Business relationships between business partners

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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 (Håkansson 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.

Networks and Dyadic Business Relationships

Dyadic Relationships

According to Ford et al (1998) relationships are formed when two companies, be they customer and supplier or otherwise, display matching needs and abilities. Such characteristics may vary over time, hence the business relationships between companies may also alter over time and become increasingly committal or wither, according to the currents needs of the parties. According to a survey carried out on the European International Marketing and Purchasing project (IMP) a small set of customers typically account for a large share of a firm’s revenue. Hence by creating closer ties with these few important customers a deeper level of cooperation, and in some cases, commitment will be achieved resulting in mutual benefits such as lowering of production costs and increased efficiency (Håkansson and Johansson 2001).

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Networks

As mentioned above, dyadic relationships exist in an interlinked network of numerous other business relationships. These external relationships may either support the focal relationship or have a detrimental effect on it. In addition, since the dyadic relationship is constantly evolving the nature of the effect, which the network has on it, will also vary (Anderson, Håkansson and Johansson 1994).

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 ...

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