cartels?

[Doug Millison]

This crossed my desk today...


COLLABORATION OR CARTEL?

by Martin Butler
Chairman
martin.butler at butlergroup.com

Having witnessed the demise of the dot.coms, many large businesses are
congratulating themselves on their level-headed, delayed response to the
Internet and the opportunities it presents. I have been to several meetings
recently where senior managers could hardly disguise their relief that the
Internet thing has not worked. As a result, the corporate world has produced
its own version of the dot.com, and has given it the respectable name of
'collaborative commerce'. On the surface this appears to be nothing more
than the co-ordination of business processes between companies using the
Internet. However, there is every reason to view collaboration of this
nature as something more fundamental.

Collaborative commerce could be seen as the formation of large cartels; and
yes this is a strong word, but what is happening under the name of
collaboration is potentially very powerful. The past decade has seen massive
consolidation in the corporate world through mergers and acquisitions. In
many ways these can be seen as legalised cartels, since they focus market
ownership and buying power. This trend towards a few mega-corporations is
reinforced by collaborative commerce. Take the construction industry for
example. This is dominated by a handful of very large multinational players
capable of servicing the needs of other large multinationals in other
industries (petrochemicals for example). Massive contracts are won and lost
on the basis of being able to satisfy demanding requirements for global
support, and this may require collaboration between several contractors.
This dynamic is forcing the creation of an elite set of very large
corporations capable of offering services and products to each other, and
here the barrier to entry for other players is prohibitive. Only the largest
merchant bank can support the largest construction company, servicing the
needs of a global petrochemical giant. Collaborative commerce is being used
to support relationships between these new super-heavy dinosaurs that look
set to dominate the global economy. Through collaboration, the relationships
between organisations become very close, such that open competition becomes
impossible. The relationships are getting too cosy, with a tacit
understanding that membership of this super league confers the right to
collaborate in a very intimate manner.

It is quite ironical that the Internet was announced as the technology that
would give the small guy the same opportunities as the giant. The opposite
is in fact true; the Internet exaggerates the differences between the small
and the large, ensuring that the barriers to entry are higher than they have
ever been. There is no easy answer to this, since governments will find it
very hard to monitor and control the activities of large multinationals. All
we can do is rely on the fact that when structures become too arthritic,
nature has a way of causing their demise. The CFO of one large company I
spoke to recently said that he was now confident that through collaborative
commerce the future could be planned with almost total certainty - I hope
for all our sakes he is wrong.

--from the May 2001 issue of Contra
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