Small or medium sized business ventures involve very less capital investment. Compared to big companies, the profit earning instincts are less ‘aggressive’. Thus, it can be apparently deduced that, such firms would hardly have any significant stratagem in terms of establishing a firm hold in the market. But that isn’t the case in the least. There is a whole sector involved in small and medium businesses and the competition there is cut-throat as well. The very general jeopardy that an entrant small business would face is being totally wiped out from the face of the competition itself. And thus, it has to ensure the very need to consolidate itself in the scenario. This consolidation would definitely come from its various liaisons with the existing organisations that can prove to be beneficial for its growth and help it learn the dynamics from the viewpoint of “existing veterans’. Nonetheless, it has to go through a PESTEL analysis, a SWOT analysis and have a sound idea about the market it is about to enter.
The venture would be following any of the three organisational theories, viz Transaction cost economics, Resource Dependence and Institutional Theory. It can be said that, Transaction Cost Economics would be financially a burden for the company if it has to purchase services from an external organisation. Yet, the possibility cannot be totally disregarded. In such cases, joint ventures and networks are suitable. This form can actually be a very conducive move for the firm, as networks help establish a strong hold in the market. These induce greater exchanges of ideas and ace learning options to the firms, and helping the same to come into a better and prominent position.
Resource Dependence would bring about to opt for an alliance, consortia or trade associations. The basis of such small scale industry stands on the capability to procure resources through healthy relationships with other organisations. This market requirement would push it to go for the afore-mentioned IORs. Trade associations should be well-built and the public relations should be given utmost attention to ensure a long lasting and ‘profitable’ return in the future.
Institutional theory is an interesting theoretical explanation to organisations that are influenced by its surrounding environment (Miller and Muir, 2004). All types and forms of IORs can be taken up in this case and it requires certain careful analyses. The organisations chosen for the relations should be beneficial for the company’s macro-environment on the whole. Relations should be the ‘determining environment’ of the small or medium sized ventures, and should have a very positive impact on the company functioning. Here, choices are very crucial as these choices turn out to be big deciding factors.