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Group purchasing organizations (GPO) as source of alternative financing, endurance’s and competiveness’s improvement of small Ukrainian family businesses

In a healthy society, family businesses are deeply motivated to pursue entrepreneurial activities because they risk their own capital and not only the well-being of their managers and owners, but also the future of their own family members. Responsibility in business translates directly into responsibility to one’s family and vice versa. When thinking of family businesses, present-day Ukrainians, however, have negative associations. Ukrainian family-owned companies face the challenge of building sustainable foundations for their businesses that are based on, among other things, transparency, a healthy value system based on cooperation and competition, a level playing field, and refraining from exploitation of political power to do business.

Group purchasing organizations (GPO) as source of alternative financing, endurance’s and competiveness’s improvement of small Ukrainian family businesses

The purpose of the project was to increase the sustainability and competitiveness of small Ukrainian family businesses by, on the one hand, identifying internal sources of financing and/or funding (the ‘hard’ factor), and, on the other hand, by adapting the successes of Polish family businesses (the ‘soft’ factor) to local conditions. The combination of both these factors was expected to strengthen Ukrainian companies and to set them on the path to sustainable growth.

Purchasing groups can constitute a no-capital-investment opportunity for increasing the competitiveness of small businesses because such groups create social and business ties in order to optimise their procurement processes through economies of scale. This approach concerns B2B rather than B2C (e.g. Groupon) purchasing. Under current Ukrainian conditions, the topic of succession – perceived around the world as crucial for the sustainability of family businesses – is a kind of a higher-order value in the hierarchy of the needs of local family-owned companies. At the moment, they are rather focused on their survival as companies.

Purchasing groups act as integrators for entrepreneurs. They teach cooperation as they build credibility and social capital. It is these goods that are most scarce in Ukraine, rather than a lack of financial resources. Providing financial capital to a social environment that is not engaged in building its business and social credibility is not unlike trying to fill a sieve with water.

Group purchasing organizations (GPO) as source of alternative financing, endurance’s and competiveness’s improvement of small Ukrainian family businesses

As part of the project, three conferences devoted to the topic of purchasing groups were organised that were attended by more than 130 participants. The Rodynni Firmy website (http://rodynnifirmy.weebly.com/) was also developed under the project. This is the first and only knowledge base in Ukrainian about managing family businesses and purchasing groups. The project enabled the delivery of 120 man-hours of consulting to four nascent purchasing groups. It also enabled the publication of four issues of the Kupujmo Razom magazine, which contained a total of 50 articles, in part adaptations of content previously prepared for Polish family-owned businesses and in part original pieces prepared by the magazine’s Ukrainian editors. The project team developed and published 150 copies of the first Ukrainian-language textbook describing a methodology for establishing purchasing groups by small and medium-sized enterprises, which it then distributed free of charge to conference participants. An electronic version of the textbook has also been made available online to all those interested in it. The project team shot a promotional video and four television interviews on the topics of purchasing groups and family firms. The project also oversaw the signing of a letter of intent for the establishment of a pilot purchasing group for the joint procurement of office supplies.