenges or difficulties with respect to the following:

• Difficulties in defining a joint strategy
• Competition
• Commitment decisions
• A company´s sense of loss of freedom
• Possible economic and financial constraints among participating companies

Can this alternative be put to work with any product?

It is important to keep in mind that forming a consortium is not suitable for all cases; an adequate design requires carefully analyzing products with business opportunities and international demand.

How does a consortium start operating?

As to operating requirements, it is very important to have a manager whose duties have been defined by the group of participating companies itself. In general, his or her functions should be tied to activities such as product sales and promotion, organization of trade missions and attendance at international fairs, advertising material, client account management, etc. The manager’s salary usually consists of fixed contributions from each company in addition to a sales commission percentage. In this regard, note that each participating company maintains its financial, legal and commercial autonomy.

After analyzing the advantages and drawbacks of this type of initiative, the following question arises: Do governments in Latin America and the Caribbean promote the participation of small and medium-sized enterprises in this type of program?

In brief, an export consortium can be a very efficient tool to facilitate the exports of regional small and medium-sized enterprises since it enables access to international markets in companies having limited financial capacities, but its general implementation requires regional government authorities to promote this initiative in order to achieve their internationalization as a sustainable economic driver.

By Antonio García Pinto, MBA and Master's in International SME Management, has developed his professional career supporting the internationalization of businesses, especially SMEs, facilitating their training and access to international markets. He is currently a consultant with the Integration and Trade Division of the IDB (Inter-American Development Bank).