Prime Advantage Blog

How Competitors Pull Together for Mutual Advantage

Dan Grant on Jun 23, 2015 8:12:27 AM

Sometimes, it pays for competitors to set the rivalry aside and work together for mutual advantage. By joining forces as part of a buying group, competitors within an industry can produce greater results for their customers without any fear of ‘falling behind’ in the process. Every Member of the group can excel within the industry without giving the competitors they work alongside an unnecessary leg up. Skeptical? Let’s first discuss how a buying group works, and then hit four key short and long-term benefits buying groups can offer businesses that choose to operate together.

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What is a Buying Group?

Before we talk about the way competitors can work with opposing businesses and still come out ahead, we need to discuss what a buying group like Prime Advantage is and how it works. Buyers within an industry team up via Prime Advantage to gather purchasing power, and in return for this market share, suppliers are able to put together a better deal for the Members. On the other side of the table, due to limited competition on the supplier side, as well as valuable feedback from the buying group, suppliers shape themselves into stronger, more effective, increasingly flexible partners. Buyers benefit from added negotiating power; suppliers gain from additional access and intelligence to potential customers. So how do the different advantages stack up? 

Group Purchasing Power 

This is simple enough: When you buy more, you enable your suppliers to provide better services and a better cost structure. By working with your competitors, you can arrange better deals, enforce higher standards, and otherwise exert influence to strengthen the quality of your supply chains while reducing costs. A few buyers grumbling about a particular problem separately carries far less power than an assembled buying group booming that same complaint in surround sound.

Developing Ideal Suppliers

It’s not all take and no give—suppliers benefit too, as they’re better positioned to receive useful, coherent feedback from a disparate group of businesses. When suppliers improve, their buyers can’t help but benefit from the enhanced offerings. If there’s any advantage to teaming up with your competitors, it’s the ability to develop ideal suppliers and strengthen your industry as a whole. 

Diversifying the Market

By working with a buying group, competing businesses may find themselves on a more level playing field and open to pursue new methods of market distinction. In certain sectors, it’s difficult to find a way to differentiate and significantly stand out among your competitors. But, as you develop ideal suppliers and gain superior deals through group bargaining power, new doors open up to take companies in directions they may not have otherwise considered. In short, competitors working together can move beyond small opportunities and on to big ones.

New Tools

Information helps in every industry, and when companies put their heads together in a buying group, they also gain more insight into thought leadership, best practices and innovative trends than any company could have achieved independently. By leveraging the data produced by their collective efforts, competing businesses can gain new insight, which leads to new profits—a boon to everyone involved.

Final Thoughts 

The old adage A Rising Tide Lifts All Boats couldn’t be more true. It’s worth remembering that the myriad of benefits of a buying group only hold true so long as high standards are maintained. Depending on your industry, there may be a buying group for you to access. Working with respected organizations, like Prime Advantage, can bring you all of those pluses without any of the worries.

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Topics: Buying Groups and Group Purchasing Organizations

Dan Grant

Posted by Dan Grant

Daniel Grant is the President of Prime Advantage, a Chicago-based Group Purchasing Organization for mid-market manufacturers.

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