Posted in Finance, Accounting and Economics Terms, Total Reads: 348
Consortium is a partnership between two or more people or organizations with the objective of working together in order to achieve certain goals. As a concept, consortium helps to achieve business goals by utilizing the common pool of resources and sharing expertise in a particular field, with the aim of reaching the final goal.
The idea behind pooling in and forming a consortium is to leverage on each entities’ strengths and get the best of both worlds from both the entities. This will help in minimizing the resource cost drivers for the consortium and help it gain a competitive advantage as compared to prevalent players in the market.
Consortiums are seen across sectors where the financial requirement is very high and the risk is also high because of the high financial outlay required. So, forming a consortium helps in investing less money in a high value project and leveraging on the partners’ synergy with your business and achieve a common goal of earning profit.
It comes from Latin word ‘con’ meaning together and ‘sor’ meaning fate. Both the entities are bound by the contractual agreement signed by them and have to adhere to it while decision making for the jointly owned entity. But entities’ remain independent in their own operations and the partners do not have any say in it.