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DEEP AND GRACIOUS: AN APPLICATION OF THE BUYER-SUPPLIER TYPLOGY BY KIM & CHOI (2015).
A CASE STUDY IN THE STEEL INDUSTRY.
Master Thesis Supply Chain Management, MSc University of Groningen, Faculty of Economics and Business
January 30th, 2017
YVONNE DEBYE Student Number: S3072177 E-Mail: y.debye@student.rug.nl
Supervisor, University of Groningen: Dr. Taco van der Vaart Co-Assessor, University of Groningen: MSc Bart Noort
Acknowledgments:
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Abstract
The aim of this research is to find out how the buyer-supplier typology by Kim & Choi (2015) can be applied in another industry. The authors conducted their study in the automobile industry, whereas this research focuses on the steel industry. An in depth single case study with embedded cases is conducted. The findings of the research show that not all four relationship types: sticky, deep, transient and gracious but only deep and gracious buyer-supplier relationships could be found. Hence, a focus is set on those two. The typology can be applied but needs adjustments for the steel industry. The differences between the gracious and the deep relationship types can be found not only in the difference of intensity but also in the following attributes: flexibility, a good relationship with the contact person(s), establishing a good handling with the difference in culture of the parties, the communication style and the reliability of the buyer and of the supplier.
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CONTENT
LIST OF FIGURES ... 3 LIST OF TABLES ... 3 1. INTRODUCTION ... 4 2. THEORETICAL BACKGROUND ... 5 2.1 Relational posture ... 5 2.2 Relational intensity ... 92.3 Closely tied relationships ... 10
2.3.1 Deep buyer-supplier relationships ... 11
2.3.2 Sticky buyer-supplier relationship ... 12
2.4 Arm’s length relationships ... 12
2.4.1 Gracious buyer-supplier relationships ... 13
2.4.2 Transient buyer-supplier relationship ... 13
2.3 Conclusion derived from theory ... 13
3. METHODOLOGY ... 14
3.1 Research setting ... 14
3.2 Case selection ... 15
3.3 Interview Protocol and Data collection ... 15
3.3.1 Description of the case ... 17
3.3.2 Demographics of the embedded cases ... 19
3.3.3 Interviews ... 20
3.3.4 Ensuring data quality ... 20
3.4 Coding Method/ Data analysis ... 21
4. FINDINGS ... 22
4.1 Findings of the survey ... 22
4.2. Findings of the interviews ... 28
5. DISCUSSION ... 30
5.1 Discussion of the findings of the survey ... 30
5.2 Discussion of findings of the interviews ... 31
6. CONCLUSION ... 32
6.1 Managerial Implications ... 33
6.2 Limitation and Further Research ... 33
LIST OF REFERENCES ... 35
APPENDICES ... 39
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Appendix B: Survey Buyer Side ... 41
Appendix C: Case study protocol ... 44
Appendix D: General and Semi-structured interview questions ... 45
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LIST OF FIGURES
FIGURE 1: Expanded Buyer-Supplier Relationship Typology by Kim & Choi, 2015 ... 5
FIGURE 2: Distribution of Supplier Relationships (Supplier Side) ... 23
FIGURE 3: Distribution of Supplier Relationships (Buyer Side) ... 23
FIGURE 4: Distribution of Supplier Relationships (Average Buyer and Supplier Side) ... 24
FIGURE 5: Adapted relational posture border: Average of the Buyer & Supplier Survey ... 30
FIGURE 6: Adapted relational posture and intensity border: Average of the Buyer & Supplier Survey ... 31
LIST OF TABLES
TABLE 1: Characteristics of Relational Posture ... 7TABLE 2: Characteristics of Relational Intensity ... 9
TABLE 3: Advantages of Closely Tied Buyer-Supplier Relationships ... 10
TABLE 4: Disadvantages of Closely Tied Buyer-Supplier Relationships ... 11
TABLE 5: Facts and Figures Focal Company ... 14
TABLE 6: Case scores ... 16
TABLE 7: Supplier Demographics ... 19
TABLE 8: Ensuring data quality (derived from Yin, 1994)... 20
TABLE 9: Overview of codes derived from the interviews ... 22
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1.
INTRODUCTION
Companies look for relationships with suppliers to ensure that they have access to resources and skills to gain competitive advantages (Sarkar, Echambadi, Cavusgil, & Aulakh, 2001). Outsourcing of non-core products is seen as a strategic opportunity and thus buyer-supplier relationships are of utmost importance (Gottfredson, Puryear, & Phillips, 2005). In the previous literature, different buyer-supplier typologies have been specified. Formerly, buyer-buyer-supplier typologies were based on only one dimension. The buyer-supplier typology by Kim & Choi (2015) is one of the exceptions that focuses on two dimensions instead of only one. The two researchers combine the dimensions of ‘relational posture’ and ‘relational intensity’ to generate different types of buyer-supplier relationships. Relational posture describes whether two companies consider each other as cooperative or as adversaries and relational intensity describes how intense the relationship between the buyer and the supplier is (Kim & Choi, 2015). In the typology it is distinguished between a relationship that can be characterized as arm’s length or as closely tied. The four relationship types are sticky (closely tied but adversarial), deep (closely tied and cooperative), transient (arm’s length and adversarial) and gracious (arm’s length but cooperative). Kim & Choi (2015) have conducted their study in the automobile industry. The question that arises is whether the typology is also applicable in other industries. This research has the purpose of this research is to go into more depth of the buyer-supplier typology by Kim & Choi (2015). Therefore, the research question is: How can the buyer-supplier typology by Kim & Choi (2015) be applied in another industry? Moreover, the research by Kim & Choi (2015) focuses only on the supplier perspective. This research will not only adopt the perspective of the suppliers but also that of the buyers. Additionally, questions regarding the identification of the different relationship types outside the automobile industry will be answered. The research findings should provide practical insights for representatives of both the buyer and the supplier side. Moreover, the research should assist in enhanced monitoring of the above mentioned relationship types. Improved understanding of this field can help to improve buyer-supplier relationships and supplier management. The research contributes to the existing literature by going into more depth in the typology. Also, the scientific contribution will be to find out whether Kim & Choi’s research is generalizable and thus applicable for other industries or if it is a unique typology for the automobile industry.
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2.
THEORETICAL BACKGROUND
Kim and Choi (2015) combine the two dimensions relational posture and relational intensity to generate different types of buyer-supplier relationships. They describe four different relationship types. The first one being ‘sticky’ which is characterized as closely tied but adversarial. Where adversarial means that the two parties do not have common goals and no cooperation can be found. The second one is called ‘deep’ since it is closely tied and cooperative. The third one is named ‘transient’ which is considered as arm’s length and adversarial. Lastly, the ‘gracious’ buyer-supplier relationship type, it is characterized by being arm’s length but cooperative. FIGURE 1 demonstrates the above mentioned expanded buyer-supplier typology by Kim & Choi (2015).
FIGURE 1: Expanded Buyer-Supplier Relationship Typology by Kim & Choi, 2015
The theoretical background is organized as follows. First relational posture is introduced, followed by relational intensity. The next step being the discussion of the two closely-tied relationships: deep and sticky. Afterwards, the two arm’s length relationships transient and gracious are introduced. The theoretical background is completed with a conclusion derived from the theory.
2.1 Relational posture
6 Choi, 2015). Overall, it can be said that relational posture seems to be important for the creation of synergy between the buyer and the supplier (Kim & Choi, 2015).
In the following table, the basic elements of relational posture are discussed (TABLE 1). A definition of each element that will be used throughout this research is given. Then, features and facts of each element are discussed and its benefits are provided. Moreover, requirements for gaining the specific element of relational posture are specified and techniques for handling e.g. conflict resolution are given. Lastly, hazards that can be associated with the elements are specified. Overall, it can be seen that it is demanding to build up relational posture. Not only commitment itself is required, but the establishment of trust and relational norms is required. Moreover, each element of relational posture has a risky side like the risk of opportunistic behavior for trust (Morgan & Hunt, 1994). These should not be underestimated and one should take notice of it.
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TABLE 1: Characteristics of Relational Posture
Characteristics Relational
posture
Definition Features Importance/ Benefits Requirements/
Techniques
Risks/ Hazards
Commitment ‘The desire to
continue the relationship and to work to ensure its continuance’ (Wilson, 1995, p.7).
-It is important to have confidence in in the relationship and to see the sense in putting effort in it (Morgan & Hunt, 1994).
-Commitment is required from both sides and needs constant demonstration (Larson, 1992)
-Commitment goes beyond legal contracts (Dhanaraj, Lyles, & Steensma, 2004)
-Crucial part of every fruitful long-term buyer-supplier relationship (Gundlach, Achrol, & Mentzer, 1995)
-Commitment is required from both sides and needs constant demonstration (Larson, 1992) -Needs more than a contract (Gulati, 1995)
-It can lead to opportunism by the less dedicated partner (Gundlach et al., 1995)
Trust The ‘belief that
one relationship partner will act in the best interests of the other partner’ (Wilson, 1995, p.8)
- It is present when one party has confidence in an exchange partner’s dependability and honesty (Morgan & Hunt, 1994)
-Relational phenomenon (Gulati, 1995) -Main governance structure (Uzzi, 1997)
-In a balanced, trustworthy relationship both counterparts make investments, take risks and perform equally (Larson, 1992)
-One of the key factors that determines the length and constancy of the exchange arrangements (Larson, 1992)
-Crucial for the exchange of tactic knowledge (Dhanaraj et al., 2004)
-It decreases the awareness of risks related with opportunistic behavior by the supplier
(Ganesan, 1994)
-It increases the confidence of the supplier that short-term imbalances will be resolved in the long-term (Ganesan, 1994)
-It decreases the transaction fees in a trade relationship (Ganesan, 1994)
-Negotiations are less expensive in situations of high interorganizational trust because
arrangements are achieved quicker and easier (Zaheer, McEvily, & Perrone, 1998)
-Needs more than a contract (Gulati, 1995)
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Information sharing The ‘degree to which each party discloses information that may facilitate the other party’s activities, as opposed to keeping all information proprietary’ (Heide & Miner, 1992, p.275)
-Precondition for supply chain integration (Prajogo & Olhager, 2012)
-It can weaken the bullwhip effect (Chatfield, Kim, Harrison, & Hayya, 2004; Lee, 1997) -Enhances new product and service design (Brown & Eisenhardt, 1995; Petersen, Handfield, & Ragatz, 2005)
-Increases profits (Kulp, Lee, & Ofek, 2004; Li & Gao, 2008)
-Reduces costs (Choi, Blocher, & Gavirneni, 2008; Lee, So, & Tang, 2000)
-Increases supplier’s performance (Amelia S. Carr & Kaynak, 2007)
- Increases supply chain performance (Zhou & Benton, 2007).
-Joint knowledge sharing (Liu et al., 2012) -Reciprocal communication (Liu et al., 2012) -Abuse of exclusive information by the other side (Grover & Saeed, 2007)
Relational norms ‘A party’s perception of whether its partner shares the understanding regarding mutually accepted behaviors’ (Kim & Choi, 2015, p.69)
- Interfirm control instrument (Siguaw, Simpson, & Baker, 1998; Spekman & Davis, 2004)
-Relational norms as unexpressed rules of conduct (Paulssen, Leischnig, Ivens, & Birk, 2016)
-Crucial roles for the operationalization of buyer-supplier relationships (Paulssen et al., 2016)
-Inalienable roles for business deals (Aggarwal & Zhang, 2006)
-In unfavorable situation between two parties, the existence of relational norms mitigates undesirable reactions and gives corporations the chance for recovery (Paulssen et al., 2016)
-Investments into relational norms enlargement can be worthwhile (Paulssen et al., 2016). -Different perceptions of injustice and unfair actions (Kaufmann & Stern, 1988)
Conflict resolution The degree to which the parties split the liability for keeping the connection itself and for difficulties that arise as time goes on (Heide & Miner, 1992)
-They arise due to rooted
interdependencies between both parties (Mohr & Spekman, 1994)
- Conflicts between buyers and suppliers occur when ever contradictory actions occur (Deutsch, 1969).
-Joint conflict solving can help to gain a win-win situation for both suppliers and buyers (Monczka et al., 1998)
-Feature of partnership achievement (Mohr & Spekman, 1994)
-Related with improved quality performance and less time is needed for new product developments (Monczka et al., 1998)
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2.2 Relational intensity
Relational intensity can be defined as the ‘transactional strength and volume’ of a buyer-supplier relationship (Kim & Choi, 2015, p.63). A stronger intensity is reflected by higher levels of (personal) communication (Santoro, 2000). It demonstrates commercial linkage between a supplier and its customer (Kim & Choi, 2015). Relational intensity is based on the strength of the connection (Kim & Choi, 2015). According to Kim & Choi (2015, p.64) relational intensity is constructed out of ‘interaction frequency, asset specificity, operational independence and multiplexity’. Generally, an outstanding level of different dedicated resources by both parties is necessary for a higher relational intensity (Santoro, 2000).
In the following table (TABLE 2), the basic elements and their characteristics of relational intensity are discussed. The table gives the definition of each element and describes their importance and benefits. Moreover, requirements for each element are given. For a high relational intensity and therefore a closely tied relationship, it is crucial to have a high interaction frequency, high asset specificity, investments that are made by both parties, high degree of operational interdependence and joint activities that lead to a high degree of multiplexity. For an arm’s length relationship the elements of relational posture need to have a lower degree.
TABLE 2: Characteristics of Relational Intensity
Characteristics Relational intensity
Definition Importance/Benefits Requirements
Interaction frequency ‘Frequency in various domains of buyer-supplier interactions’(Kim & Choi, 2015, p.69)
- A higher interaction frequency leads to more expected future interactions (Heide & Miner, 1992)
- Interactions are like an intermediary for improving the buying firm’s understanding of the supplier’s work accomplishment and has a beneficial effect on the relationship (Cousins & Menguc, 2006)
- A high interaction frequency supports the tie strength between the parties (Capaldo, 2007) - The interaction frequency has influence on the performance of an organization (Lavie, 2006)
- The frequency of information sharing is higher when information technology is used by both parties (A. S. Carr & Smeltzer, 2002) - for suppliers it is important to have good communication channels with the buying firm (Cousins & Menguc, 2006)
Asset specificity ‘The extend of relation-specific investments made by each parts’ (Kim & Choi, 2015, p.69)
- There is a causal relationship between asset specificity and performance (J. H. Dyer, 1996)
- In order to avoid negative effects of asset specificity it is important to do only in batches asset specific investments (Dyer & Singh, 1998)
Operational interdependence
‘Economic value of the exchange tie (in volume and product) and lack of substitutes’ (Kim & Choi,
- A higher level of operational
interdependence shows that the relationship between the two parties might be a strong and collegial long-term relationship. Both the buyer and the supplier have invested in it (Caniëls & Gelderman, 2007)
10 2015, p.69)
Multiplexity ‘The extent to which two firms engage in joint activities above and beyond their regular exchange’ (Kim & Choi, 2015, p.69)
- Indicator of the strength of the relationship (Kim & Choi IN Coleman, 1988; Dimaggio & Louch, 1998; Marsden & Campbell, 1984) - Possibilities to learn from the other parties’ experience (Beckman & Haunschild, 2002)
- To be open to learn from the other parties’ experience (Beckman & Haunschild, 2002)
2.3 Closely tied relationships
Ever since the success of Japanese firms, closely tied buyer-supplier relationships are considered as beneficial because they create value for both sides (Bensaou, 1999) and also strategic gains (Jap, 1999). Nonetheless, they require monetary investments such as common systems. These are time consuming since they demand regular communication and visits (Bensaou, 1999). But if the companies strive for a long-term relationship, both partners will benefit from these investments (Joseph P. Cannon, Doney, Mullen, & Petersen, 2010). Hereby, high commitment between the two firms is an essential factor for setting performance targets (Krause, Handfield, & Tyler, 2007).
Close ties are not appropriate for all buyer-supplier relationships (Goffin, Lemke, & Szwejczewski, 2006; Petroni & Panciroli, 2002). If a company aims to gain short-term benefits of market exchanges to make the most of their profits in a business deal, it would not be advisable to engage in long-term orientation (Ganesan, 1994). Closely tied, long-term relationships are useful if a company would like to maximize their returns over a sequence of transactions (Ganesan, 1994). It is essential to determine whether it is worthwhile since they do not only gain advantages.
In the following, advantages and disadvantages of closely tied buyer-supplier relationships are discussed.
TABLE 3: Advantages of Closely Tied Buyer-Supplier Relationships
Advantages Reference
• Higher quality (Goffin et al., 2006)
• Lower expenses due to lower purchasing prices
(Goffin et al., 2006)
• Trustworthy delivery (Goffin et al., 2006)
• Price reduction (Ganesan, 1993)
• Fast development of new processes and products
(Liker & Choi, 2004)
• Operational fulfillment improvements (Terpend, Tyler, Krause, & Handfield, 2008) • Integration-based enhancements (Terpend et al., 2008)
• Supplier capability progresses (Terpend et al., 2008) • Economic performance results (Terpend et al., 2008)
11 Closely tied buyer-supplier relationships have several significant advantages that can facilitate competitive advantage (Sarkar et al., 2001) (TABLE 3). They offer process optimizations for the buying company like trustworthy delivery (Goffin et al., 2006) or operational fulfillment improvements (Terpend et al., 2008). Moreover, they provide monetary benefits like lower expenses (Goffin et al., 2006) and price reductions (Ganesan, 1993).
TABLE 4: Disadvantages of Closely Tied Buyer-Supplier Relationships
Disadvantages Reference
• Resource demanding (Goffin et al., 2006)
• Disintermediation within the supply chain (Rossetti & Choi, 2005) • Devotion of relationships for short-term profit (Rossetti & Choi, 2005)
• Risk of loss of control (Rossetti & Choi, 2005)
• Suppliers might enter the aftermarket new competitors (Rossetti & Choi, 2005)
• High switching costs (Rossetti & Choi, 2005)
• Supplier opportunism (Kim & Choi, 2015)
• Risky due to specific investment
• Higher risks of conflicts due to greater level of interdependence
(Bensaou, 1999)
(Gadde & Snehota, 2000)
Nevertheless, there are also many disadvantages that companies should consider before striving for a closely tied relationship (TABLE 4). One of the main disadvantages of closely tied buyer-supplier relationships is that generating and sustaining these relationships is resource demanding (Goffin et al., 2006). Moreover, there is always the risk to lose control as the increase of outsourcing can lead to more mistakes and less control of the processes is in the hands of the buying company (Rossetti & Choi, 2005).
2.3.1 Deep buyer-supplier relationships
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2.3.2 Sticky buyer-supplier relationship
Sticky buyer-supplier relationships are characterized as closely tied but adversarial. One party sees the other as malicious but they are still dependent on each other (e.g. automobile industry) (Kim & Choi, 2015). In most cases, there is a party that dominates the relationship. The more powerful party takes advantage of its superior position and systematically misuses its advantages (e.g. vendor managed inventory). Thus, the weaker party is often forced to make relation-specific investments and has a captive position. Hence, the benefits of the more powerful one are staged on the weakness of the less powerful actor. Over time the weaker party may attempt to retaliate (Kim & Choi, 2015). The probability of warfare thereby is increased (Rossetti & Choi, 2005).
Kim and Choi (2015) are not the first researchers to come up with this type of relationship. Mudambi & Helper (1998) discussed the ‘closed but adversarial’ model within the American automobile industry. Moreover, Bensaou (1999) created a buyer-supplier typology based on supplier’s and buyer’s specific investment instead of on relational posture and relational intensity. In Bensaou’s Portfolio of Buyer-Supplier Relationships the relationship types that is most similar to the sticky relationship type is described as ‘captive supplier’ or ‘captive buyer’ (Bensaou, 1999). The buyer’s investment in the relationship is low and the supplier’s is high. The supplier has a high dependency on the buyer and the buyer uses the power in the relationship to its advantage (and the other way around) (Bensaou, 1999). The difference between the two buyer-supplier typologies is that Bensaou (1999) focuses only on the specific investment, which is part of relational intensity in Kim & Choi’s classification, to figure out the relationship type. On the other hand focus on the more social relationship and how interlinked the companies are (relational posture and relational intensity).
2.4 Arm’s length relationships
Arm’s length buyer-supplier relationships are the opposite of closely tied buyer-supplier relationships. Historically, American automobile manufacturers have managed their suppliers in an arm’s length way whereas Korean automobile manufacturers have seen their suppliers as partners and Japanese automobile manufacturers had (depending on commodity and competences) an individual strategy for each supplier. The reason the Japanese did not choose merely one strategy for all suppliers, was to benefit from both closely tied relationships and arm’s length relationships (Dyer, Cho, & Chu, 1998). Generally, arm’s length buyer-supplier relationships are seen as the traditional way of dealing with suppliers whereas nowadays a trend of moving to collaborative relationships can be recognized (Bensaou, 1999; Humphreys, Shiu, & Lo, 2003). Currently, gaining competitive advantages through supplier collaboration has changed many company’s views about their supplier management (Humphreys et al., 2003).
13 Some disadvantages of closely tied relationships can be perceived as reversed advantages of arm’s length relationships. For example, arm’s length relationships are not that resource demanding (Goffin et al., 2006), no risk of loss of control, low switching costs (Rossetti & Choi, 2005) and no specific investment must be made (Gadde & Snehota, 2000). They are discussed in TABLE 4: Disadvantages of Closely Tied Buyer-Supplier RelationshipsTABLE 4: Disadvantages of Closely Tied Buyer-Supplier Relationships.
2.4.1 Gracious buyer-supplier relationships
The relationship type that has the attributes arm’s lengths but cooperative and that can be found in the lower right corner of the buyer-supplier relationship typology by Kim & Choi (2015) is called ‘gracious’ (FIGURE 1). Gracious buyer-supplier relationships are characterized as arm’s length but cooperative since the relational posture is high and the relational intensity is comparatively low (Kim & Choi, 2015). In most cases, both parties have a good and positive perception of the other, even though the collaborative intensity is low and collaborations only occur infrequently (Kim & Choi, 2015). The disadvantage of gracious relationships is that since the relationship is not close, the supplier may also cooperate with competitors (Das & Teng, 1998). Nevertheless, this might also be a reason for keeping the relationship as a gracious one. The special nature of this relationship is that the level of control especially by the buying company is relatively low and that the potential for supplier innovation is comparatively high to other relationship types (Kim & Choi, 2015).
2.4.2 Transient buyer-supplier relationship
In transient buyer-supplier relationships, the partners have weak ties and keep each other at arm’s length (Kim & Choi, 2015). The focus of this relationship type is to attain short-term gains like price advantages. Both, the level of relational posture and the level of relational intensity, are low. Hence, the relationship is adversarial. In order to compensate the weakness of this relationship type, both parties are active in larger business networks. The level of communication and information sharing is low (Anand & Ward, 2004) which leads to an optimistic tendency. Kim & Choi (2015) describe this relationship type as the most flexible one. Flexibility is necessary, as, they operate in an unpredictable environment (Zahra & Filatotchev, 2004).
2.3 Conclusion derived from theory
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3.
METHODOLOGY
The aim of this research is to replicate and extend the findings of Kim & Choi (2015) in order to find out whether their research is also applicable in other industries. In order to answer the underlying research question, a single case study research with embedded cases is conducted (Yin, 2009). The purpose of this study is to generate expressive, significant theory and thus the implementation of a case study as the most appropriate method (Eisenhardt, 1989; Eisenhardt & Graebner, 2007). Since the primary objective of this study is difficult to quantify and needs to be investigated with all its insights within its natural surroundings, a case study is conducted (Meredith, 1998; Yin, 1994). Case study research includes collecting a large amount of qualitative data with for instance conducting interviews. The analysis of the data builds the foundation for theory building (McCutcheon & Meredith, 1993). The theory is based on patterns and coherence observed in their natural context (Eisenhardt & Graebner, 2007). Analyzing a single company is appropriate in this research context since more detailed, in depth data can be gathered (Chris Voss, Tsikriktsis, & Frohlich, 2002). The unit of analysis is a buyer-supplier relationship.
3.1 Research setting
The overall research setting of this study is the steel industry. Like the automobile industry, it plays a big, economical role in the world market. It is an old industry where trust plays a big role as not a lot of suppliers are available. Therefore, in this industry intensive relations with a smaller supplier base are necessary. The European steel industry is a highly competitive one due to low steel prices and increasing competition from Asia. Strong relationships are essential to be superior in this competitive environment.
The main criterion for selecting an appropriate case for this study was that the company operates in the steel industry. The chosen European steel manufacturing company managed deal with various challenging circumstances and has been operating in the industry for more than 100 years. Its long experience in the industry also supported the choice for this company, since they can be seen as a representative for the whole industry. Moreover, the company was interested in doing research and cooperating with the University of Groningen. Proximity to the researcher and accessibility facilitated the decision. More facts about the company are displayed below (TABLE 5).
TABLE 5: Facts and Figures Focal Company
Facts & Figures
Industry Metal industry
Products Filler metals
Number of plants 11
Biggest filler metal plant in Europe Number of employees 2500
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3.2 Case selection
In order to find interesting buyer-supplier relationships (nested unit of analysis) of the focal company, it was required to analyze and categorize the supplier base. Following the example of Kim & Choi (2015), firstly the type of relationship between each supplier and the buyer needed to be determined. The company selected 14 suppliers with whom they have had the highest turnover within the commodities steel/metal and raw materials. This implies that the outcomes cannot be statistically tested.
The suppliers of the mentioned commodities have the highest interaction with the focal company. This is supported by the importance the commodities have for the production processes. In order to categorize the suppliers, a survey was sent to them. To see whether the buyer side considered the relationship in the same way, the buyer also had to fill in a survey for each of the suppliers. Both surveys were based on the survey that Kim and Choi (2015) had distributed to the suppliers in their study. The survey measured the level of relational posture and relational intensity of the relationship. Relational posture was measured by trust, commitment, information sharing, relational norms and, conflict resolution whereas relational intensity was gauged by interaction frequency, asset specificity, operational interdependency, and multiplexity (Kim & Choi, 2015). For the survey for the supplier side, only a few questions had to be adjusted according to the research setting (e.g. multiplexity). Since the original survey was conducted in the automobile industry and industry related questions were given (e.g. car models), those questions were held more general in this setting. For some questions, it was not possible to use the same scale since they were not suitable for the given research context. Asset specificity and interaction frequency were adjusted by using statements of other studies which are: J. H. Adams, Khoja, & Kauffman (2012, De Vita, Tekaya, & Wang (2010) and Terpend & Krause (2015). Like Kim & Choi (2015), a 6-point Likert scale was used throughout the survey. The division for interaction frequency was alters into more specific categories since the researcher of this study wanted to have more precise outcomes (from 1=rarely to 6=very often it was changed to 1=once per year to 6=once per day or more).
For the buyer side, the survey by Kim & Choi (2015) had to be adjusted since it had been intended for the supplier side. The statements were reversed for the buyer side e.g. from: How often does your firm interact with ‘name of buying firm’ as compared with other customers? To: How often does your firm interact with ‘name of the supplier’.If it was not possible to reverse the statement, new statements were chosen e.g. from: Our company has extensively invested in production equipment to do work for ‘name of buying firm’ to: Our company has extensively invested in production equipment with ‘supplier name’ to do work for us exclusively. Hereby, researchers from the University of Groningen assisted with their expertise.
3.3 Interview Protocol and Data collection
16 employee of the focal company called all suppliers personally and informed them about the survey. It was promised to the suppliers that the results of the survey could only be seen by the researcher of the University of Groningen and not by the focal company to avoid biased results. Moreover, all results were kept anonymously. Subsequently, each supplier received an e-mail with more explanations given by the researcher and a link to the Qualtrics survey. The survey that has been sent to the suppliers can be found in Appendix A.
The survey was sent to the focal company via e-mail with the corresponding Qualtrics survey link. Two purchasers (e.g. the lead buyer and another purchaser) filled in the survey independently to ensure objectivity. A transcript of the survey for the buyer side can be found in Appendix B.
The survey was send to 14 suppliers. One company only filled in half of the questions and that was the reason why this supplier was excluded since no scores could be calculated. Two other suppliers never filled in the survey. That is the reason why in the end the relationships of 11 suppliers were analyzed. After receiving the surveys again from suppliers and the buyer, the surveys were evaluated by means of an average analysis.
The scores of the four chosen cases are depicted in the following table (TABLE 6). The scale of each dimension: relational posture and relational intensity is given from 1 to 6. For each chosen relationship the scores of the supplier side, the buyer side, the average of both sides and the difference between the two sides are given. The switch from one relationship type to another one is at the score of 3.5. If the score for relational posture is less than 3.5 the relationship is an adversarial one (sticky or transient). If the score is above 3.5 the relationship is characterized as cooperative and can be either deep or gracious. The same applies to relational intensity. If the score is less than 3.5, the relationship is characterized as arm’s length. If the score is above 3.5 the relationship is a closely tied one. For instance, supplier A scored on average 4.93 (relational posture) and 4.13125 (relational intensity). That means that this relationship is a deep one since both scores are above 3.5. The relationship should be characterized by being closely tied and cooperative (see also section 2.3 and 2.4).
TABLE 6: Case scores
Supplier Side Buyer Side Average Difference
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3.3.1 Description of the case
The main case: the focal company
The focal company is located in Western Europe and is operating in the steel processing industry. It is part of a bigger company group with different divisions. They operate in an innovative environment but compared to competitors the focal company has a special focus on innovations. A specialty about the competitive environment is that a lot of the focal company’s suppliers are also competitors or have a competitor in their company groups.
The main purchasing strategy of the focal company is to have a relatively small supply base. A small supply base means that for one product group not more than three suppliers supply their products to the focal company. This can be explained by the fact that it costs a lot of maintenance and care activity efforts to have a large supply base. In a large worldwide supply base they see the risk of not being able to approve and evaluate all suppliers and see the hazard of lower quality standards. The target is to have at least two suppliers for each product. Hence, they follow a dual sourcing strategy.
They categorize their products in three commodities: cheap, middle expensive and expensive or exclusivities. For cheaper products they do not source from oversea. They focus on European and especially on German suppliers. In that category the focal company has two suppliers and in some cases a third one. They import middle expensive products from overseas and especially from Asia. The strategy says to have two European suppliers and one from outside Europe to exploit e.g. exchange rate fluctuations. The last commodity contains exclusivities. Those products are not worldwide available and there are only a few suppliers. To have a choice and to be flexible the strategy for that commodity is to have at least a dual sourcing with suppliers from all over the world. The determining factors for working together with a supplier are price and quality. But also flexibility is important for the focal company.
Four extreme cases were selected to fit in the suggested range of four to ten (Eisenhardt, 1989). Those four are all relationships where conspicuities were recognized. In the findings section later, they are marked within the three figures (FIGURE 2, FIGURE 3 and FIGURE 4) with special signs. The remaining suppliers are marked with crosses.
The embedded case: Supplier A (Square)
Supplier A is South American supplier that operates in the metal manufacturing industry. This supplier was chosen as a case since it was the only deep supplier that the focal company has according to
18 of the steel processing division whereas supplier A is part of the steel manufacturing division of the group. The target of the relationship is to gain a win-win situation. However, the focal company only established the relationship on the basis that the collaboration is beneficial and profitable.
The main reason to establish the relationship was a switch from single sourcing to dual sourcing for the products that supplier A supplies. The focal company wanted to build up another supplier in order to be more flexible, to get cheaper prices and to be able to set the former single supplier under pressure. The focal company helped supplier A to overcome their issues with quality problems and started a close collaboration in terms of product development activities. An advantage of supplier A is that they do not deliver to other European competitors, only to ones in the USA and Mexico.
The embedded case: Supplier B (Triangle)
Supplier B is a European supplier that operates in the steel industry. This supplier was chosen since it is rated by both the buyer and the supplier side with the lowest relational intensity and the
lowest relational posture (FIGURE 2 and FIGURE 3). Hence, it is according to (Kim & Choi, 2015) a gracious supplier. Supplier B is operating within the European competition for the product they deliver since the transport costs are very high and that is why it is not worthwhile to export worldwide. The relationship started at least 30 years ago. At the moment, the supplier is not a focus supplier for the products they supply which means that another supplier is supplying higher volumes. The focal company has a dual sourcing strategy. The main competitor of supplier B is supplier C. In the last couple of years, supplier B was volatile, which means that they did not deliver products regularly. Supplier B does not do any product development for the focal company.
The embedded case: Supplier C (Diamond)
Supplier C is a European steel supplier and is the biggest steel producer in the world. This supplier was chosen since it is according to the supplier survey a deep relationship and according to the
buyer side gracious type (FIGURE 2 and FIGURE 3). The parties indicated a big difference in
relational intensity. The relationship started over 30 years ago. They are delivering the same products to the focal company as supplier B does. The focal company is the biggest customer of supplier C in the commodity of high class products which demonstrates the importance of the focal company for supplier C.
According to the buyers this supplier is now characterized by flexibility and innovativeness. The new plant offers a higher quality and a high degree of flexibility. This is the supplier they are most satisfied with.
The embedded case: Supplier D (Circle)
Supplier D is a South European supplier. The results for supplier D show the biggest differences
between the buyer side and the supplier side in both relational posture and relational intensity
19 strategic partner. They have the deepest relationship according to them and the definition of Kim & Choi (2015) whereas the buyer side survey result shows that they are a weak gracious supplier. On average, the relationship meets exactly in the middle of those two relationship types (FIGURE 4). Supplier D is a supplier that has a competitor of the focal company in its own organization. The relationship has started over 30 years ago and there is regular contact and the focal company gets regular deliveries at least in the last 6 years. Since they are a South European supplier, their working, negotiation and communication style is different than the one of the focal company. The big advantage of supplier D is their quality level.
The difference between the perceptions of the relationship of the two parties can be explained by the cultural difference of the focal company and supplier D. There seems to be a tendency that supplier D gave more positive answers which can be seen in the difference between the scores of the two surveys (TABLE 6). Moreover, supplier D learnt a lot from the focal company and could profit from the focal company’s experience and know-how for their own company. That is why they see the relationship as more strategic and deep than the focal company does.
3.3.2 Demographics of the embedded cases
The demographics of all suppliers which participated in the survey are displayed in the table below (TABLE 7). The biggest group of suppliers has revenues of 100 Million to 1 Billion Euro. 41% of the suppliers have 51 to 250 employees and 45% have 501 to 10.000 employees. More than one third of the suppliers have multiple plants. Most of the suppliers are operating in the steel/metal industry the rest in the raw materials industry. 46% of all relationships have duration from up to 15 years 54% of the suppliers have a relationship to the focal company for over 21 years.
TABLE 7: Supplier Demographics
Demographics Classification Percentage
Revenue 0-5 Million (€) 00,00% 5-10 Million (€) 11,11% 10-50 Million (€) 11,11% 50-100 Million (€) 16,67% 100 Million–1 Billion (€) 50,00% > 1 Billion (€) 11,11% Number of employees < 50 00,00% 51-250 40,91% 251-500 09,09% 501-1,000 22,73% 1,001-10,000 22,73% > 10,000 04,55%
Multiple plants Yes 63,64%
No 36,36%
Industry Steel/metal 68,42%
Raw materials 31,57%
20 5-10 15,38% 11-15 15,38% 16-20 00,00% 21-30 30,77% >30 23,08%
Survey respondents Sales Director 05,26%
Sales Manager 68,42%
Technical Manager 21,05%
Other Company Representatives 05,26%
3.3.3 Interviews
Next to conducting surveys, interviews were the primary source in order to gain rich data for this explorative research. In total, 12 semi-structured interviews with mainly open-end questions were conducted to leave enough room for questions that might emerge and to have room for discussions. The standardization of questions allowed comparing given answers. The case study protocol can be found in Appendix C and the semi-structured interview questions in Appendix D.
For each buyer-supplier relationship three interviews were conducted: two from the buyer side and one from the supplier side. The interviewees were purchasers and lead buyers from the buyer side and sales and marketing representatives from the supplier side.
The interviews had an average length of 29 minutes. All interviews of the buyer side were held in face-to-face situation and the interviews of the supplier side were conducted by phone.
3.3.4 Ensuring data quality
To ensure data quality, as well as validity and reliability, different approaches were used. Derived from Yin (1994), in the following table (TABLE 8), these approaches are demonstrated. In order to guarantee construct validity, semi-structured interviews are conducted. Moreover, a pilot testing of the interview protocol was performed and the interviewees have checked the draft transcripts after the interview. For internal validity, the interviews have been transcribed word-by-word and in order to build knowledge from the resulting data pattern matching was accomplished. For external validity the generalizability was ensured by comparing the results with the existing theory. For the purpose of guaranteeing reliability a case study protocol was developed and records and transcripts of the interviews were prepared (Yin, 2009).
TABLE 8: Ensuring data quality (derived from Yin, 1994)
Test Approach used
Construct validity • Semi-structured interviews
• Pilot testing of the interview protocol • Interviewees checked the draft transcripts
21 Internal validity • Pattern matching to build knowledge from
the resulting data
• Interviews have been transcribed word-by-word
External validity • Generalizability of results with existing theory
Reliability • Case study protocol
• Records and transcripts (Yin, 2009)
3.4 Coding Method/ Data analysis
22
TABLE 9: Overview of codes derived from the interviews
4.
FINDINGS
Based on both data collection methods, surveys and interviews, several findings could be detected. In the following the results regarding the cases are presented. First, the results of the survey are introduced and then the results of the interviews.
4.1 Findings of the survey
23
FIGURE 2: Distribution of Supplier Relationships (Supplier Side)
As can be seen in FIGURE 2, the results from the survey show that the supplier side mainly sees their relationships to the focal company within the deep quadrant. In the gracious quadrant only three relationships can be found. Remarkable is that no relationships in the transient and sticky quadrants could be found. This can be explained by the fact that relational posture was always rated very high. This applies particular for trust, commitment and conflict resolution. If three out of five elements of relational posture are rated very high, it is almost not feasible to reach a relational posture level below 3.5 based on the average calculation.
FIGURE 3: Distribution of Supplier Relationships (Buyer Side)
24 elements lower than the supplier side. But still no relational posture level is below 3.5. Moreover, they also have rated intensity way lower than the supplier side which results in a lot of gracious relationships.
FIGURE 4: Distribution of Supplier Relationships (Average Buyer and Supplier Side)
In a last step, the averages of both surveys are taken into account. It means that FIGURE 4 shows a combination of both ratings and estimates. It visualizes a positive trend of the buyer-supplier relationships. The cases in this research suggest a linear relationship meaning that the higher the relational posture, the higher the relational intensity. Nevertheless, it is remarkable that the imaginary line does not go through the center cross but more to the right. This can be explained by the fact that the overall posture level was rated relatively high especially by the supplier side. Since a 6-point Likert scale was used the border between the relationship types for both relational posture and relational intensity was set at 3.5. Regarding the outcome of the survey it is questionable if the border between the relationships types should rather be placed at maybe. 4.0 for relational posture to balance the high rates.
25 The single outcomes of each of the characteristics of relational posture are listed in TABLE 10. The average trust level is higher at the supplier side than at the buyer side (difference of 0.5181). This can be related to the fact that the supplier side wanted to present their trust level in a more positive way to their customer. This might have been influenced by the fact that the purchaser of the focal company contacted them. Moreover, the survey of the buyer side was filled in by two purchasers from the same company with the same cultural background whereas on the other hand, the survey of the supplier side was filled in by different people. Larger variations of survey answers in the supplier survey might be explained by the heterogeneity of the respondents in terms of positions and cultural background.
Commitment shows the biggest difference of the outcomes of relational posture of all characteristics (difference of 0.7572). It is higher at the supplier side than at the buyer side. This can be explained by the fact that the supplier sides thinks that they put more effort into the relationship since they are in the position of selling something. The questions regarding commitment were about helping each other and each side’s the engagement.
The level of relational norms is higher at the supplier side. This result can be explained like the outcome of trust. The suppliers have put their answers in a more positive light for e.g. finding solutions together.
Information sharing is the only characteristic of relational posture that is higher at the buyer side than at the supplier side. This can be explained by the fact that the supplier thinks that they get less information from the buyer than they give to the supplier. For instance, in the interviews the supplier side claimed that they would prefer earlier and accurate production schedules so that they can adapt their production schedule to the one of the buyer. This shall be elaborated in the next section where the results of the interviews regarding relational posture are displayed.
The overall outcome for conflict resolution is higher at the supplier side than at the buyer side (difference of 0.6628). This can be explained in the same way as trust and relational norms.
The single outcomes of each of the characteristics of relational intensity are listed in TABLE 10. The first construct of relational intensity is interaction frequency. The results for interaction frequency show the smallest difference for all elements of relational posture and relational intensity (difference of 0.3181). This signifies that both parties have a good appraisal of the interaction frequency. The supplier side anticipates the frequency slightly higher than the supplier side.
26
27
Asset specificity shows the biggest difference of all characteristics of relational posture and relational intensity (difference of 2.1477). It is probably one important factor that explains the big differences between the overall relationship outcomes (deep and gracious). It is way higher rated by the supplier side than by the buyer side. This can be explained by the fact that asset specificity is related to investments that both parties make in order to make a business possible. This must also be way higher at the supplier side than at the buyer side since the supplier in most cases is in a dependent position and wants to sell its products.
Multiplexity has the lowest overall rating from the supplier side and the second lowest rating from the buyer side. It deals with extraordinary joint activities. Since Kim & Choi (2015) are the only ones that describe and define multiplexity in the context of buyer-supplier relationships in the whole body of literature, it can be assumed that this element of relational intensity is not perfectly elaborated.
The average scales of Supplier A show that it is a deep relationship (TABLE 6; FIGURE 4). This is also confirmed by the individual estimations of both sides (FIGURE 2; FIGURE 3). Both parties perceive trust, commitment and relational norms on the same level. Whereas differences for information sharing and conflict resolution can be found. The level of information sharing is regarded lower at the supplier side than at the buyer side. As already mentioned this can be seen in connection with poor information about future production schedules. The level of conflict resolution is higher at the supplier side than at the buyer side. This can be associated with the fact that the buyer side is not as pleased with the conflict resolution regarding e.g. prices. The relational intensity outcomes of supplier A do not show any conspicuity in comparison to the average relational intensity outcomes.
The relationship with Supplier B is on average a gracious one (TABLE 6; FIGURE 4). This is also confirmed by the two different surveys (FIGURE 2; FIGURE 3). A big difference between the trust levels can be found (difference of 0.5). It reflects the average difference of trust. For commitment the distinction is even higher than the average. This can be explained by the fact that the focal company sees low flexibility in supplier B. This is related to the willingness of helping each other. For relational norms the buyer side sees the relationship in a better way. The level of information sharing with supplier B shows the lowest of all suppliers. This phenomenon can be related to the fact that the buyer side does not see the supplier as an important (strategic) supplier with whom it would be worthwhile to share a lot and important information with. Nevertheless, the level of conflict resolution is above the average. For the relational intensity, the interaction frequency shows a large difference between the two sides. The supplier side sees it way higher. This can be explained by the fact that this supplier is not a focus supplier for the focal company. The other elements of relational intensity do not show any anomalies compared to the average.
28 the supplier side than at the buyer side which can be explained by the overall commitment level. As it can be seen in the two figures, the differences in intensity are large. This explains also the final outcomes of the relationship types. Remarkable is that the buyer side sees the interaction frequency level slightly higher than the buyer side regards it. Compared to the other suppliers it is rated high. This can be declared by the overall good communication as described by both parties.
The average scales of Supplier D show that it is a gracious relationship (TABLE 6; FIGURE 4) whereas the two surveys show differences. The buyer side sees it as a deep relationship and the supplier side as a gracious relationship (FIGURE 2; FIGURE 3). The trust level shows the typical difference whereas commitment and relational norms show minor differences. The conflict resolution level does not differ. The differences between buyer and supplier estimates are the lowest among all other cases (TABLE 6). Supplier D shows the biggest differences in intensity. Supplier D learnt a lot from the focal company and could profit from the focal company’s experience and know-how to benefit of their own company. That is why they see the relationship as more strategic and deep than the focal company does.
Concluding one can say that the perspective on relational intensity and relational posture can differ to a high extent. Hence, in order to evaluate relationships it is important to take both perspectives into account. Understanding the different views and the background of the relationship is crucial. Moreover, it might be suitable to adapt the borders between the relationship types to balance the higher estimations for relational posture. Nevertheless, it should be considered that no statistical significance could be tested.
4.2. Findings of the interviews
The conducted interviews had the purpose to find out if factors other than those described by Kim & Choi (2015) influence the different buyer-supplier relationships to get a deeper understanding of the relationship types. The main findings were that flexibility, the contact person(s), culture, communication and reliability have an influence. The complete coding tree for the findings regarding the coding tree can be found in Appendix E.
29 Another characteristic that determines relational posture and intensity are the contact persons. Hereby, the relationship with the contact person is determining. “The relationship is extraordinary good since they are also visiting our open house events. They always visit us with a lot of their people at several days.” (Purchaser #2 about Supplier C). Moreover, the working style of the contact person and the sympathy level are crucial. A bonus is if the communicating parties are able to overcome language barriers. “Supplier A is a South American supplier with a European contact person. She is only in charge for our company. She is in charge for the development, orders and does not have a lot of other customers. That is an advantage because she focuses on us. Moreover, we speak the same language” (Purchaser #2 about Supplier A).
Moreover, culture plays a role within buyer-supplier relationships. Factors here are: the differences of nationalities, the differences of mentality and different values. “The negotiations are more difficult. They are a South European supplier and that is why their negotiation style is more emotional than ours. They are not as cold and dry as we are. That makes the relationship interesting when doing negotiations and when working together. The south of Europe has the reputation of being unpunctual, less reliable. Supplier D shows that.” (Purchaser #2 about Supplier D). Especially different perceptions of promises and statements are determining for relational posture and intensity. “Supplier A has a problem with saying no. They do waste a lot of words. They can say no but they always try to find another solution and alternatives. The problem is that if it does not work that they should learn to recognize and accept that. This can lead to displeasure on the side of supplier A. They think that one can always reach an agreement” (Purchaser #2 about Supplier A).
Furthermore, good communication is essential for gaining high relational posture levels. This implies the communication style, the communication regularity, the overall decision-making style, the reaction time and a common understanding of objectives and hence miscommunication. For instance, the buying firm claims: “They react slowly when we have questions” (Purchaser #1 about Supplier D). Whereas other suppliers say that: “the communication and decision-making works really well” (Supplier Representative, Supplier A). It seems to be that communication is an antecedent for trust and commitment.
Another characteristic is the reliability level regarding relational posture and intensity the reliability of the supplier and of the buyer Hereby, supply reliability, sticking to delivery times, accurate planning of production, reliability during price negotiations and regular orders from the buyer side are involved. “We would like to have more reliability in delivery time and more accurate planning of production (e.g. on a weekly and not monthly basis)” (Supplier Representative, Supplier A). Higher reliability leads to more orders at the supplier side. “But if they would have higher supply reliability they could supply more or we would order more” (Purchaser #1 about supplier D).
30 For the gracious relationships flexibility is lower than it is in deep relationships. The connection to the contact person is poor. The focal company experiences slower reaction times and less flexible working styles. Also, cultural differences occasionally play a role (depending on where the companies are located) and the overall communication is weaker. The reliability is lower than for deep relationships.
5.
DISCUSSION
In the following the findings of the survey and the interviews are discussed.
5.1 Discussion of the findings of the survey
The results of the survey have shown that the outcomes are different compared to the ones of Kim & Choi (2015). Neither at the buyer side survey nor at the supplier side survey sticky and transient relationships could be found. Moreover, there was the tendency that relational posture and also relational intensity was rated higher than expected.
A new finding is that there seems to be a relation between relational posture and relational intensity where Kim & Choi did not identify a relation. Therefore, there must be instead of two dimensions only one dimension like former typologies have shown.
Since the borders are not exact either in Kim & Choi’s research an adaptation is necessary.
In order to adapt the typology from Kim & Choi (2015) to the steel industry and the findings of this research, in a first step, the relational posture border could be changed. A change from 3.5 to e.g. 4 could be executed as it can be seen in FIGURE 5. The relationships with lower relational posture moved to the transient quarter. Hence, less gracious relationships can be seen.
31 As a second step, also the border of relational intensity could be adapted. In order to let the imaginary line go through the center cross like a diagonal line, the border for relational posture could be decreased to 3 as it can be seen in FIGURE 6. It can be assumed that if the survey would be filled in by more than 11 suppliers, the number of outliers would increase. Then it might be that also sticky and gracious relationships could be found.
FIGURE 6: Adapted relational posture and intensity border: Average of the Buyer & Supplier Survey
5.2 Discussion of findings of the interviews
The conducted interviews have shown that also other factors other than relational posture and relational intensity influence the relationship types.
Kim & Choi (2015) see flexibility as a relational outcome and not as part of relational posture. The conducted interviews show that flexibility is a determining factor that also reflects the relational posture towards the other party. Relationships with low relational posture show lower flexibility and relationships with higher relational posture show a higher flexibility level. In the literature, flexibility is discussed in context with supplier performance (Anand & Ward, 2004; Chu, Chang, & Huang, 2012; Liao, Hong, & Rao, 2010; Merschmann & Thonemann, 2011). It is not analyzed in relation to all elements of relational posture but in regard to trust, commitment and relational norms (J. P. Cannon, Achrol, & Gundlach, 2000; Young-Ybarra & Wiersema, 1999).
32 Like the contact person, also culture and its influence on relationships were not discussed by Kim & Choi (2015). The influence of culture on the relationship of two companies is also discussed by other researchers. Jia, Rutherford, & Lamming (2016) see the need of building a ‘hybrid culture and cultural adaptation’ when the buyer and the supplier side have different cultural backgrounds (p.1246). This is especially helpful during negotiations since it could otherwise lead to the reduction of shared profits due to lower information sharing (Ribbink & Grimm, 2014).
For Kim & Choi (2015) communication is part of the interaction frequency of the relational intensity dimension and part of information sharing for relational posture. Their research only focuses on how regular the two parties interact, they do not focus on the style of communication. Other researchers like Yan & Dooley (2013) say that the communication intensity is positively related to the performance of the relationship similar to flexibility.
The last characteristic that could be found through the interviews was reliability. The interviews show that the reliability of a supplier or a buyer influences especially trust. Whereas Kim & Choi (2015) do not discuss reliability at all, the literature discussed (supply) reliability as a performance indicator (Shin, Collier, & Wilson, 2000). Moreover, (Jensen, 2002) argues that reliability is connected with confidence into the relationship. The researcher sub groups reliable delivery execution (incl. the proportion of annulments), the cooperation capabilities, the objectives (incl. dependability and contribution) and the degree of unity between the parties.
6.
CONCLUSION
To answer the research question that was identified in the introduction “How can the buyer-supplier typology by Kim & Choi (2015) be applied in another industry?” the following can be concluded. For this research the steel industry was the chosen context. The findings have shown that it is difficult to put a relationship into a specific category by means of a survey and numerical classifications. Each person has different estimates and each party of the relationship has a different view in terms of strategic/ non-strategic partnership, intensity and posture on the relationship. Additionally, in different industries relationship types can be viewed in a different way.
Hence, the buyer-supplier typology can be applied in other industries but some adjustments need to be made and generalization should be carefully performed.
33
6.1 Managerial Implications
In order to create or maintain a successful buyer-supplier relationship, companies should not forget to create a good relational posture if they expect more from each other than simple transactions or even fighting parties. The results of this research created more than theoretical knowledge. By knowing how to get a high relational posture level, both suppliers and buyers can reach more of their business goals.
Moreover, other determining factors are flexibility, the relationship with the contact person(s), the cultural background of the two parties, the communication style and the reliability of the buyer and of the supplier. Especially, soft skills and a good strategy are needed from both sides to achieve their goals. Understanding the other party is essential hereby.
For mostly the sales department or other representatives at the supplier side it is important to understand the needs of the customer and its expectations from their supplier. For knowing how to handle cultural differences work experience and experience with other cultures are needed.
6.2 Limitation and Further Research
The findings are subject to several limitations. As this research is explorative, there are naturally some limitations in the early stage of theory generation. Conclusions from the chosen context in the steel industry might not be applicable in every type of industry and therefore might be not completely generalizable. Furthermore, the choice of the focal company was biased by the fact that the focal company was willing to cooperate in doing research with the University of Groningen. The proximity to the researcher and accessibility for the researcher facilitated the choice. There might be other companies in the steel industry that would have been more appropriate for this research e.g. one where sticky and transient buyer-supplier relationships could also be found.
Moreover, the survey that was chosen for the buyer and the supplier side to characterize the relationships was based on the article of Kim & Choi (2015). Especially, the adaptation of the originally supplier side survey to a buyer side survey by changing words and sometimes even whole statements could have distorted the results of the survey.
34 conducting the research mainly from the buying side. The suppliers were contacted by the buying firm and that is why their answers regarding important information like trust and information sharing could be not a hundred percent honest. Moreover, they could have tried to put their answers in a more positive way to ensure that their relationship to the focal company does not suffer from this research. This can slightly be seen in the outcome figures of the survey. The suppliers more or less all tend to a strategic deep relationship and the answers of the supplier side were more moderate and had an overall focus on gracious relationships.
Differences between the gracious and the deep relationship could also be found here.
