How Small Business

How Small Business Networking Can Help You

How Small Business Networking Can Help You : Business Network is one of the important factors in business to increase economic scope, efficient business management and expand market share. Companies that have a strong business network will become capital for the company so that the company can carry out its operations effectively and efficiently. The business network can also be the capital of the company’s competitiveness.

Even in the supply chain perspective, business competition occurs not between individual companies but between supply chains, in which there is a group of companies from upstream to downstream as a team that jointly produces/deliveres products and services to consumers. In other words, this means that business competition occurs between networks. So companies that have a strong network will have strong competitiveness.

Understanding Business Network

Business Networks are business cooperation, access and relationships with third parties (other companies, financial institutions, other institutions) needed by companies to run their businesses effectively and efficiently, so that high productivity and competitiveness can be achieved. In the end the company can achieve the expected profit and business development.

Benefits of Business Network

More specifically, a business network can provide the following benefits:

  • Improve bargaining position
  •  Achieving efficient economies of scale,
  •  Improve business/company performance,
  •  Build market influence and power,
  • Building competitive capabilities,
  • Build a common strength to overcome limitations,
  • Facilitate access to services such as management consulting, accounting, market research, 8)
  • Facilitate in obtaining/expanding market information,
  • Make it easy to get additional business capital,
  • Reduce transaction costs,
  • Makes it easier to meet market needs or larger market contracts,
  • Reducing the burden of risk by means of joint responsibility,
  • Can maintain price stability from competitors,
  • Guaranteed business continuity

Business Network Dimension

  • Business Networks can be seen based on several dimensions, namely:
  • The company’s business functions, including: Marketing network, production/operation network and financial network
  • The linkage of supply chain functions and positions, including: Vertical and horizontal cooperation
    Business Partnership, including: Partnership between MSMEs, between MSMEs and Big Business
  • Network formality/solidity, including: Soft Network and Hard Network
  • The objectives include: Business Networks to Increase economies of scale, Business Networks for Efficient Business Management, Business Networks to Improve Bargaining Position.

Types of Business Networks Based on the Company’s Business Functions

1) Marketing Network

For success in marketing their products and services, MSMEs need to have a reliable marketing network, which is always ready to absorb MSME products and services at the right volume, price and time or to assist with marketing activities. Thus this marketing network can consist of a core and supporting networks.

The core network may consist of marketing intermediaries such as wholesalers, retailers, agents and other marketing intermediaries. While the support network, namely institutions/third parties that play a role in supporting marketing success, such as companies/institutions engaged in promotion, expedition, transportation, market information, financing marketing activities, providing guarantees in marketing, and others.

These institutions/third parties can be government institutions, business institutions and other institutions.

2) Production/Operation Network

The production/operation network includes business cooperation and relationships with various parties (producers, suppliers and other parties) needed to ensure the production/operation process can run well.

With a strong production network, the company’s production capacity can be adjusted according to needs (flexibility in capacity), a kind of division of production tasks can be carried out in accordance with the advantages of network members, so that the production process can be carried out more efficiently, can carry out large production through subcontracting / understanding or doing consortium so as to meet the huge demand in an economical way).

3) Financial/Financing Network

The financial network mainly concerns cooperation, relationships and access to sources of financing, both bank and non-bank financial institutions. This financial/financing network is certainly needed by the company, especially to meet the company’s capital needs effectively and efficiently. In addition, a network with financial institutions is needed for convenience in conducting business transactions.

Business Network Based on Function and Position in the Supply Chain (covering Vertical and Horizontal integration)

Vertical Integration

Vertical integration consists of upstream integration and downstream integration. In upstream integration, this means that the company exercises stronger control over input supply sources. The purpose of this integration is to ensure a more effective and efficient supply of inputs. This integration can be done internally and externally.

Upstream integration internally means that the company moves upstream itself to procure or produce inputs for the company’s operational needs. Meanwhile, upstream integration is external, in this case the company cooperates with other companies operating upstream (conducting strategic alliances) to carry out production/procurement of production input needs.

Furthermore, in downstream integration, the company exercises stronger control towards the end consumers. Similar to upstream integration, this integration can also be done internally and externally. Downstream integration aims to enable companies to secure the company’s interests in delivering their products to consumers. Thus the company’s marketing can be done more effectively and efficiently.

Horizontal Integration

Horizontal integration is the integration between companies that perform similar functions, products and services. For example, a shoe manufacturer cooperates with a fellow shoe manufacturer, a clothing manufacturer joins another clothing manufacturer. This collaboration aims to create synergies, so as to increase the bargaining position in dealing with certain parties or increase economies of scale in various business activities or functions.

For example, shoe manufacturers join forces, then purchase raw materials together, so that the scale becomes more economical, the bargaining position of the supplier becomes bigger.

Horizontal cooperation can be carried out in the form of cooperatives, associations, joint entrepreneurs/companies, consortia, joint ventures, and others. For small businesses, it is suggested, among others, to join a producer’s cooperative, a craftsman’s cooperative, or a merchant’s cooperative.

These cooperatives are expected to be able to carry out their functions as facilitators, mediators, coordinators or carry out certain business functions to support the businesses of their members, so that when carried out together they become more effective and efficient.