Advantages and disadvantages of cooperation

The advantages and opportunities of cooperation

Depending on the nature of your cooperation, a lot of benefits can be achieved. Among those are the following:

• Bundling of resources to jointly handle large orders
• Risk sharing for an order
• Streamline processes to reduce costs and increase productivity
• Better utilisation of the capacities of both cooperation partners and compensation for capacity bottlenecks.
• This will increase the available know-how.
• Large orders no longer have to be split into partial orders in order to be accepted.  
• Market position can be expanded
• New customer acquisition

The disadvantages and risks of cooperation

But cooperation also involves risks that should not be neglected. These are among others:  

• You can often no longer make your decisions alone, but have to coordinate and often make compromises
• An exact division of the cooperation tasks is difficult, which is why one side often does more for the cooperation than the other
• They have to share the profits, but in case of doubt they have to share the losses
• In many cases, the employees of cooperating companies are no longer as motivated as before
• Depending on which form of cooperation is chosen, part of the independence can be lost both legally and economically

Partner search

The starting point is the creation of a professional partner profile based on the gaps identified in a strengths and weaknesses analysis. Furthermore, the partner should also culturally fit the searcher. Examples: Cooperation experience, company size, degree of formalisation. Sources for the search for suitable partners are, for example, industry and competition analyses, trade fairs or cooperation exchanges (e.g. banks, trust companies).

If a potential partner is found, the most important points of the cooperation relationship should be recorded in writing:

• Type of partnership
• Explicit target agreements
• Organizational rules for the distribution of tasks and target contributions
• Profit and loss regulations and distribution of profits
• Confidentiality agreements
• Rules for the escalation or resolution of conflicts
• Termination regulations for the regulated termination of the partnership

Which legal form should be chosen?

A cooperation can come about in many ways. The simplest form - which in the narrower sense is not a real cooperation - is the pure mediation of assignments. However, the cooperation already becomes more far-reaching when it comes to establishing a partnership company or a simple partnership (ARGE). We will introduce you to the most important forms of cooperation and explain the legal consequences for you.

Subcontracting

Subcontracting is a popular form of cooperation for almost all company sizes. In the narrower sense, however, it is not actually a cooperation, since the two companies do not give up their economic or legal independence. The subcontractor is commissioned with the creation of services or the provision of services and later issues an invoice to the client. The designations say it already - here it does not concern "partners", but principal and contractor.

Relaying

The mediation is not a genuine cooperation either. One partner places orders with the other partner for which it has no capacity at the moment. The mediating partner is not involved in the later business. This enables both sides to make optimum use of their capacities.

Working communities

Several companies can join forces and apply for a contract. This procedure is particularly common for public tenders in the construction sector. As soon as a bidding consortium receives a joint contract, a working community is formed. A company is founded for the period of the contract execution, often as a simple partnership OR 530 - 551.

Joint ventures

Cooperation can also take place through the joint establishment of a new company. If necessary, the former companies of both partners can remain in existence, but they can also be incorporated into the new company. It is a legally independent company that is founded with all the usual legal consequences and can theoretically take any possible legal form. As a complete company with regulated liability relationships, the joint venture enjoys a very high status as a form of cooperation.

Which form of cooperation is the right one?

This question cannot be answered in general terms. The variety of forms of cooperation already shows the diversity of cooperation in practice. It is important to consider exactly which liability relationships exist and want to be entered into. What are the aims of the cooperation, how long should it last and how should decisions be made?

The most important reasons why cooperations fail

Unfortunately, many cooperations fail in practice. There are many reasons for this. Here are the six most common problems that can lead to cooperation going wrong:

1. A partner wants to consolidate through cooperation
   Both partners should be financially secure when entering into the cooperation. Otherwise, the better-off partner is constantly busy plugging the other's financial holes. This makes one forget the actual goals of the cooperation.
2. There are interpersonal problems
   Even if you knew each other before the cooperation - some character traits can only be recognized when you work closer together. A partner suddenly turns out not to be as conscientious and reliable as he or she had been estimated to be. Perhaps one of the partners suddenly puts his own interests above those of cooperation. Once problems have crept in on the interpersonal level, the end of the cooperation is often already more or less sealed.
3. One partner disappears with the other's customers
   It becomes problematic in many cases, if one quarrels in the cooperation. If this is not contractually regulated, the partner can poach the customers of his partner and then separate. Then a company suddenly has no business basis.
4. The hoped-for advantage does not materialize for one or both partners
   Each cooperation partner pursues one or more goals, such as an increase in turnover, better capacity utilisation or new customers. If, however, these goals are not achieved by the cooperation, the cooperation loses its attractiveness and ultimately causes only work instead of benefit.
5. The partners can't trust each other
   Trust is the most important basis for a successful cooperation. The partners have to trust each other to the extent that everyone fulfils his or her part of the agreements. Trust must also prevail with regard to the quality level of the cooperation. If trust cannot be built up, this leads to control, control to bad mood and bad mood to failure of the cooperation.
6. There are uncertainties about the distribution of tasks
   Particularly when the distribution of tasks is not contractually agreed, there are often problems in practice with the question of who has which tasks to perform. Who takes care of correspondence, who takes care of bookkeeping and who makes new customer contacts? If the tasks are not distributed properly right from the start, there is often a dispute about the amount of work that the individual partners have to do.