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Business relationships between business partners

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Introduction

Introduction Close-knit business relationships between business partners are gradually becoming the norm in today's business environment (Holm, Eriksson and Johansson 1999). Having previously dealt with business contacts in a predominantly arms-length fashion firms nowadays have increasingly come to realise the value of creating close relationships with their business partners. Driven partly by rapid technological development as well as increasing internationalisation this has had a significant effect on the everyday running of businesses. By creating inter-firm linkages of i.e. legal, administrative, information exchange and technological nature companies become more closely tied together and activities in the two partners may be synchronised in order to achieve synergy (H�kansson and Johansson 2001). However, although focal relationships are of particular interest in this essay a closer examination of the network structure of which the focal business relationship is a part is needed in order to gain a better understanding of its impact on businesses. In this PM inter-firm connections and coordination of these activities will be more closely studied. In particular it will be examined, according to existing theories, what possible effect activities in secondary relationships will have on the focal business relationship and vice versa. ...read more.

Middle

Network Connections Research has identified five different kinds of network connections, namely; Competitive connections (C-connections, comprising competitors the supplier as well as the customer side), Value-Chain connections (V-connections, comprising supplier's suppliers and customer's customers), Internal Supplementary connections (I-connections, comprising additional relationships between the focal firms), External Supplementary connections (E-connections, on the customer side only) and Ancillary connections (A-connections, comprising connections with other, external players including non-commercial agencies, commercial banks and regulating agencies) see figure1. According to the Received Industrial Organisation Theory (Scherer, 1980) the corresponding C-connection relationships will almost always have a negative impact on the focal relationship. However, case studies in business markets have shown positive effects created by external competitive situations (Laage-Hellman, 1989). This view is partially supported by the research carried out by Anderson, H�kansson and Johansson (1994). (Blankenburg Holm, D., and Johansson, J. 1995) As mentioned above, relationships, including the focal one, may influence and affect one another in various ways, and may have positive as well as negative effects. Anderson, H�kansson and Johansson (1994) discuss the concept of Network Identity, (defined by the authors as ..."the perceived attractiveness of a firm as an exchange partner due to its unique set of connected relations with other firms, links to their activities and ties with their resources") ...read more.

Conclusion

They may even have a detrimental effect on the firm's other relationships), Anticipated Actor-relationship Incompatibility (The business partner may be negatively perceived by other business relations, whom might become hesitant to continue their relationship with the company). Network Atmosphere According to Holm and Johansson (1995) every business relationship has a certain atmosphere, which is based on the characteristics of mutual understanding, trust and power dependence. However, although forming the basis of relationships there is no clear pattern as to how these attributes develop between business partners. The degree to which these characteristics are present in the relationships will change over time and can do so very rapidly which will influence the current state of the relationships. Conclusion Business relationships are increasingly important in today's business environment. By forming close relationships firms may benefit from synergistic effect such as lower productions costs and increased efficiency. However, such dyadic relationships are invariably part of a bigger network structure, which influences the nature of the individual relationships. In order to get a better understanding of focal relationships it is therefore necessary, not only to study these in isolation, but to examine the surrounding network of relationships. ...read more.

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