In competitive markets firms face uncertainty and risk. How will economic forces operate?
How will competitors react? What will happen to the level of demand? This
uncertainty can be partly reduced through planning and control of output and supplies
through cooperation with other firms. There is a whole range of cooperative behaviour
ranging from special relationships with suppliers and distributors through collusion
with competitors and integration. Included under the heading of cooperative behaviour
would be the relatively new phenomena of networking and franchising (all of these are
discussed at length in Worthington and Britton, 2003). Such relationships reduce the
uncertainty faced by firms and once in operation can operate as a barrier to entry which
would need to be addressed by any new entrant.