Business Relationships for Competitive Advantage

This book discusses the appropriate management of business-to-business relationships. It is not, therefore, a book about how humans beings can or should manage all of their personal or their economic relationships. The book focuses instead on buying and selling relationships between organisations, whose purpose (at least theoretically if not always in practice) is to maximise the returns for their shareholders or owners. While this activity may sometimes involve individuals acting as buyers from, and suppliers to, business organisations the primary focus is on buying and selling relationships between organisations.

Having discussed the strengths and weaknesses of the current literature this chapter introduces the conditions that must be in place for successful relationship alignment under changing circumstances of buyer and supplier power. The analysis attempts to provide a holistic account by focusing on the relationship from the perspective of the buyer as well as the supplier. Unlike some previous analyses the approach outlined here starts from the view that there is no one best way for buyers or suppliers to manage business relationships. Although there may be ideal positions for both the buyer and supplier, how any organisation should manage a business relationship in practice depends on the circumstance it is in. This means that buyers and suppliers often have to manage business relationships in circumstances that are far from ideal.

The discussion of operational means that follows is divided into three sections.

In this chapter a framework is provided to allow managers to understand how to align business relationships between buyers and suppliers under different power circumstances. The chapter is divided in two sections:

In this chapter six cases are presented of aligned buyer and supplier relationship management. Each case is drawn from the six ideal-types discussed in Chapter 4 and demonstrates how the buyer and supplier relationship was commercially and operationally appropriate, even though tensions still existed in the relationship.

In this chapter six cases are presented of sub-optimal misalignment in buyer and supplier relationship management. Each case demonstrates how the buyer and supplier relationship was commercially and operationally inappropriate, and how the buyer and/or supplier were able to make relationship-specific adaptations to create a more effective alignment given the power circumstances prevailing.

In this chapter six cases are presented of dysfunctional misalignment in buyer and supplier relationship management. Each case demonstrates how the buyer and supplier relationship was commercially and operationally inappropriate, and why the buyer and/or supplier needed to find alternative partners in order to achieve their commercial goals.

We hope that theoretical discussion and empirical case evidence provided in this volume has explained why it is that many business relationships fail to deliver what was expected. The problem for mangers who engage in buyer—supplier exchange relationships is that there are many variables that must be in place before a relationship can be successfully aligned. Indeed, the discussion in previous chapters has emphasised that misalignment of business relationships is a common occurrence. This is true whether misalignment occurs because of unavoidable conflict over the commercial goals of the two parties to the exchange, or because there is a ‘remediable’ misalignment occasioned by misperception on the part of one or both parties to the transaction. In this final chapter we provide further evidence of the complexity that must be managed internally by both the buyer and the supplier if alignment is to occur in any relationship. Following that, we provide a simple decision-tree checklist for managers to use when they try to align relationships whether acting as buyers or suppliers. In the final section of the chapter we discuss the problem of opportunism in relationship management and indicate what some of the predictable outcomes of opportunism by buyers and suppliers are likely to be under different power and leverage scenarios.