Academic journal article Journal of Business Economics and Management

The Effectiveness of Cooperation of Industrial enterprises/Gamybos Imoniu Kooperacijos Efektyvumas

Academic journal article Journal of Business Economics and Management

The Effectiveness of Cooperation of Industrial enterprises/Gamybos Imoniu Kooperacijos Efektyvumas

Article excerpt

1. Introduction

The main condition of enterprise survival under market economy is its competitiveness. The actions aimed at decreasing the number of the existing and potential competitors are referred to as strategic management. The above actions are much more complicated than proper determining of costs and volumes of production. Strategic management embraces a number of actions taken by an enterprise seeking to achieve higher profit by affecting the market. On the other hand, an enterprise should adapt itself to the continually changing environment to remain on the market (Auskalnyte and Ginevicius 2001; Ginevicius 1998). There are two main methods of strategic management--concentration of production and cooperation. The strategic management of cooperation includes joint actions of competing enterprises for the benefit of each of the partners (Barzdenyte 2000; Novickas and Savaneviciene 2000). Under the conditions of global economics these actions help to create new possibilities and search for new sources of profit, based on the available resources. Cooperation can promote the development of new products and their introduction to the market, as well as new market research with the aims of entering it, etc. (Blohm 1980; Savaneviciene 2001).

The enterprises not capable to produce and sell the desired products because of the lack of finances and labour force usually cooperate with other enterprises. Thus, cooperation means working together of two or more independent enterprises for a long time in any area of activities with the aim of obtaining a synergetic economic effect by the partners (Sakalas and Savanaviciene 2000).

Cooperation of small- and medium-size enterprises helps them to smooth the negative effects of insufficient experience, not properly developed marketing, lack of state support, etc. (Brandenburger 1997; Kaul 1999). It can also help such enterprises to strengthen their position in the market or even to survive by cooperating with a large enterprise (Kaul 1999; Beamish 1988).

When a group of small- and medium-size enterprises located in the same area start to cooperate, regional networks are formed. Their functions are diverse and flexible, embracing the analysis of the state of the market, price regulation, the control of raw materials, etc. The above enterprises can also make trade associations (of a branch of industry).

Cooperation is often confused with concentration. The essential difference between the strategic management of these activities of two enterprises is shown in Fig. 1 (Ginevicius and Andruskevicius 2000; Ginevicius 2000).

Thus, the cooperation of enterprises reflects the cases, when they make an agreement about joint activities but remain legally and economically independent. In all other cases, when enterprises have no legal or economic independence or both, we have actually a new enterprise, reflecting the concentration of production.

Therefore, cooperation may be defined as the establishment of long-term relations in production between legally and economically independent enterprises (Benisch 1991; Bleicher 1992).

In the literature, various approaches to the analysis of concentration (and its measurement) (Ginevicius 1998, 2005, 2009; Ginevicius and Cirba 2007, 2009) can be found. However, this does not apply to cooperation (Albino et al. 2007; Brenner 2005; Lawson et al. 2008; Royer and Simons 2009; Shan et al. 1994; Stark et al. 2008). It is evident that without quantitative evaluation of cooperation development it is hardly possible to assess its effect on enterprise commercial activities, as well as the extent and limits of this effect, the conditions ensuring economic effectiveness of cooperation, etc.

2. The conditions required for cooperation development

The analysis of the literature on the problem shows that there are quite a few approaches to the conditions required for cooperation of enterprises. …

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