Business Relationships for Competitive Advantage: Managing Alignment and Misalignment in Buyer and Supplier Transactions

Citation

Cavusgil, E. (2005), "Business Relationships for Competitive Advantage: Managing Alignment and Misalignment in Buyer and Supplier Transactions", European Journal of Marketing, Vol. 39 No. 7/8, pp. 947-948. https://doi.org/10.1108/03090560510614613

Business‐to‐business relationships have caught the attention of managers, academics and consultants alike. As buyers and sellers struggle to manage their economic relationships to their advantage, they must better understand the dynamics of their interaction and figure out ways in which value‐added relationships can be cultivated. Today, most managers have come to an appreciation that harmonious inter‐firm relationships may provide the firm with one of its most enduring competitive assets.

This new book by Andrew Cox at Birmingham University, and his colleagues Chris Lonsdale, Joe Sanderson and Glyn Watson, provides fresh and insightful perspectives on how managers can go about creating such an asset – a competence in relationship management. In doing so, they draw from their research and consulting experiences with a large number of firms. A nice feature of their book is its practicality: the authors illustrate their points with a rich sample of company illustrations – cases of firms that demonstrate “aligned”, “misaligned and sub‐optimal”, and “dysfunctional” buyer‐supplier relationship management.

For the reader who is looking for a crisp definition of what “alignment” means in the buyer‐supplier relationships early in the book, there is disappointment. Yet the authors quickly articulate the distinction between existing “one‐dimensional” dyadic approaches and their preferred “holistic” dyadic approaches. This distinction then serves as the rationale for the rest of the book. The former approach focuses primarily on one side of the business relationship and emphasizes how either the buyer or the supplier can improve what they obtain from any transaction (p. 4). In contrast, the holistic dyadic approach focuses equally on the motivations of buyers and suppliers when they interact. Cox and his colleagues argue that alignment is two‐pronged: “it is necessary for both the buyer and supplier in any relationship to internally align their strategic ends with operational means, as well as to find an appropriate coincidence of interest with one another externally” (p. 33).

The authors cite a number of limitations associated with current approaches to business relationship management. Existing frameworks such as purchasing portfolio management, supply chain management, and transaction cost economizing tend to focus one‐dimensionally on the commercial and operational goals of the buyer rather than of the supplier. They also tend to be descriptive and prescriptive.

In contrast, holistic dyadic approaches contend that it is necessary to understand the goals and motives of both the buyer and the supplier as they interact together (p. 19). They elaborate two types. The first, International Marketing and Purchasing (IMP) had existed for some two decades (see, for example, Hakansson and Wootz, 1979; Ford, 1980, 2002; Turnbull and Cunningham 1981). The IMP group, a five‐country group of researchers in Europe, indeed laid the groundwork for much of inter‐firm relationship management theory. They argued early that buyers and sellers are shaped by environmental factors (market structure, dynamism, internationalization, channel position, and social system). Those factors that can be influenced by them (the atmosphere), however, are elements such as power/dependence, conflict and cooperation, and expectations.

Cox and colleagues then identify the “Power Perspective School” as the other example of a holistic dyadic approach. Here, the “relative power of the buyer and supplier is the determining factor in the operational and commercial outcome in any transaction” (p. 21). As such, the assumption is that power is central to an understanding of relationships. While this may not necessarily be a new revelation, the authors provide rich illustrations of this concept later in the book through actual company case studies.

Readers may or may not agree with all of the assertions of the authors. Here is a sample:

The ultimate purpose of a business relationship is always fundamentally about commercial rather than operational outcomes (p. 24).

The aim of both the buyer and supplier is not to satisfy the commercial goals of the other party to the exchange, but to maximize their own (p. 25).

Nevertheless, Cox and his colleagues introduce useful new terminology to make their arguments. “Transactional harmony” is when both parties achieve their commercial goals (a rare case). More likely is “transactional tension”, when one party may be more satisfied than the other. If both parties are dissatisfied with the commercial outcome, then a state of “transactional conflict” exists (p. 25).

Business Relationships for Competitive Advantage: Managing Alignment and Misalignment in Buyer and Supplier Transactions is a highly readable, engaging and insightful book. Though not all of the ideas are necessarily new, the reader will find it useful in gaining deeper appreciation of the dynamics of business‐to‐business relationships. The practical nature of the book, coupled with a good number of flowcharts, tables and exhibits, makes it easier to digest for the reader. Of the eight chapters in the book, three are devoted to company cases that illustrate good or poor examples of relationship alignment. The book also ends with a chapter on decision support tools for improving business relationships. While the authors have primarily aimed this book at managers, the academic community will find it of interest as well.