Company’s relationship with supplier

Company’s relationship with supplier

 

Outline

  1. Introduction
  2. Steps to building customer supplier relationship
    • admitting your past mistakes
    • identify major source of problem
    • identification and implementation of corrective actions
    • monitoring and maintenance of relationship
  3. Stages of relationship progress
    • pre-relationship phase
    • negotiation phase
    • relationship development phase
    • maturity/commitment phase
  4. Critical factors in each stage of development
  5. Cultural and linguistic requirements
    • cultural requirements
    • operationalizing culture
    • dimensions of culture to consider
    • linguistic requirements
  6. Conclusion
  7. References

 

 

 

Company’s relationship with supplier

Introduction

Supplier relationship management (SRM) is an important aspect in international marketing. It involves the formulation of definite plans, and proper management of all interactions and parties involved in delivering goods and services to the company and strengthen the relationship between the company and its respective suppliers. Czinkota  (2012 pg.5) wrote that international marketing consist of activity, institutions and processes across national borders that create, communicate and exchange offerings that have value for stockholders and society. It is concerned with the establishment of a firm connection between the company and suppliers for mutual benefits.

In international marketing, a firm tries to apply marketing mix decisions beyond the borders of a country. Businesses need to create, communicate and deliver value to customers and manage customer relationships in ways that benefit the organization and its stakeholders (Kleindi 2006, p.6). To achieve this, there is a need for constant supplies of the required goods and services, and this can only be maintained when supplier-company relationship is strong.  SRM, therefore, is very essential in international marketing management. Lambert (2008, p.54) wrote that the supplier relationship management has both strategic and operational elements. The aim of SRM has been to provide a mutual relationship with strategic suppliers so that an organization may gain competitive advantage over its rivals in the market scene. Interaction with suppliers may involve several activities amongst logistics management, purchasing, delivery of products and services and collaboration in the design of specific products. Ford (2002 p.24) writes that every business relationship is developed by two companies with certain requirements and capabilities.  Since such relationships are mutual, it is in order that agreements reached by both parties should satisfy both the organization and suppliers. Break-down in relationship between an organization and its suppliers can sometimes occur, in which case, the relationship may be rebuilt or a new relationship established.

Steps to building a customer-supplier relationship

These relationships suffer various challenges, which have always, led to their break-down. The company should assess its relationship with current supplier and then handle all concerns. Woodside (2010 p.16) further describes that members of two or more companies engaged in commercial exchange can be deemed as coordinating their interactions as if their act make sense to each other. The steps involved in building a customer-supplier relationship should be within the limits of the organization’s Supplier relationship management (SRM) program. There are four basic steps in building relationships

Step 1: Admitting your past mistakes.

In this stage, the organization evaluates its present relationship with identified suppliers. An assumption is made that the organization has selected its new supplier. Since the relationship with initial supplier had been broken, it is essential that the firm acknowledges its previous mistakes. The marketing manager should understand why the previous relationship broke-up, the actions that led to its break-up and why such things happened. In addition, the consequences of those actions should be understood plus the position of the supplier at the moment. Moreover, the manager should try to understand supplier’s feelings towards the organization and his organization’s feeling too. Once this is done, the firm will have to undertake clear and honest communication with current supplier to ensure that previously made mistakes are not repeated. Major issues in your current relationship need to be addressed in an objective manner.

 

Step 2: Identify the major source of problem

This is the most crucial step in this process. In the case of our company, the personnel had insufficient knowledge of linguistic and cultural aspects of dealing with former supplier, and this led to a variety of problems. In this stage, the company will ensure that existing personnel understand all linguistic and cultural aspects of the current supplier in order to reduce misunderstandings.

Step 3: identification and implementation of corrective actions.

The major causes of relationship breakdown having been identified, this step involves formulating and implementing corrective actions that will solve a problem. Best actions should be taken and to ensure that the consequent improvements are can be quantified and measured objectively. In the case of our company, corrective measures would include training personnel on various linguistic and cultural issues with regards to our current supplier to ensure that mistakes are not repeated.

Step 4: monitoring and maintenance of the relationship

From time to time, the marketing manager should check on the supplier to ensure that he derives satisfaction from our transactions. These actions should be carried out on a timely basis. Management can then ascertain whether the supplier is confident with the organization or not.

Stages of relationship progress

Supplier-company relationships are dynamic and always change over time.  The relationship will begin from the identification stage, which is characterized by very limited trust in both parties’ abilities, coupled with the desire to explore and find out about the supplier. Cheng (2009 p.5) writes that SRM entails an effective methodology to reveal, quantify and manage customer relationship uncertainty. The early stages of trust and commitment are well defined, and the supplier expects the company to exhibit trustworthy behavior.

3.1 The pre-relationship phase

The decision to change supplier was prompted by disagreements between the company and its former supplier which led to dissatisfactions. As a result, the company has to focus on building a relationship with another supplier who will be reliable, and all this begin at the pre-relationship phase. In the case of our company, the solution has been decided to be an addition of another supplier.  The process involves evaluating the usefulness of our chosen supplier with regard to the level of satisfaction that both the company and supplier will gain from transactions. Moreover, the company may undertake to find relevant information from its business colleagues about the reputation of the supplier. This will help in building some level of trust which is very essential in the early stages of relationship building.

3.2 The negotiation phase

This is the immediate phase after the company has decided on its supplier, and it involves a series of discussions and bargaining. It is always described as a negotiation and matching phase where issues, priorities and inputs are openly exchanged. The quality and sharing of information influence the success of relationships (Mohr and Spekman 1994). This phase may sometimes lead to collapse of negotiations since the company, and supplier are not compatible. However, when issues are handled soberly with both the company and supplier satisfied, negotiations may be fruitful and a long-lasting relationship too may be established.

3.3 The relationship development phase

This will be the third phase in relationship development process and it will be characterized by a positive trend in benefits obtained by both the company and supplier from its various transactions, and a rise in the level of their interdependence. In addition, mutual dependency is expected to increase in this stage.  Moller and Wilson (1995 p.59 ) write that a relationship will not endure if the supplier is unable to meet the buyer’s expectation, however, many sophisticated buyers are now willing to work with selected suppliers to raise their performance and make them suitable partners. This stage will be characterized by an increase in level of experience between the company and supplier hence reduced uncertainty and distance between them. In addition, it is in this phase that more communication is carried out and there is a conducive atmosphere for exchange of information, ideas, and feelings from both parties.

3.4 The maturity/commitment phase

It is the last stage in relationship development process. It is characterized by the existence of knowledge-based trust, development of effective communication and sharing of common objectives. It is in this phase that both the company and supplier will believe that either of their actions is predictable and, as a result, there is mutual investment. This stage is also characterized by loyalty from both company and supplier. Kincaid (2003 p.10) further writes that loyalty is built on relationship developed through the customers’ experience when she interacts with the company.  Moreover, both parties will be aware of each other’s goals and objectives since there is openness in communication and trust is also knowledge-based. In addition, mistakes from either party can be tolerated because of the existing level of trust.

Critical factors in the stages of development

All stages of development are characterized by unique features, which identify every stage. The success of relationship development depends on how both parties handle stages hence it is important to understand the various factors that may be important at each stage.

 

4.1 Critical factors in the pre-relationship phase

Being the initial phase in relationship building, it is majorly characterized by image building.  The aim of all activities and communications carried out in this phase is to boost the image of the company to the supplier. In effect, it is required that personnel involved in this phase be of very high integrity. Moreover, the level of knowledge is also important, especially in relation to the history of our company. Adequate knowledge is important because it enables quick responses to all forms of questions the supplier may have. As we have discussed earlier, the aim of this stage is to build confidence.

4.2 factors in the negotiation phase

This is where terms and conditions of the agreement will be determined. This level of development requires the use of personnel with best bargaining qualities. The aim should be to set favorable prices and ensure satisfaction by both parties. Additionally, the company should have prior knowledge of the expectations of supplier.

4.3 Critical factors in the relationship development phase

This stage is characterized by high levels of confidence in both parties which, and quality transactions. Due to fear of failure, the company should assign personnel who are competent enough to keep the company going through this phase. It is where supplies tend to be highest and trust in the company becomes knowledge-based. This level also requires that the company maintains clear records and communication system should be perfect in order to enhance quick transactions.

The cultural and linguistic requirements

Break down in relationship with our former supplier was caused by insufficient knowledge of linguistic and cultural aspects of dealing with the supplier, which led to many problems especially lack of trust. To avoid a repeat of this, there should be a clear understanding of all linguistic and cultural requirements for the establishment and maintenance of a healthy relationship with our present supplier in Columbia.

5.1 Cultural requirements

Culture makes up the largest influence of relationship in international marketing. It can be defined as a complex whole that comprises of morals, beliefs, knowledge, art, and many other capabilities that human beings attain as members of the society. Cultural behaviors are unique and very distinct from the religious, educational, political and technological environment in which people operate. An understanding of Colombian culture is necessary and can be carried out by lunch programs in Colombia and development of a long term relationship.

5.2 Operationalizing culture

There are three major approaches to operationalize culture; through language, through belief system and material goods. Although language offers an interpretative system for presenting the world, it is not the best indicator of ethnicity and cannot be used explicitly in explaining behavior of people from different cultures. Possession, on the other hand, allows concrete understanding of dimensions of culture since some artifacts are solely associated with certain cultures. Kleindi (2006, p.6) added that businesses that engage in international marketing must understand how marketing activities differ in the cultures they are entering.

5.3 The dimensions of culture to consider

  1. Individualism vs. collectivism; in individualistic cultures, people look after themselves and their immediate relations only whereas in collectivism groups exist and individuals claim membership from such groups in exchange of their loyalty. In this regard, the company should understand whether our prospective supplier is individualistic or collectivist. Colombians are collectivists while the British are individualistic. In Colombia, children are taught from an early age to love one another and have basic goals in life as a group. This may reflect in our supplier who is a Colombian
  2. Uncertainty avoidance; this implies “the extent to which people feel threatened by uncertainty and ambiguity and try to avoid these situations” (Hofstede 1991: 113). Additionally, Colombia scores high on this concept than UK and citizens in Colombia are highly threatened by unknown situations hence they’ve developed beliefs trying to evade uncertainty. It is evident that Colombians may panic in unknown situations hence the need to understand supplier in this aspect. Uncertainty avoidance index also shows how flexible individuals are to changing situations, and can be shaken when conditions change abruptly.
  • Power distance; it shows the consequences of power inequality and levels of authority relation in the world. This is a major influence on hierarchy with regards to the relationship between the company and supplier. Colombian culture scores higher than UK in these aspects hence their belief that individuals in a country cannot be equal. In UK, however, it is believed that inequalities among citizens should be reduced. Different views regarding power distance by these two countries should be addressed. To overcome this, supplier can be treated equally like any other colleague as a proof of equality.
  1. Masculinity-femininity; it is believed that common attributes in masculine culture are success and achievement while quality of life and caring for others are dominant in feminine countries. Consequently, the company should understand the culture where supplier comes from in order to formulate the best ways of treating them. In this aspect, the two countries score almost equal percentages, implying that they have similar ideas on what motivates people.However, UK scores higher than Colombia, showing that British are success-oriented people who have higher ambitions.

5.4 Linguistic requirements

Linguistics is concerned with the study of human being’s language. The aim is to break down a particular language into parts so that people being addressed can easily understand. In marketing, especially supplier-company relationship, linguistics plays a major role in bringing the two parties together. This is because, most transactions between and supplier involve detailed communication and explanation of contents in a transaction. “Each language can in principle express all the meanings that can be expressed in other languages (Baker & Lengeveld 2012 p.16). The personnel involved in communication with company’s supplier should be conversant with Colombian language and able to express himself clearly. This will in turn reduce problems associated with poor knowledge of linguistic aspects while dealing with the supplier.

Conclusions

Supplier relationship management (SRM) is an important aspect in international marketing. It involves the formulation of strategic plans and proper management of all interactions with suppliers of goods and services to an organization in order to increase the value of organization-supplier relationships. The process of building a customer-supplier relationship involves four major steps; acknowledging past mistakes, identification of the source of problem, identification and implementation of corrective actions and monitoring and maintenance of relationships. In this regard, there are also four basic stages of relationship development, they include, pre-relationship phase, the negotiation phase, relationship development and finally the maturity stage. A rewarding relationship between the company and supplier will also require in-depth understanding of all cultural and linguistic aspects of supplier.

 

References

Baker, A, E and Hengeveld, K., 2012. Linguistics, Introducing Linguistics, Chichester West Sussex, John Wiley & Sons.

Cheng, Z., 2009. Value-Based Management of Supplier. Lohmar, BoD – Books on Demand.

Czinkota, M, R., 2012. International Marketing, New York, Cengage Learning.

Daniels, J.D. and Radebaugh, L.H, and Sullivan, D.P., 2009 International Business, Environments and Operations (12th Edition, Upper Saddle River New Jersey:  Pearson Education, Inc.

Ford, D. 1980, Buyer/seller relationships in international industrial markets, European Journal of Marketing, Vol. 14 No. 5, pp. 339-54.

Ford, D., 2002. Understanding Business Marketing and Purchasing, An Interaction Approach. New York, Cengage Learning EMEA.

Hofstede, G., 1991.Cultures and organizations — software of the mind, New York, McGraw Hill.

Hollensen, S., 2008. Essentials of Global Marketing. Harlow, Pearson Education Ltd.

Kincaid, J, W., 2003.  Customer Relationship Management: Getting it Right, Upper Saddle River, New Jersey, Prentice Hall Professional.

Kleindi, B., 2006. International Marketing, 1st ed: WinningEdge Title Series, Cengage Learning.

Lambert, D, M., ed., 2008. Supply Chain Management, Processes, Partnerships, Performance. USA, Supply Chain Management Inst.

Mohr, J.and Spekman, R., 1994. Characteristics of partnership success: partnership Attributes, communication behaviour and conflict resolution techniques.  Strategic Management Journal, Vol. 15, pp. 135-52.

Moller, K. and Wilson, D, T., 1995. Business Marketing, An Interaction and Network Perspective, Norwell, Massachusetts, Springer.

Woodside, A, G., ed., 2010.Relationships Organizational Culture, Business-to-business, and Interfirm Networks, New york, Emerald Group Publishing.

 

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