Master thesis, MSc. Supply Chain Management
University of Groningen, Faculty of Economics and Business
Dependences in Dyadic Buyer-Supplier
Relationships: A Mixed Method Research
Approach
Name
Niek Blom
Student number
s2214105
Student mail
h.j.blom.1@student.rug.nl
February 26th, 2018
Supervisor
dr. J.T. van der Vaart
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Abstract
Power differentials and dependences are concepts that play a big role in buyer-supplier
relationships. Yet, current literature primarily focusses on the cooperative-adversarial
dichotomy to typify buyer-supplier relationships. Kim & Choi (2015) proposed an
expanded framework in which relational intensity (closely-tied vs. arm’s length) and
relational posture (cooperative vs. adversarial) are the two dimensions. In this paper
we take a look at the asymmetry in dependences of buyers and suppliers and how
asymmetry affects the relationship according to the dimensions of Kim & Choi (2015).
First, a survey research is done to determine the effect of dependence asymmetry on
these relationships. Furthermore, four embedded multiple-case studies are performed
in order to gain insight in the underlying mechanisms of dependence asymmetry within
different types of buyer-supplier relationships.
Key words: Interdependence, Dependence Asymmetry, Buyer-Supplier
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Table of Contents
Abstract _________________________________________________________________ 1 1.0 Introduction __________________________________________________________ 4 2.0 Theoretical Framework _________________________________________________ 6
2.1 Context: buyer-supplier relationships ____________________________________ 6 2.2 Dependences in the prevailing cooperative-adversarial typology _______________ 6 2.3 Framework of Kim & Choi (2015) _______________________________________ 8 2.4 Buyers’ and suppliers’ dependences ____________________________________ 9 2.5 Dependence (a)symmetry _____________________________________________ 9 2.6 Conclusions from literature ___________________________________________ 10
3.0 Methodology _________________________________________________________ 11
3.1 Research method __________________________________________________ 11 3.2 Research setting ___________________________________________________ 11 3.3 Survey research (Part 1) _____________________________________________ 12 3.3.1 Data collection (Part 1) _________________________________________ 12 3.3.2 Data analysis (Part 1) __________________________________________ 14 3.4 Case research (Part 2) ______________________________________________ 15 3.4.1 Case selection _______________________________________________ 15 3.4.2 Data collection (Part 2) _________________________________________ 17 3.4.3 Data analysis (Part 2) __________________________________________ 18
4.0 Analysis & Results ____________________________________________________ 20
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6.0 Conclusion __________________________________________________________ 43
6.1 Managerial implications ______________________________________________ 43 6.2 Limitations and future research ________________________________________ 44
References _____________________________________________________________ 45 Appendix _______________________________________________________________ 49
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1.0 Introduction
Competitiveness through collaboration with supply chain partners has gotten increased attention from firms (Ketchen & Hult, 2007) and for this collaboration to be rewarding there must be equal risks and rewards and this is most likely to be accomplished when there is symmetric dependence (Chicksand, 2015). The concept of interdependence has been the subject of many studies over the past decades. Emerson (1962) made a distinction between dependence asymmetry, “the difference in actors’ dependencies on each other”, and joint dependence, or “the sum of actors’ dependencies’ on each other”. Multiple studies were conducted researching the effects of dependence asymmetry and joint dependence on buyer-supplier relationships (e.g. Bent & Maloni, 2005; Casciaro & Piskorski, 2005; Gulati & Sytch, 2007; Geyskens et al., 1996). Previous research showed that a large dependence asymmetry often leads to adversarial, arm’s length relationships. Also, dependence asymmetry would cause joint dependence likely to be detrimental for the weaker actor (e.g. Gulati & Sytch, 2007; Emerson, 1976) and it is precisely in situations of dependence asymmetry and their resulting power disparities that adversarial action is more likely (Gulati & Sytch, 2007). .
5 For this reason, the aim of this paper is to answer the following question:
How does dependence asymmetry affect the relational posture and
relational intensity of buyer-supplier relationships?
To fill this theoretical scientific gap elaborate surveys are conducted to determine the interdependencies of different buyer-supplier relationships, while also assessing the corresponding relational posture and relational intensity of the companies investigated. Theoretically, this paper contributes to the research of Kim & Choi (2015) by expanding their view of interorganizational relationships and by enhancing the understanding on how power differentials and dependencies play a role in shaping these relationships. In a practical sense, this could support managers with their challenge of choosing companies to collaborate with, based on their dependence asymmetry and consequently determining the ideal level of integration according to their strategy.
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2.0 Theoretical Framework
The primary purpose of this section is to review the existing literature on buyer-supplier relationships in proportion with theories regarding (a)symmetrical dependences. Buyer- supplier relationships (BSR’s) are defined as “the set of practices and routines that support economic exchanges between the two firms” (Kotabe et al., 2003, p. 294). The first section will discuss buyer-supplier relationships in general, following dependences in the cooperative-adversarial dichotomy. Then, the expanded dichotomy of Kim & Choi (2015) is discussed in combination with literature on dependences. Finally, a conclusion is drawn based on the theory presented in this section.
2.1 Context: buyer-supplier relationships
Organizations are always dependent on other organizations to a certain extent. The resource dependency of Pfeffer & Salancik (1978) states that firms in a supply chain are dependent on each other for critical resources as money and materials. Resources that provide competitive advantage to firms have no substitutes, are difficult to imitate and allow companies to avoid threats or chase opportunities (Barney, 1991). Also, several studies have argued that inter-organizational relationships are critically important to achieve competitive advantage (Cao & Lumineau, 2015; Carey et al., 2011; Goffin et al., 2006; Lumineau & Henderson, 2012). More specifically, companies that develop successful and cooperative, long-term BSR’s could profit from improved competitive advantage and operational and financial performance (Carr & Pearson, 1999; Krause et al., 2007; Autry & Golicic 2010).
In many studies, BSR’s are categorized from adversarial arm’s length relationships to cooperative, closely-tied partnerships (e.g. Khoja et al., 2015; Carr & Pearson 1999; Autry & Golicic, 2010; Carter et al., 1998; Dong et al., 2001). Whereas arm’s length relationships are often typified as adversarial, with buyers and sellers fighting over price (Khoja et al., 2015), cooperative relationships are often closely-tied and are more desirable when resources are high in priority and limited to obtain from a few suppliers (Carr & Pearson, 1999).
2.2 Dependences in the prevailing cooperative-adversarial typology
7 perpetuating the adversarial nature of these interactions” (Shapiro, 1985). Blau’s (1964) classical theorizing suggests that the more powerful actor in a relationship will increase its adversarial tactics, because of less fear of retaliation, thereby capturing greater value at the expense of the weaker actor. These examples indicate that high dependence asymmetry often leads to adversarial, arm’s length relationships.
Additionally, highly interdependent companies are often associated with more cooperative, closely-tied relationships. When companies make asset specific investments, they also invest in their relationship. Increasing joint dependence with a partnering company demonstrates that efforts to maintain a relationship are reciprocated (Anderson & Weitz, 1992). Consequently, as joint dependence increases, the chance that retaliation will occur is smaller, as both companies have the power to seriously damage the other, should conflicts arise (Kumar et al., 1995). To maintain a long-term and mutually cooperative relationship, companies will avoid using legal rules or incentives to control the activities of their exchange partners and they will not depend on power to let partners meet their demands (Lusch & Brown, 1996). Furthermore, a high level of joint dependence makes it increasingly tricky for collaborating companies to engage in opportunistic behaviour, negative tactics, and intimidation, because they both have a lot to lose. (Kumar et al., 1995). Therefore, as partnering firms meet relatively high exit barriers and receive reciprocal contributions, these firms have a strong motivation to maintain, build, strengthen and even deepen the cooperative relationship (Kumar et al., 1995). Consequently, a level of high joint dependence between companies often leads to cooperative, closely-tied relationships.
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2.3 Framework of Kim & Choi (2015)
According to Kim & Choi (2015) the one-dimensional cooperative-adversarial relationship dichotomy is insufficient to accurately describe the complex dynamics of buyer-supplier relationships. Instead, they propose an extended view of the dichotomy by adding a dimension. Their expanded typology combines relational intensity –the strength and amount of interfirm transactions- and relational posture -two parties’ mutual attitude and behavioural motivation towards each other (see Figure 2.1).
As a result four ideal relationships have originated, namely sticky (adversarial and closely-tied), deep (cooperative and closely-closely-tied), transient (adversarial and at arm’s length), and gracious (cooperative and at arm’s length) relationships.
The relational posture addresses how the buyer and supplier regard each other and how they behave, as either cooperative or adversarial. Kim & Choi (2015) defined 5 basic constructs to determine the level of relational posture: commitment, trust, information sharing, relational norms, and conflict resolution. On the other hand, relational intensity is determined by four indicators: interaction frequency, asset-specific resource commitment, operational interdependence and multiplexity.
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2.4 Buyers’ and suppliers’ dependences
Caniëls & Gelderman (2007) show in their research that organizational dependence can be summarized by the following four key characteristics:
(1) The financial magnitude of the exchanged resources (2) The criticality of the resources
(3) The availability of alternative sources
(4) Switching costs, incurred when replacing a partner
The buyers’ dependence and suppliers’ dependence can be constructed according to these characteristics. Regarding the switching costs and the availability of alternative sources, the dependence positions of buyers and suppliers are symmetrical (Caniëls & Gelderman, 2007), meaning that the supplier depends as much on the buyer as the other way around.
These four key characteristics are derived from the research of Jacobs (1974), who introduced two concepts to describe dependence, namely ‘essentiality’ and ‘substitutability’. In this case essentiality means the importance of a resource, which according the ‘Resource Dependence Theory’ (Pfeffer & Salancik, 1978) is determined by (1) the financial magnitude of the exchanged resources and (2) the criticality of the resources. Substitutability on the other hand, refers to the costs involved with switching suppliers and is therefore determined by (3) the availability of alternative sources and (4) switching costs.
2.5 Dependence (a)symmetry
The dependence asymmetry of an organizational relationship is established by the difference between buyers’ and suppliers’ dependences on each other and reflects the power differential in the relationship. In general, the dependence construct is inseparably intertwined with the power construct (Caniëls & Gelderman, 2007; Handley & Benton, 2012). Emerson (1962) stated that power and dependence are the opposite of one another and describes that if company A is dependent on company B, then company B has power over company A. Relationships with symmetrical dependence therefore suggest a power differential of zero between two companies, which means that the amount of power is equally distributed between the parties. From the perspective of Cox et al.’s (2000) ‘Power Regimes’, the type of BSR, as well as the outcome of that BSR will be determined by the power differentials or dependence asymmetry that exists between the buyer and the supplier.
10 (Pfeffer & Salancik, 2003), whereas dependence focuses more on the desired goals to achieve and the importance of a partner to achieve these goals by means of a specific relationship that is preferable to any alternative option (Buchanan, 1992; Emerson, 1962).
BSR’s with a high level of asymmetric dependence are claimed to be more dysfunctional, because the less dependent party will experience high power and will be tempted to exploit it (Anderson & Weitz, 1989; Geyskens et al., 1996; Frazier & Rody, 1991). In contrast, symmetric relationships are claimed to be more stable because of the balance of interests and the reduced motivation to engage in conflict (Anderson & Weitz, 1989). In case of asymmetric relationships, the relatively powerful firm can inflict a lot more damage on its partner than vice versa (Kumar et al., 1995). Also, the one firm with more specific investments in the particular BSR is more likely to undertake steps to safeguard the investment, by decreasing the one-sided dependence of the other firm (Xie & Kwon, 2010). Consequently, the result of a relationship in which there is an equal sharing of risks and rewards, depends upon the power differentials. Finally, Chicksand (2015) notes that companies that want to collaborate need to either acknowledge that the relationship is asymmetric and work together to reduce the conflicts as far as possible, or balance the relationship (e.g. through asset specific investments).
2.6 Conclusions from literature
From previous sections can be concluded that dependencies influence the type of relationship that buyers have with their suppliers. When there is a high level of dependence asymmetry this often leads to an adversarial relationship, in which the more powerful actor captures more value from the weaker actor by exploiting them. In contrast, symmetrical relationships tend to be more stable because of the balance of interests and avoidance of conflicts. However, even the most closely-tied cooperative relationships can turn sour, when joint dependence reaches its peak and lock-in effects emerge.
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3.0 Methodology
3.1 Research method
The aim of this research is to explore how dependence asymmetry affects the relational posture and relational intensity of buyer-supplier relationships (BSR’s). First of all, survey data is collected from the suppliers of a single buyer in order to categorize the BSR’s according to the dimensions relational posture and relational intensity of Kim & Choi (2015). Furthermore, through this survey, the buyer’s and suppliers’ dependences are measured to determine their dependence asymmetry. The survey will show if there is any link between dependence asymmetry and the type of relationship. Based on the results, an embedded case study is conducted to research how, for what reasons, and under which conditions dependence asymmetry influences these BSR’s, and if not, why so? The case study research will reveal which of the constructs that together form the dimensions relational intensity and relational posture are most susceptible for dependence asymmetry and will provide an in-depth analysis on their effect on the relationship. A mixed method of qualitative and quantitative research is used to ensure triangulation. In this way, the qualitative method raises its earned reputation and it shows that quantitative methods should be used in a complementary way (Jick, 1979).
3.2 Research setting
In order to answer the research question, a combination of qualitative and quantitative methods is used on a single case (with embedded cases) to enrich our understanding of the influence of dependence asymmetry on the dimensions relational intensity and relational posture. The selected focal company of this study operates in the high-tech industry. The high-tech industry was chosen due to the fact that this industry is characterized by the often high switching costs, a low number of alternative suppliers and complex nature of the market (De Ruyter et al., 2001), thereby ensuring BSR’s with varying levels of dependence asymmetry.
The focal company was selected based on its diverse relationships with its suppliers and different levels of integration and collaboration, to ensure an elaborate perspective on the effects of dependence asymmetry. Second, the focal company has varying BSR’s, in which some of the suppliers have a significantly stronger or weaker power position, in order to establish its effects on the relationship.
Third, the focal company is a manufacturing company, relying on resources and materials from its suppliers. Table 3.1 shows the characteristics of the focal company.
Table 3.1: Characteristics of the Focal Company
Focal Company - Characteristics
Size (Employees) > 100
Size (Revenue in €) > € 65.000.000,-
Location Drachten, the Netherlands
Founded 1954
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3.3 Survey research (Part 1)
3.3.1 Data collection (Part 1)
In this part of the research, data is collected to establish the types of relationships based on the model of Kim & Choi (2015). Furthermore, both the dependences of the focal company and the suppliers are measured by surveys completed by the suppliers. This survey research is done to gain insight into the effects of dependence asymmetry and provides the basis for the more in-depth case study in Part 2 of the research. The in-depth cases are used to understand the relative importance of the individual constructs that form the dimensions relational intensity and relational posture when it comes to power differentials. Also, the causality of the emergence of a BSR is reviewed, meaning that the case study research will explore if the type of relationship is formed by the dependence asymmetry, or if companies choose a strategy based on the dependence asymmetry of that particular relationship.
The dimensions relational intensity and relational posture are measured by the constructs provided by Kim & Choi (2015) and the buyer’s and suppliers’ dependences are measured by the constructs developed by Caniëls & Gelderman (2007). Table 3.2 shows these constructs and provides their definitions. The resource criticality (see section 2.4) refers to “a need for technological expertise of the partner, but on the other hand it points to issues of logistical indispensability” (Cagliano et al., 2002). As logistical indispensability is more of a buyer’s issue, it is excluded from the supplier’s dependence construct. Also, if switching costs are low, a buyer will not experience dependence on its supplier. Consequently, as the financial magnitude of a transaction with a supplier is much less crucial for its dependence situation, the financial magnitude is excluded from the construct of buyer’s dependence and included in the supplier’s dependence construct (Caniëls & Gelderman, 2007).
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Construct Definition
Buyer’s dependence “The extent to which a buyer does not entirely control all of the conditions necessary for the achievement of an action or for obtaining the outcome desired from the action.”
Logistical indispensability “The essentiality of supplier logistics.” Need for suppliers’ technological
expertise
“The extent to which specialized knowledge and skills are required from the buyer.”
Availability of alternative suppliers “The quantity of alternate options for the procurement of a resource” Switching costs buyer “Fixed costs incurred by a buyer when changing supplier”
Supplier’s dependence “The extent to which a supplier does not entirely control all of the conditions necessary for the achievement of an action or for obtaining the outcome desired from the action”
Financial magnitude of the exchanged resources
“The relative amount of money that is involved with resource transactions between the buyer and supplier”
Need for buyer’s technological expertise
“The extent to which specialized knowledge and skills are required from the supplier”
Availability of alternative buyers “The quantity of alternate options for selling a resource” Switching costs supplier “Fixed cost incurred by a supplier when changing buyer”
Relational Posture “Two parties’ mutual attitude and behavioural motivation toward each other”
Commitment “Both partners’ long-term perspectives toward the relationship” Trust “The level of expectancy of partner reliability and faithfulness” Information sharing “The extent to which parties disclose information that may be beneficial
for the other”
Relational Norms “The extent to which parties share the understanding of mutually accepted behaviours”
Conflict Resolution “The extent to which interfirm conflicts are managed amicably” Relational Intensity “The strength and amount of interfirm transactions”
Interaction Frequency “Frequency of buyer-supplier interactions in various domains”
Asset-specific Resource Commitment “The extent to which two firms engage in joint activities beyond their regular exchange”
Operational Interdependence “A partners’ economic value and substitutionality”
Multiplexity “The number of different interaction domains between firms”
14 3.3.2 Data analysis (Part 1)
The set of data of the BSR’s is used to (1) calculate the dependence asymmetry and to (2) determine the position of the relationships according to the dimensions of Kim & Choi (2015); relational posture and relational intensity. As dependence asymmetry is defined as ‘the difference in actors’ dependencies on each other”, the difference between both parties’ individual dependences is taken in other to construct the value of the dependence asymmetry in the relationship along with the data from the company documentation. For the relational intensity, the values of the corresponding constructs; interaction frequency, asset-specific resource commitment, operational interdependence and multiplexity are averaged to determine its position. Similarly, for the relational posture, the value of the corresponding constructs; commitment, trust, information sharing, relational norms and conflict resolution are averaged. As the survey consists of statements with a 6-point Likert scale, the values of the dimensions relational intensity and relational posture differ between 1 (arm’s length/adversarial, respectively) and 6 (closely-tied/cooperative, respectively). This was executed for every supplier and for the focal company in accordance to these suppliers.
15 The survey, that was distributed among 59 suppliers of the focal company, was completed by 21 of them, resulting in a response rate of 35,6 %. Some general background information and characteristics of these suppliers can be
found in Table 3.3. The table shows that the sample is diverse and features suppliers with various characteristics. For instance, the sample exists of companies of multiple industries, of different sizes (revenue) and with varying lengths of cooperation with the focal company, although the sample only includes companies from the Netherlands and features suppliers with a relatively low number of employees, due to the business environment the focal company operates in. Furthermore, Table 3.4 shows the functions of the employees that filed in the survey and the response times of that same suppliers.
3.4 Case research (Part 2)
3.4.1 Case selection
The second part of this research will investigate how dependence asymmetry affects the level of relational posture and relational intensity in BSR’s through multiple embedded case studies. Case research can be used as a follow-up to survey-based research to examine, validate and interpret previous quantitative results (e.g. Meredith & Vineyard, 1993; Hyer & Brown, 1999). The unit of analysis in the multiple-case studies is the buyer-supplier relationship. To better understand the influence that dependence asymmetry has on relational posture and relational intensity, theoretical replication is used, meaning case studies producing contrary results, but for predictable reasons. (Karlsson, 2009, p.176). Logically, dependence asymmetry was chosen as one of the selection criteria, because the aim of the research is to discover how this construct influences the dimensions of Kim & Choi (2015). Additionally, the type of relationship was chosen as one of the selection criteria to be able to detect the influence that dependence asymmetry has on the two dimensions.
16 First of all, two BSR-cases involving high dependence asymmetry and two cases with low dependence asymmetry are selected. Second, suppliers with different types of relationships (and thus different levels of relational intensity and relational posture) are selected to fathom the effect of dependence asymmetry. These case selection criteria are depicted in Table 3.5.
Gracious Relationship Deep Relationship Dependence Asymmetry Low High Low High
Table 3.5: Case selection
Lastly, as results are regarded highly generalizable when they apply to every situation and in any time frame (Meredith, 1998), BSR’s with different characteristics are selected to augment generalizability. As the suppliers from the population sample only include gracious and deep relationships (as will be elaborated in section 4.1), two cases with a deep relationship and two cases with a gracious relationship are selected. Based on these sampling conditions, the results of the surveys and the degree of cooperation on the supplier’s side, the four cases were selected (Table 3.6 and Table 3.7).
Case Length of relationship Industry No. employees Revenue (€) Type of relationship Kraljic-Matrix Supplier A 4 years Steel/metal
parts
<50 1 – 10 Million
Gracious Leverage
Supplier B 2 years Steel/metal parts
<50 1 – 10 Million
Gracious Bottleneck
Supplier C 15 years Packaging 51 – 250 10 – 50 Million
Deep Strategic
Supplier D 20 years Wholesale 51 – 250 10 – 50 Million
Deep Bottleneck
Table 3.6: Case characteristics
Case Amount of placed orders
Total value of the transactions (in €)
Supplier A 4 10.000
Supplier B 15 40.000 Supplier C 250 200.000 Supplier D 250 50.000
17 3.4.2 Data collection (Part 2)
As aforementioned, triangulation by the use of mixed methods is used to increase the construct validity of the research. Interview protocols were constructed for the semi-structured interviews of each individual case (see Appendix D). These interviews were conducted by one researcher, and recorded and transcribed to smoothen the data analysis process.
Interviewees were asked if the interviews could be recorded, anonymously transcribed and if they understood the content of the research they were participating in through a consent form (see Appendix F). The aim of the interviews is to gather information to answer the research question and to gain additional information regarding the concerning relationship. The interviews consist of general questions about their company, questions about the relational intensity and relational posture of the relationship, about the focal company’s dependence and about the supplier’s dependence. As these constructs all consist of multiple container constructs, every container construct is assigned one or two questions (see Table 3.8 and Appendix D).
Issue Question
General information How long has FC been working with this supplier? Interaction frequency How often does FC interact with Supplier X?
Information sharing How often do you share sensitive information with Supplier X? Availability of alternative
suppliers
Are there currently many alternative suppliers that can deliver the same product?
Financial magnitude of the exchanged resources
Would Supplier X get into financial trouble if you stop placing orders?
Table 3.8: Interview outline
Two purchasing managers and a controller from the focal company were interviewed for approximately 60 minutes about the cases. The purchasing managers were appointed two cases each, as they were specialized in that particular suppliers, and therefore were able to speak more in-depth about it. The controller was questioned about all four cases (see Table 3.9). The data of the survey, in combination with the companies’ characteristics recovered from preliminary research and the data retrieved from the interviews ensure triangulation by the use of different sources. Also, a case study database is used to store the collected data, in order to increase reliability.
Embedded Case Study: Semi-Structured Interviews
Case Case A Case B Case C Case D
Interviewee 1 (Purchaser) A1 B1 _ _
Interviewee 2 (Purchaser) _ _ C2 D2
Interviewee 3 (Controller) A3 B3 C3 D3
18 3.4.3 Data analysis (Part 2)
After collecting the data from the semi-structured interviews the data is coded, as it is important to spread the data over multiple categories (Miles & Huberman, 1994). The data is coded following the deductive reasoning approach. Coding refers to “the process of transforming raw data into a standardized form” (Babbie, 2001). The data from the transcripts will be reduced to first-order codes in the form of quotations. These quotations are grouped into domains, which are derived from the theoretical framework. The domains consists of the container constructs of dependence; the financial magnitude of the exchanged resources, the criticality of the resources, availability of alternative sources, switching costs and obviously the two relationship dimensions of Kim & Choi (2015); relational posture and relational intensity. The quotations that provide insight into the subject, but cannot be divided among the domains will be placed in the domain “Other”. Table 3.10 shows an example of a code tree and the complete coding trees are found in Appendix E.
After the data reduction and data displaying stage, it is time for the conclusion drawing/verification stage (Miles & Huberman, 1994). The verification stage starts with the analysis of within-case data, which allows the researcher to discover the unique patterns and characteristics of each individual case that is needed for cross-case analysis (Eisenhardt, 1989). By means of second-order codes these patterns are uncovered and it consists of categories that are revealed through the examination of the within-case quotations.
Construct Ref. nr.
First-order code Second-order code
Criticality A1.1 It might be possible that no suitable orders are available for Supplier A throughout the whole year.
Order availability; Supplier capabilities Availability of alternative suppliers / buyers
A1.8 They have many other customers. Supplier’s alternative buyers
Switching costs
A1.11 It’s not simple to replace Supplier A, because you go through a whole qualification process with a supplier.
Qualification process; FC’s alternative suppliers Financial magnitude of the exchanged resources
A1.13 We contribute only a very small part to their turnover Order availability
Relational posture
A3.28 If we can support our suppliers with our knowledge, then we’ll surely do that, but to a certain extent.
Supplier education
19 Subsequently, the second-order codes are divided even further into third-order codes, based on the similarities found between the categories of the second-order codes.
The next step is the cross-case analysis which provides insights into the dependence asymmetry in the different relationship types (see section 4.3). The individual cases are compared for similarities and differences among the third-order codes and are valued on their importance. The gracious relationships (Case A, B) will be compared to the deep relationships (Case C, D), as those cases have varying levels of dependence asymmetry and have the same relationship type. By comparing the characteristics of the cases and the third-order codes of the within-case analysis, conclusions can be drawn about the effect that dependence asymmetry has (or may not have) on the relationship type and its underlying mechanisms. Lastly, to ensure the quality of the research, the following measures were taken to ensure validity and reliability (see Table 3.11)
Validity & Reliability
Taken measures
Construct validity Triangulation: qualitative and quantitative methods are used, with different sources. Internal Validity Pattern matching
Coding schemes for cross-case analysis Multi-stage coding process
External Validity Theory from theoretical framework Multiple case study
Reliability Recordings and transcripts of the interviews The use of a case study database
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4.0 Analysis & Results
In this section the results of the two parts of the research will be presented and analysed. First of all, the results of the survey (Part 1) and the effect of the dependence asymmetry on the relationship will be discussed. Second of all, the four individual within-case studies of the embedded multiple case study (Part 2) will be examined and analysed. Finally, the results of both research parts will be combined and discussed (see section 5) and thereafter a conclusion is drawn (see section 6).
4.1 Results survey research (Part 1)
Through the supplier survey, the relationship types of a sample of suppliers from the focal company were mapped. Figure 4.1 shows that from the 21 responded suppliers, officially 10 of these relationships can be considered as deep and 11 can be considered as a gracious relationship. This means the suppliers are reasonably equally divided on the dimension relational intensity, although the classification of suppliers on the border between closely-tied and at arm’s length is dubious.
21 On the other hand, it is remarkable that all of the survey findings contain relationships that are more or less cooperative, and thus have a high level of relational posture. Why all these relationships are considered as cooperative is difficult to conclude on the survey results alone. It could be that in the industry of the focal company it is more desirable to have cooperative relationships instead of adversarial, because quality is a more important key performance indicator than price. It could also be that the results are somewhat biased, as cooperative partners might have a bigger interest in filling out the survey. To be able to give a good answer to those questions, additional research is needed. Therefore, questions on this topic were added to the semi-structured interviews and the answers will be discussed in section 4.2. Furthermore, it is striking that the results show that in every relationship the buyer is more dependent on the supplier than vice versa, with two minor exceptions. In the case study research this will be addressed and questions were asked to explore possible reasons for this situation.
4.1.1 Dependence Asymmetry and Relational Intensity
To examine the effect that dependence asymmetry has on the relational intensity of a relationship, a comparison among results is required. Table 4.1 shows the dependence asymmetry per responded supplier and the corresponding intensity of that relationship. The results clearly show no link between dependence asymmetry and relational intensity. Also, when taking a closer look at the values of the container constructs of relational intensity, no connection between the constructs and dependence asymmetry can be made (see Appendix B).
22 However, when decomposing the dependence asymmetry construct back into the buyer’s and the supplier’s dependence some conclusions can be drawn. When both the buyer’s dependence as the supplier’s dependence are high (low dependence asymmetry), the relational intensity is almost certainly closely-tied according to the survey results. Similarly, when both the buyer’s and the supplier’s dependence is low (low dependence asymmetry), then the relational intensity is at arm’s length.
Finally, when a relationship is asymmetric, i.e. the buyer’s dependence is high and the supplier’s dependence is low or vice versa, the average of these dependences represent a rough estimation of the relational intensity of the relationship, as either closely-tied or at arm’s length. In other words, the results show that the average of the buyer’s and supplier’s dependence can be used to predict the intensity of the relationship. Table 4.2 shows the average dependences of the BSR’s against the intensity of the corresponding relationship per responded supplier.
23 4.1.2 Dependence Asymmetry and Relational Posture
As aforementioned, it is remarkable that all of the relationships of the responded suppliers are typified as cooperative. Also, with a variety of levels of dependence asymmetry from the results, and all of the suppliers being more or less cooperative, the answer to the question if dependence asymmetry affects the relational posture in a BSR, seems obvious. In Table 4.3 the levels of dependence asymmetry are plotted from highest to lowest and with the corresponding values of relational posture.
Similarly to the relational intensity, the level of dependence asymmetry does not seem to influence the relational posture of these BSR’s. Nonetheless, literature on dependences and BSR’s suggests that as the power differential in a BSR is larger, the less dependent partner will increase its adversarial tactics to exploit the relationship to create more value. So, this begs the question why the less dependent partner, which in this particular research is the supplier in most cases, does not act on this. Also, when looking at the individual container constructs of relational posture (trust, commitment etc.), no connection can be made with the level of dependence asymmetry.
To conclude, the results of the survey part of the research seem to suggest that there is no link between the dependence asymmetry of the focal company and its suppliers, and the type of relationship they have, whatsoever. The survey does demonstrate that the average of the buyer’s and suppliers’ dependences is a good predictor for the intensity of a relationship.
24 Looking back at the theoretical framework, the presence of only cooperative relationships is an interesting one, as the relationships vary in power differentials and more adversarial action from the less dependent parties would be expected. In Part 2 of the research the cases will be used to create an understanding of these results and will explore why it diverges from the prior expectations.
4.2 Results embedded case study research (Part 2)
This section contains the results of the four within-case studies. Each case provides a detailed description of the (type of) relationship and the corresponding dependence asymmetry. The provided quotations derived from the semi-structured interviews are coded and refer to the corresponding code tree (see Appendix E). First, the influence of dependence asymmetry on the relational posture and thereafter the influence on relational intensity will be discussed. The results of each individual case are then used in the cross-case examination (see section 4.3) to develop a conclusion on the research question. The four selected cases are presented in Figure 4.2. Lastly, to guarantee the anonymity of the focal company, it shall henceforth be referred to as ‘FC’.
25 4.2.1 Case A
FC’s dependence
Supplier A is a relatively small company (A1.30) and their collaboration with the focal company has started four years ago (A1.22, A1.23, A3.14). On a regular basis, the focal company outsources parts of its production to suppliers like Supplier A when FC’s internal capacity is insufficient (A1.3, A1.7, A3.2). They could outsource
the work to their other branch, but their workload is often too high (A3.9). On the other hand, when the focal company realises an outsourced product or component is too expensive, they could decide to stop outsourcing it and instead produce it internally to save costs, provided that sufficient capacity is available (A1.4). Another reason to outsource, is if the focal company does not have the technological capabilities to manufacture certain products themselves (A3.1).
As the focal company operates in an industry that works with high precision machinery, suppliers must require a certain level of expertise. The relationship between the companies is relatively young and FC is still testing Supplier A’s potential, before they will increase the number of outgoing orders.
“They’ll have to pass a couple of qualification orders before we start increasing their workload.” (A1.40)
Furthermore, FC is satisfied with Supplier A’s work so far (A1.32), but the number of orders FC places is very dependable on the type of work they have to offer.
“It might be possible that no suitable orders are available for Supplier A throughout the year.” (A1.1)
Finally, the focal company uses more suppliers for the same type of work, although the number of alternatives is somewhat confined (A1.16, A3.10).
In conclusion, the number of suitable orders for Supplier A is limited as their technological capabilities are still being tested. Moreover, the focal company has alternatives; producing internally, or turn to other suppliers. This results in a relationship in which the focal company is not that dependent on Supplier A.
26 Supplier A’s dependence
As aforementioned, the number of available orders for Supplier is still limited. The focal company does not conduct a lot of business with Supplier A yet and they contribute only a little to their yearly turnover (A1.10, A1.13, A3.12). However, Supplier A is not dependent on FC (A1.36), because they have a lot of alternative buyers for their products (A1.8). Moreover, the switching costs are low, as Supplier A has not made any asset specific investments in the relationship (A3.11).
Dependence asymmetry
Both the dependences of the focal company as Supplier A are low, as the two companies do not conduct a lot of business with each other yet. The focal company only calls upon Supplier A when it exceeds its own capacity or technical capability. Supplier A has enough alternative buyers for its products, and so the result is that there is a balanced relationship in which the level of dependence asymmetry is low.
Dependence asymmetry vs. relational posture
With a relatively new supplier like Supplier A, the relationship starts with a qualification process. The focal company puts a lot of time and effort in qualifying suppliers to see what their suppliers are capable of. The number of qualification orders keeps growing as Supplier A proves its capabilities to the focal company, but it can take years before a supplier has proven its full worth.
“We put a lot of time into qualifying our suppliers and we don’t do that for just one order. We want to grow with a supplier, so that eventually we’ll have a reliable supplier we can turn to.” (A3.18)
27 company state that before their trust is ensured and before they become a reliable partner, time and energy must be put into the relationship (A1.9, A3.3).
In conclusion, as the focal company needs to collaborate and share a lot of information with its suppliers, it aims for cooperative long-term relationships. As the relationship is young, Supplier A’s qualification is still in process and FC is testing Supplier A with different types of orders. There have been no conflicts and the focal company is satisfied with the work that Supplier A has delivered thus far, but it will take more time for them to prove their worth to FC.
Dependence asymmetry vs. relational intensity
When the focal company places an order, there is telephone contact about the price, quality and lead times of the products (A1.26, A1.27), while after that the contact is mainly done by e-mail (A1.25). Momentarily, FC places on average between 10 and 15 orders a year (A3.17). When selecting a supplier for a certain production order, the focal company looks at the supplier’s key performance indicators. The most import KPI is quality, and the lead time comes as a close second (A3.3). Price is not unimportant, but the quality and lead time have a strict priority, as this is also very important to FC’s buyers. However, Supplier A often indicates lead times that the focal company cannot work with (A1.20). FC states that the lead times would be allowed to be a bit longer, if the price goes down and it fits within their planning (A1.21). While the focal company is satisfied with the quality of the work that Supplier A has done so far (A1.2, A3.5), their prices are regularly too high (A1.14, A1.15, A1.33).
“We think that their prices are a bit too high compared to other parties that can deliver the same quality.” (A1.16)
Lastly, the focal company and Supplier A have not been engaged in joint activities outside of the usual business exchange (A3.29) and FC has not invested in machines or production equipment for Supplier A (A3.11).
28 4.2.2 Case B
FC’s dependence
Supplier B is a manufacturer that produces metal and steel parts for the focal company. The focal company started this collaboration two years ago, and Supplier B is used when FC’s internal capacity is insufficient (B3.1).
“Supplier B has been a search.. We have 2 machines here; the most accurate milling machines we have, which are overloaded. So overloaded, that we were asked to look for external parties” (B1.10).
These Yasda-machines are a bottleneck for the focal company (B1.5, B3.7), and when production reaches its peak, the focal company outsources this type of work to Supplier B (B3.6, B3.12). The number of yearly orders depends heavily on the work that FC receives from its customers and on its own internal capacity at that moment (B3.5).
“If a certain customer in the medical sector starts placing a lot of orders, then we do not have sufficient capacity for that. Then we will certainly end up at Supplier B” (B1.7). There are only a few available suppliers that can manufacture parts as accurate as Supplier B (B3.2) and besides Supplier B and FC, there is only one supplier in the Netherlands that possesses a Yasda-machine (B1.11, B3.4). A while back, Supplier B even procured a second Yasda-machine (B1.2).
To summarize, the amount of placed orders at Supplier B strongly depends on the workload of the focal company. When FC has sufficient internal capacity, it does not appeal to Supplier B. However, when their own Yasda-machines lack capacity, FC has only two suppliers to turn to and FC becomes quite dependent on Supplier B.
Supplier B’s dependence
The number of orders that FC places at Supplier B is still limited (B3.19), as the relationship is quite new and the focal company has not tested all of Supplier B’s technical capabilities yet. Supplier B is a relatively small company with around 15 employees (B3.27) and they do not own a lot of machines (B3.3), although they possess two highly accurate Yasda-machines.
29 Supplier B has many other buyers besides FC, as otherwise they would not be able to afford such expensive equipment (B3.16), but they would like to expand their business with FC (B1.16). So, Supplier B is momentarily not that dependent on the focal company, as the financial impact of the placed orders is still relatively small. However, both parties are eager to expand their business in the near future and they want to build a long-term relationship. Dependence asymmetry
When the focal company exceeds its internal capacity, they appeal to their suppliers. As the Yasda-machine is a bottleneck for FC, it depends on Supplier B to perform a part of their highly accurate milling activities. The result is that FC is highly dependent on Supplier B during their production peaks. Supplier B however, has sufficient alternative buyers for their products and FC contributes only a small part to their yearly turnover as of yet. The result of this situation is a relationship with a high level of dependence asymmetry in favour of Supplier B.
Dependence asymmetry vs. relational posture
The focal company praises the work that Supplier B has delivered so far (B1.25, B1.26) and is exploring options to extend the different types of jobs they can offer them (B1.3).
“Supplier B is very reliable, they always deliver on time and at high quality”. (B3.20) Furthermore, a lot of propriety information is shared to ensure that FC receives products from the highest quality. All information that is needed to produce a component is shared (B1.28); work preparation information, measurement details, price indications and so on (B1.27), and FC protects this information by means of non-disclosure agreements (B3.21). The contact between the partners is good (B1.31) and the focal company values the technical knowledge that Supplier B has.
“If you talk to employees of Supplier B, then you’re talking to practitioners. You’re not just dealing with a sales department.. that only sees numbers, but you’re talking to people that can judge a blueprint and know what they’re talking about.” (B1.32)
30 the supplier side would be expected. FC indicates that Supplier B’s prices are indeed very high, but that this is something they can accept, as the quality and lead times are a priority (B1.17). Furthermore, FC points out that if there were more suppliers with Yasda-machines available, the price would have to go down (B3.9, B3.17). They also point out that they expect Supplier B to know that they are dependent on them (B3.28). Lastly, FC only places orders with the highest degree of difficulty at Supplier B as of yet, as their products are too expensive for simpler tasks (B1.19).
In conclusion, due to the close collaboration, the considerable amount of information that needs to be shared and the focal company’s willingness to pay a relatively high price for Supplier B’s products, a cooperative partnership in an asymmetrical relationship is possible in this case.
Dependence asymmetry vs. relational intensity
Due to the short length of the relationship, the amount of placed orders is still reserved. The relationship is still young and Supplier B has indicated that it wants to cooperate and increase the number of orders, but at a steady pace (B1.22). In the last year, FC placed 15 orders at Supplier B, including a couple of qualification orders. The details of every order are discussed by telephone at the start of every order, and from there on out, communication is primarily done via e-mail.
In order to produce a wider variety of products for FC, qualification orders are placed to check Supplier B’s technological capabilities. The qualification orders that Supplier B has manufactured thus far, have been in accordance with the agreement (B1.1). Furthermore, the focal company has done some additional asset specific investments in the form of education. For example, the focal company has invested time to teach Supplier B on what types of packaging materials to use (B1.24) and it has provided help with the measurement reports. Moreover, after the first qualification order, both parties agreed that FC would take over the measurement of the products, as Supplier B lacked the right equipment to deliver the desired measurement reports. Lastly, it would take a lot of financial effort for FC to replace Supplier B, mainly due to the scarcity of alternative suppliers that own a Yasda-milling machine, but also due to the above relationship specific investments that were already done to educate Supplier B.
32 4.2.3 Case C
FC’s dependence
Supplier C is a manufacturer of high-end packaging materials for the focal company. FC’s relationship with this supplier started over 15 years ago and Supplier C is the main supplier of all packaging materials for a big client of the focal company. This client will be from now on, referred to as ‘Buyer A’. When the focal company receives an order from
Buyer A, they are forced to use the packaging materials of Supplier C (C2.36, C2.37, C3.7, C3.20).
“Supplier C is more or less prescribed by our client Buyer A. We don’t really have a say in that” (C3.25).
Moreover, all packaging materials that are acquired from Supplier C are also directly charged to Buyer A (C3.3).
“Buyer A just says to us: you can go to them for your packaging materials and we will pay. So, in that sense there is no pressure to lower the price.” (C3.14)
With over 250 orders a year, Supplier C is an important supplier for the focal company (C2.16). On the other hand, FC only uses Supplier C to pack products for Buyer A, as the packaging materials are quite expensive (C3.15). Price does not play a role when it comes to packaging materials for Buyer A, but for other customers FC prefers different suppliers (C2.10, C3.4).
“We have once even tried to go to another company, but that took so much effort and so much extra energy. We couldn’t work it out in terms of price and delivery times, so eventually we didn’t do it.” (C2.11)
Finally, the products of Supplier C are often very complex and technically high-standard (C2.2, C3.1) because the products they cover need to be transported around the globe and under the right conditions (C2.5). As Buyer A is a very important client to FC, the result is a relationship in which the focal company is very dependent on Supplier C.
33 Supplier C’s dependence
Almost weekly FC receives packaging orders (C2.21). The number of orders that FC places, is very dependent on the number of orders they receive from Buyer A. Logically, the more orders Buyer A places, the more packaging material FC requires. (C2.14, C2.23, C2.24). Supplier C is very dependent on Buyer A, as Buyer A prescribes its packaging material to all of its other suppliers (C2.8, C2.9, C3.9). Furthermore, as the financial magnitude of the placed orders is substantial, it would be a big setback for Supplier C if FC would withdraw its business from them (C2.15). It is not known if Supplier C has any more clients besides Buyer A (C3.8), but it would get into serious financial trouble if Buyer A would withdraw its business from them. Moreover, the same applies to the focal company (C3.11).
Dependence asymmetry
The prescribed relationship between FC and Supplier C is characterized by their mutual client, Buyer A. As both companies are highly dependent on Buyer A, they are bound to work together. Although FC is slightly more dependent on Supplier C (C2.38) because Supplier C is a bigger company (C3.27), both companies rely heavily on each other. The focal company, because Supplier C is their sole supplier of packaging materials for Buyer A-products, and Supplier C because of the yearly turnover that FC provides for their company. The result of all this, is a balanced and mutually dependent relationship.
Dependence asymmetry vs. relational posture
34 Conflicts between the partners are scarce (C3.19), but when serious conflicts do arise, Buyer A is called in (C2.34), as FC itself is too small to put its foot down (C3.18)
“In the end, Buyer A is the customer who needs its products .., and if we do not get it right with Supplier C, then Buyer A will be on top of it.” (C2.39)
“If there are really serious conflicts that we cannot resolve, then Buyer A will be called in, as they are even bigger and more important to Supplier C, so they have more influence.” (C2.31)
To conclude, both companies rely on each other through the products they manufacture for Buyer A. The focal company is satisfied with the lead time and quality of the products and price is not an issue, as these products are directly charged to Buyer A. There are hardly any conflicts between the parties, and if there are any, Buyer A is called in, leaving FC out of the conflict. The result is a high level of relational posture in this balanced relationship.
Dependence asymmetry vs. relational intensity
The collaboration between FC and Supplier C was established many years ago and almost every week the focal company receives their orders (C2.22). Communication is primarily done via e-mail (C2.26), as the type of orders are pretty standard for both parties (C3.21). Both companies are fully informed about Buyer A’s products (C2.1) and when FC places an order at Supplier C, a Buyer A-number is used as a reference (C2.3, C2.20). Supplier C has not adjusted its production line to FC, but it has to produce high-quality packaging materials for Buyer A (C2.4). Lastly, the focal company sees Supplier C as their best option, because otherwise they would have to invest in the qualification of new packaging suppliers (C2.13, C3.6) and they would have to specify themselves which products require what type of packaging (C2.12).
“Those qualifications have in fact already been done by our customer. So we do not have to reinvent the wheel ourselves.” (C3.26)
35 4.2.4 Case D
FC’s dependence
Supplier D is a wholesale supplier of various types of nuts, bolts and tools. The focal company and Supplier D have been in a business relationship for over 20 years and much like Supplier C, certain products of Supplier D are prescribed by Buyer A (D3.3).
“Buyer A prescribes a number of products to us, e.g. a very special bolt that you can actually only buy from Supplier D at the moment”. (D2.6)
For these prescribed parts, it is not possible to replace Supplier D (D2.16), but for the relatively standard components (D2.2, D2.3), the focal company has a variety of alternative suppliers (D2.7, D2.14, D3.6). The focal company tries to divide the number of orders between these suppliers, so it will not become too dependent on just one or two of them (D2.9, D2.10, D2.11). When it comes down to a very specific component that is only available at a couple of suppliers, FC makes an offer to all of them to get the price down (D2.12)
“Sometimes I send a message to a supplier saying: your competitor can offer me this price. And usually I send that to both suppliers, because then the price usually drops.” (D2.15)
However, for the standard components price is less of an issue as these nuts and bolts are only very small pieces of the products that FC manufactures (D3.10, D3.11).
“It’s not worth negotiating very hard over, as for the products we manufacture, such a bolt is only a very small piece. We don’t need a thousand bolts and nuts for a product or anything, so it does not make a big difference, financially.” (D3.12)
Consequently, the lead times of these components play a much bigger role in the purchasing process (D2.23) and moreover, in case of Supplier D, the parts are directly charged to Buyer A (D3.9). So, the focal company relies on Supplier D because of the specialized parts they produce, but mostly because a part of these components is prescribed by Buyer A. For the standard components FC has sufficient alternative suppliers and for that matter relies less on Supplier D. The fact that FC is highly dependent on the Buyer A-part of their purchases and a
36 lot less on the rest of their assortment, results in a relationship in which FC is reasonably dependent on Supplier D.
Supplier D’s dependence
Last year the focal company placed approximately 250 orders at Supplier D (D3.13, and Table 3.7) and as long as Buyer A is a client of FC, they will continue to do so (D2.1). Supplier D is a company with roughly 150 employees (D2.25) and with a larger turnover than FC (D2.21, D3.22). Supplier D has a multitude of alternative suppliers, as Buyer A prescribes their components to all of their suppliers (D3.5). The survey results (see Appendix C) suggest that the financial impact of FC’s placed orders on Supplier D’s yearly turnover is low and that the switching costs are minimal. Together, this results in a relationship in which Supplier D is not that dependent on the focal company.
Dependence asymmetry
A lot of the components that FC procures from Supplier D are somewhat standard and there are a variety of alternative suppliers available. For the products they manufacture for Buyer A, FC is dependent on Supplier D as they are required to use their products. Supplier D is a larger company with a lot of buyers. The financial impact of FC’s orders is low and thus Supplier D is not very dependent on the focal company. As FC is partially very dependent on Supplier D, and Supplier D is not dependent at all on FC, this results in a relationship with a high dependence asymmetry in favour of Supplier D.
Dependence asymmetry vs. relational posture
Supplier D is a reliable supplier and actually there are almost never any complaints or remarks (D2.27, D2.29, D3.19). The contact between the companies is good and they always deliver their orders as agreed (D2.36).
“The contact between our companies is good and at the moment things are going well. There are few remarks, they are reliable and they deliver fast.” (D2.33)
37 To conclude, through the years Supplier D has proven itself to be a reliable and trustworthy partner. There are rarely conflicts and although they do not share a lot of proprietary information, the level of relational posture is high. Despite the fact that Supplier D has a dependence advantage, the relationship is cooperative, because the price of these components plays a relatively small role and the parts for Buyer A-products are directly charged to their client.
Dependence asymmetry vs. relational intensity
From the very start of the focal company, they have been collaborating with Supplier D. FC places a lot of orders every year (D3.13 and Table 3.7) and there is a lot of e-mail contact about these orders (D3.15). The partners barely have any telephone contact as the orders are rather standard (D3.16). The focal company and Supplier D both have not made any asset specific investments in the relationship (D3.17) and FC relies on Supplier D for its rare components prescribed by Buyer A. However, for the standard parts FC has many alternative suppliers. Also, when FC realises that Supplier D has a high workload they increases their order quantities (D3.4). Finally, if Supplier D would stop producing the prescribed components of Buyer A, it would take a lot of effort to replace them, but it would be up to Buyer A to find an alternative (D2.19)
“If we can no longer get a prescribed nut, bolt or washer from Supplier D, then Buyer A will search for an alternative supplier, and then they will prescribe that supplier to us again.” (D2.18)
38
4.3 Cross-case analysis
4.3.1 Gracious Relationships
From the four ideal relationship types from Kim & Choi (2015), the gracious relationship is characterized by a high level of relational posture and a low level of relational intensity. The relationships of FC with Supplier A and Supplier B were both classified as gracious by the survey research, but have different levels of dependence asymmetry. Both companies only have had a short collaboration with FC, and are used to outsource products that FC is not capable of producing, or when their own capacity is insufficient.
In the high-tech precision industry in which FC operates, it takes a long time to qualify a supplier’s technological expertise and during this qualification process the focal company invests in supplier education and relationship development. To manufacture products for FC, a lot of cooperation is required and it is necessary to share a lot of proprietary information, as the focal company requires products with very high standards. This type of close cooperation explains the high level of relational posture in both supplier’s relationships with FC.
“The product quality and lead times are the most important, and after that comes price. The price is not unimportant, but far less than the quality and the lead time of a product.” (Purchaser 1)
39 4.3.2 Deep Relationships
The deep relationship type is characterized by the high level of relational posture and
relational intensity. Supplier C and D were both identified as deep, but have different levels of dependence asymmetry. Both companies have had a very long relationship with the focal company and are more or less prescribed by FC’s important client, Buyer A.
Compared to the specialized skills that are required to manufacture products like Supplier A and B, the products of Supplier C (low dependence asymmetry) and D (high dependence asymmetry) are far more standard. Again, price is less important than the quality and lead times of the products, but in this case even more so, as these products are directly charged to Buyer A. FC is very satisfied with both suppliers’ services and there are hardly any
