August 24, 2008

Buyer Seller Relationship Research Proposal

 

 

2) Identify characteristics of buyer-seller relationship

Buyer-seller relations operate within a highly complex organizational environment bordering on a partnership where trust and respect for each other prevails (Eckels, 1990).  It is argued that companies and relationships in the business markets are inter-dependent and that the interaction is a series of short-term social interactions that are influenced by the long-term business process that bind the firms together.  Ford (2002) also argues that it would not make sense of companies by looking at them in isolation, but only in relation to each other.  The buyer-supplier relationship in Singapore home furnishing and customer electronics business markets can be analysed based on the general characteristics of buyer-seller relationships identified by Gadde & Hakansson (1993) as below:

 

a) Complexity

Gadde & Hakansson (1993) state that the complexity of the relationship depends on the number of people involved.  In general, the buying process in Singapore home furnishing and customer electronics business markets involves buyers, supplier's salespeople, buyer's and supplier's marketing department with extensive contacts to discuss and solve more or less advanced problem.  However, the complexity of the entire buyer-suppliers interface system lies in the fact that the ultimate actions may be controlled by some individuals who do not involve in the original transaction.  This may include the supplier's operation planning, transportation, and inventory control people.  On the buyer's side, the budgetary committee, that could hole the ultimate authority over the dispensation of the organisation's finances.     

 

b) Relationships as investments – their long-term nature

Ford et al (2002) argue that every action in a relationship should be seen in a time perspective that the investment which may involve costs will be pay off in the long run.  Based on their arguments, the cost of Singapore home furnishing and customer electronics business buyer-supplier relationship may involve contact/information cots and adaptation costs especially during the beginning stage.  The costs will fall later when buyer is getting to know the suppliers and their abilities and expertise through marketing and sales promotion activities.  It is worthy to note that it is more effective to retain and maintain existing relationships than to seek out new ones that may pose an obstacle to implementing changes.  Hence, buyers and suppliers should note that day-to-day activities should remain at a relatively high level to maintain a long-term relationship.

 

c) Adaptation

Adaptation occurs when one party in a relationship alters its processes or the item exchanged to accommodate the other party (Gadde & Hakansson, 1993).  Ford (2002) discusses that adaptation behaviour would vary over the life of the relationship.  In the early stages it will be a means to develop trust, and in the mature state it will expand and solidify the relationship.  There are many types of adaptations stated by Gadde & Hakansson (1993) such as technical, administrative routines and knowledge-based adaptations.  Buyer-seller in Singapore home furnishing and customer electronics business markets should continuously increases their knowledge of each other application of technology to give themselves an important developmental boost.  Besides, administrative routines such as planning, supply and communications systems need to be adapted by both parties for effective working relationship.  Hallen, Seyed-Mohamed & Johanson (1988) cited by Sheth & Parvatiyar (2000) argue that adaptation tend to bond the buyer and seller in a tighter relationship and create barriers to entry for competing suppliers.

 

d) Power and dependence

Power and dependence may be unbalanced with regard to individual dimensions and varies with the general state of the economy (Gadde & Hankansson, 1993).  The buyer-seller relationship may be more important to the buyer than the seller, or vice versa.  For example, Sharp Corporation viewed the relationship with SAFE was more important to SAFE and the relationship was struggled and characterised as distrust and both try to avoid vulnerability to other.  In 2001, the relationship was dissolved due to negative and strong form of reciprocity.  Gadde & Hankansson (1993) argue that there is no best strategy in any individual case of imbalance power and dependence relationship.  However, the awareness of the problem, regular and systematic discussions are the first step to learn and handle the questions better, and to build trustworthy relationship.

 

e) Conflict and cooperation

Buyer-seller mutual goals can only be accomplished through joint action and the maintenance of the relationship.  Conflict may arise if there is no goal and interest sharing.   Hence, reciprocal trust is a prerequisite for long-term relationships (Gadde & Hankansson, 1993).  It is also argued by Michel, Naude, Salle & Valla (2003) that buyer-seller relationship is built up through human effort and human contacts and in order for them to survive they must be under continual development.

 

f) Reciprocal trust rather then formality

Trust has assumed a central role in the development of marketing theory as business marketers placed greater emphasis on building long-term relationship (Dwyer, Schurr, & Oh, 1987; Morgan & Hunt, 1994 cited by Doney & Cannon, 1997).  Ford et al (2002) argue that trust should not be built in a relationship by making promises, but only by fulfilling them.  He argued that it could be easy to destroy a buyer's trust when the seller demonstrates a lack of commitment to a relationship.  Doney & Cannon (1997) discuss that seller should make significant investments to develop and maintain customer trust.  They argue that for suppliers, the value of such efforts is most apparent when high levels of buyer trust lead to more favourable purchasing outcomes for the supplier.  Although the process of building trust is expensive, time-consuming, and complex, its outcome in terms of forging strong buyer-seller bonds and enhance loyalty could be critically important to supplier firms.

 

3) Analyse Relationship Marketing

Relationship marketing is defined as all marketing activities directed towards establishing, developing and maintaining successful relational exchanges (Morgan & Hunt, 1994).  Anderson (2001) suggests that organisations need to move away from the traditional one-off transactional approach to a relationship marketing perspective and this point supports the discussion in Hutt & Speh (2001) that a business marketer may begin with a relationship from a supplier with transactional exchange to a preferred supplier status with collaborative exchange. 

 

Ford (200) argues that buyer and seller form long-term relationship, in which they share responsibilities and benefits, trust each other and are engaged in some coordinated planning.  His view is supported by Sheth & Parvatiyar (2000) that relationship must be mutual beneficial to both buyers and sellers in order to exist, and adopting relationship marketing implies the acknowledgement that each partner has a stake in the others activities.  In this way, both sides should think of ways to appropriately involve each other in strategy formulation and implementation processes.  Gronross (1991) cited by Polonsky, Schuppisser & Beldona (2002) states that the traditional relationship marketing literature emphasis the benefits of keeping existing partners satisfied.  Their discussion supports the views of Doyle (2000) that customers who stay with the supplier are assets of increasing value – each year they tend to generate higher and higher net cash flow.  Besides, the rational factors that influence stakeholder relationship discussed by Polonsky, Schuppisser & Beldona (2001) clearly supports the key characteristics of buyer-seller relationship as discussed earlier. 

 

4) Determine how trust of a selling firm and salesperson are built and developed in business markets.

a) Examine the antecedents and consequences of trust of a supplier firm and salesperson focusing on characteristics of the supplier firm, supplier firm relationship, salesperson and salesperson relationship.

Commitment and trust are the foundation of relationship marketing as it encourages buyers and sellers to make investment into a relationship, to resist taking advantage of alternative which provide short-term benefits, and not to behave opportunistically with regard to the relationship (Morgan & Hunt, 1994).  It is argued that trust has assumed a central role in the development of marketing theory as business marketers placed greater emphasis on building long-term relationship (Dwyer, Schurr & Oh, 1987; and Morgan & Hunt, 1994 cited by Doney & Cannon, 1997). 

 

Developing trust in a supplier firm is not only based on the size, but also the reputation, willingness to customize, confidential information sharing of supplier firm, and length of relationship with supplier firm and salespeople (Doney & Conoon, 1997).  In general, Singapore home furnishing and customer electronics retailers build trust with supplier firms primarily relying on supplier firm's size and reputation.  It is worthy to note that the supplier firms' willingness to make idiosyncratic investments and share confidential information provided evidence that they can be believed, they cared for the relationship and willing to make sacrifices.  These investments contribute to forging strong buyer trust in the selling firm and they can be expected to pay off the long run (Ford et al, 2002).   

 

b) Examine the role of supplier firm and salesperson trust on a buying firm's current supplier choice and future purchase intentions

Doney & Canoon (1997) argue that a company sales representative who proves to be dishonest and unreliable could jeopardize a long-term relationship between the buyer and seller but trusted salespeople helps to preserve customer commitment during difficult times.  A close interpersonal relationship helps to reduce customer firm's costs in the long run that can be a source of competitive advantage for supplier's firm (Wathne, Biong & Heide, 2001).  This can be done with emphasis on the supplier flexibility, product/service quality and relationship-specific adaptation stated by Cannon & Homburg (2001).   

           

Relationship marketing strategies are often based on account management programs, in which buyers are assigned a designated sales person who acts as an intermediary between the buyer and supplier (Lovelock & Wright, 1999).  As supplier's salespeople plays an important role in developing customer relationship value, the supplier firm should recognize the potential vulnerability if the key contact person were to leave, be transferred or promoted and thus be unable to serve the customer (Bendapudi & Leone, 2002).  Because turnover is bound to occur, there should be efforts to capture the employees' knowledge about their customers to transfer this information to a replacement.  Doney & Canoon (1997), and Cannon & Homburg (2001) suggest that supplier firms should emphasize customer satisfaction and note that the interpersonal trust engendered by salespeople and transferred to the supplier firm plays a key role in developing and maintaining enduring buyer-seller relationship. 

 

RESEARCH QUESTION

How buyers make choice of suppliers in term of trust in Singapore home furnishing and customer electronics business markets?


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