Business Network: Meaning & its Objectives

A business network is a complex network of companies, working together to accomplish certain objectives. These objectives, which are strategic and operational, are adopted by business networks based on their role in the market. There are two categories of business networks — business associations and company aggregations — that help small and medium-sized enterprises (SME) to become more competitive and innovative.

Several descriptions of business networks stipulate different types of characteristics:

• A business network is a form of inter-firm cooperation that allows companies, located in different regions or countries, to collaborate on a basis of common development objectives expressed in a cooperation agreement. The companies decide to join their strengths, share information and create synergies to become more innovative and competitive in domestic and international markets, while keeping their autonomy, not creating a separate legal entity. This cooperation model is suitable for any kind of business activity or sector.

• A business network is greater than the sum of the individual businesses. It incorporates suppliers, customers, third-party developers, distributors, and others. These third parties generally have a strong reason to support the network and remain active in it.

• A business network is generic and includes both smart and not-so-smart business networks. A smart business network is defined as a group of participating companies (nodes) that are linked together by one or many communication networks (links). The companies have compatible goals and interact in innovative ways. A smart business network is perceived by each company as increasing its own value and is sustainable as a network over time.

• A business network is owned by the business enterprise, where the scope of the network is to support the informational and operational requirements of the business, such as marketing, sales, accounting, and manufacturing departments.

Business networks have two types of objectives — strategic and operational — that are adopted depending on the role of the business network in the market.