Izabela Jonek-Kowalska
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RISK AND EFFICIENCY IN COMPANIES’ COOPERATION
1. Companies’ cooperation
The term companies’
cooperation means achieving economical aims together. In the literature this
phrase is précised and companies’ cooperation is perceived as ‘varied
kinds of relations between companies, (…) in these relations companies strive
(in the same time) after achieving a common aim or after making themselves
unable to achieve diverge aims’.[1] The base of cooperation is written
agreement. Companies joined in cooperation have the same aims and make hard
efforts to achieve them together.
Usually the main aim of cooperation is looking for possibilities of
increasing efficiency. That makes cooperation positive relation because
‘companies defined the aims together, they achieve them together
and they respect each other opinions’.[2]
The main classification
of cooperation includes cooperative relations and concentration. As it is
presented at picture 1 companies cooperation includes a lot of varied forms.
Picture 1
Main classification of companies’
cooperation
Source: own presentation on the ground of: J. Lichtarski, Teoretyczne i praktyczne problemy integracji gospodarczej przedsiębiorstw, [w:] Współdziałanie gospodarcze przedsiębiorstw, praca zbiorowa pod red. J. Lichtarskiego, PWE, Warszawa 1992, s. 30.
Cooperative relations
include the first three levels of cooperation: economical agreements,
coordinative relations and cooperation in strict meaning. In cooperative
relation the object of cooperation is strictly defined. It concerns only some
agreed aspect of business. Those relations are loose and not intense. Companies
state aims together but the aims are single and short-term. They are unable to
realize a task alone or in an effective way and therefore they decide to work
on it together. The main cause of this inability is usually lack of resources.
So the result of cooperation is joining a part of resources to gain expected
efficiency and synergy effects. [3]
Denseness,
intensity and durability as well the level of formalization are higher in
concentration. But in these relation the separateness and independence of
partners are reduced. Concentration includes two more intense levels of
cooperation: loose and strict concentration. The aims in concentration are
varied and they usually concerns all aspects of business activity. In loose
concentration companies work together in wide range and in strict concentration
companies cooperate in all areas of business activity. Partners do not separate
resources they join them all.
Among
different circumstance of cooperation companies often indicate need of
increasing efficiency and necessity of reducing risk. Running business in a
group seems to be safer due to multiplying resources and scale of business
activity in a quick way. In this way companies are able to resist changes
occurred in surrounding. Therefore they could easily reduce systematical risk
connected with this surrounding. Moreover joining competences positively
influences on reduction of specific risk associated with wrong decision about
using resources. Consequently due to wide range of joined resources
concentration is better way to increase efficiency than cooperation. Furthermore
concentration is characterized by more extensive range of risk reduction
because of risk dispersion caused by wide scale of joined resources. In
cooperative relations risk is reduced only in common activities and in
concentration relations risk reduction includes all resources of joined
companies.
It is worth
of noticing that running business together is not only the way of risk
reduction. It could also be a cause of risk intensifying because when a company
decides to cooperate it generates a new source of risk – the cooperation risk.
This risk is firstly connected with the possibility of unsuccessful resources
connection. Failed resources association could cause lack of harmonious
cooperation and as a result the aims of cooperation could be in danger. So if
the cooperation risk realizes the partners will loose or they will not realize
the assumed profit. As a result the efficiency will worsen.[4]
Considering
the range of joined resources cooperation risk seems to be higher in
concentration because such relations need specified and detailed coordination
and adaptation. And therefore planned growth of efficiency is possible only
when all resources are harmonized. In cooperative relations risk increase
concerns only connected activities and therefore its influence on efficiency is
less intense. In accordance with the above statement, companies taking the
decision about cooperation should consider not only the benefits such as growth
of efficiency but also the threats connected with cooperation risk.
Beta
ratios (b) for
Farm Food and Sokołów (1996-1999)
|
Years |
Farm Food
|
Sokołów
|
|
1996 |
0,81 |
0,95 |
|
1997 |
0,92 |
0,88 |
|
1998 |
0,75 |
0,55 |
|
1999 |
0,40 |
0,45 |
Source: own presentation on the ground of shares quotations.
Table 2
Beta
ratios (b) for
Sokołów (2000-2003)
Years
|
Beta |
|
2000 |
0,21 |
|
2001 |
0,84 |
|
2002 |
0,70 |
|
2003 |
0,54 |
Source: own presentation on the ground of shares quotations.
On the ground
of contents of table 1 it could be said that the risk level during 1996-1997
had been higher than in the period when companies decided to cooperate and were
preparing consolidation (1998-1999). The lowest level of beta ratio was noted
just after the merger in year 2000. This situation means that the market
expected positive results of this merger. The investors anticipated also
reduction of systematical risk for joined companies. Nevertheless after the
merger some problems with resources consolidation appeared. Therefore
restructuring process was started from material resources. The outdated part of
machines was dissolved. The production lines in Farm Food were modernized.
Moreover Sokołów made endeavors for the best quality of production.
The company constantly received certificates of best quality. All factories
produced under permanent supervision of veterinary inspection. The HACCP system
was initiated. In October 2002 Sokołów received ISO 9001
certificate and as a first on Polish meat market AQAP certificate demanded from
deliverers meat for NATO. The process of restructuring included also human
resources. 158 people were dismissed but the company had been trying to find
them posts in another meat companies in
In
this part of article the measurement of efficiency in Farm Food –
Sokołów merger will be done. Economic Value Added will be used as a
measure of efficiency. It is one of the most modern and perfect measures. The
efficiency is analyzed 4 years before merger and 4 years after it. The results
are presented in the tables 3-5.
Table 3
EVA
for Farm Food (1996-1999)
|
Lata |
EVA - Fram Food |
|
1996 |
-19552,04 |
|
1997 |
-22344,93 |
|
1998 |
-30284,29 |
|
1999 |
-30717,85 |
Source: own presentation on the ground of financial reports.
Table 4
EVA
for Sokołów (1996-1999)
Lata |
EVA - Sokołów |
|
1996 |
-17743,16 |
|
1997 |
-17251,95 |
|
1998 |
-37828,69 |
|
1999 |
-53661,17 |
Source: own presentation on the ground of financial reports.
Table 5
EVA
for Sokołów (2000-2003)
|
Lata |
EVA - Sokołów
|
|
2000 |
-99585,77 |
|
2001 |
-115263,19 |
|
2002 |
-41626,36 |
|
2003 |
-7060,65 |
Source: own presentation on the ground of financial reports.
On the ground
of contents of table 3-5 it could be said that Farm Food and
Sokołów before merger were in poor financial condition and their
situation year by year had become worse. EVA had dropped dramatically in both
companies. The main reason of it was the decrease of NOPAT. Companies tried to
increase the invested capital but they could not use it effectively. They could
not create resource combinations that influence the increase of economic value
added. After merger in 2000 EVA was lower than the sum of EVA reached by
companies doing on their own. In 2001 the decrease of EVA deepened.
Nevertheless in 2002 and 2003 EVA started to increase. It was the result of
successful restructuring process. In this case the merger not at once was
successful. It needed restructuring process and resources adapting to reach the
increase of efficiency.
5. Conclusions
Cooperation
is very often consider as an easy and quick way of risk reduction and
efficiency increase. Mean-while the companies forget that cooperation needs
great effort and well though-out activity. Very often in dense relation with a
wide range of joined resources a restructuring process is necessary to achieve
the cooperation aims. This necessity occurred in the case of Sokołów –Farm Food merger. In the
first years of cooperation efficiency decreased and risk increased. Only after
restructuring process effectivnes became higer and risk became lower.
Literature
1.
Encyklopedia organizacji i
zarządzania, PWE, Warszawa 1982.
2.
Finanse przedsiębiorstwa,
praca zbiorowa pod red. L. Szyszko, J. Szczepańskiego, PWE, Warszawa 2003.
3.
Grzybowski W., Przedsiębiorczość
i ryzyko w gospodarce rynkowej, Wydawnictwo Uniwersytetu M.
Curie-Skłodowskiej, Lublin 1994.
4.
Komunikat PAP, Zakłady
Sokołowa w Tarnowie planują zwolnienia, Parkiet 17.04.2001.
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Kortan J., Kooperacja i
koncentracja – dwie podstawowe formy łączenia się
przedsiębiorstw, Ekonomika i Organizacja Pracy nr 1/1986.
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„Rzeczpospolita” 17.09.1999.
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encyklopedia prakseologii i teorii organizacji, PWE, Warszawa 1978.
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Wieczorek D., Sokołów
liderem wzrostu, Parkiet 15.04.2004.
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