In this section of the thesis, theories relating to the purpose are discussed. Firstly, the researchers discuss the relationship life-cycle model. This is with the view to linking the stages of the relationship to the creation of structural bonds. Secondly, the constituents or types of structural bonds are discussed. Finally, the synthesis is presented
The Relationship life cycle model
There have been numerous articles written on the subject of relationship life-cycle (Dwyer, Schurr & Oh, 1987; Ring & Van De Ven 1994; Ford, 1980; Wilson, 1995; Ellram 1991, amongst others) . The relationship life cycle concept could be exceptional-ly important for predicting and influencing the direction of a business relationship (Ellram, 1991). There are different schools of thought or categories surrounding the classification of the relationship life-cycle: stages theory, states theory and joining theo-ry (Batonda & Perry, 2003). Batonda et al. (2003) continued further by explaining the different classifications. The stage theory posits that relationships grow or develop through different progressive stages. The states theory focuses on strategic moves of ex-change actors that occur in unstructured or unpredictable manner. While the last, joining theory focuses on entry processes of positioning, repositioning and exiting. However, for the purpose of this research, the stages theory shall be the focus of the researchers.
The research shall discuss the following stages of relationship life-cycle: Awareness, Exploration/Development, Expansion, Commitment/Integration, Disintegration/Decline, and finally, Dissolution. The first three stages of the cycle, according to Hertz (1996) involve increasing integration while the remaining three stages involve decreasing inte-gration
At this stage, the need for a partner arises and the search for the right partner begins. The choice for the company is between existing suppliers or a new supplier selection process may be undertaken. Evaluation of a new potential supplier could be based on the supplier’s experience, uncertainty and distance; and there are no commitment made at this stage (Ford, 1980). Of importance, in this stage, is the perception of the compara-tive advantage and the risks that are associated with the relationship before formaliza-tion. It is worthy for the parties to also understand any barrier that might bedevil the re-lationship’s development and progress before the final decision of commitment to the relationship (Ellram, 1991). In order to reduce the perceived risks, Wilson (1995) opined that preliminary discussions should be held with multiple potential suppliers, and also to involve suppliers the organization is already acquainted with. After these different issues surrounding the need for and the choice of a supplier, the buying com-pany moves to the next step
Exploration / Development Stage
Meaningful discussions with the potential suppliers shortlisted by the organization begin at this stage. The discussions are centred on obligations, benefits and burdens within the dyadic relationships. It could also be characterized by testing and evaluation of the purported services to be offered by the supplier (Dwyer et al. 1987, and Baker & Hart, 2008). Ring and Van De Ven (1994) calls it negotiation stage. This is where the actors develop joint expectations involving motivations, investments and uncertainties. Basic ground rules are established in this stage and it involves a high degree of contact between the firms, involving multiple levels and functions. By involving these contacts, the parties show their support and commitment to the relationship as well as enabling the acceleration of the partnership. Being the formation stage of the relationship, there are numerous unanswered questions; the frequent contacts made ensures that the ques-tions are responded to swiftly (Ellram, 1991). Perceived loop-holes are filled by these frequent contacts as objections are responded to rapidly to the satisfaction of the other party.
It is also critical for the parties at this stage, to establish congruent goals regarding sale and profit objections and the purpose of the relationship. Information exchange han-dling and sharing discussion is also pivotal in order to cope with the risks and uncertain-ties in the expansion stage (Jap & Anderson, 2007).
Discussions commence about expected strategic advancement of the relationship, in-cluding the investments expected to further strengthen the relationship. Preliminary dis-cussions about the necessary and vital investments that will be made, and what asset each party will be introducing individually to the relationship is proffered. It is during these discussions that an idea of what type of investments the parties will be creating jointly during the relationship life span is decided
Based on the success achieved in the exploration/development (formation) stage, the re-lationship enters the next level, which is expansion. This level is characterized by con-tinuous increase in benefits obtained by the parties in the relationship, including a prob-able increase in interdependence (Dwyer et al. 1987). An increase in risk-taking can al-so be noticed, as well as the parties’ commitment. The relationship is more stable here, as such aids the integration and future development of the relationship (Dwyer et al. 1987). The goal here is to “improve the relationship, building strength and dependency, becoming committed to the partnering nature of the relationship” (Ellram, 1991, p. 15). Ellram (1991) further stated that the frequency of contacts is still high, but not as high as that of the exploration stage. Ellram (1991) also added that the discussion about stra-tegic relationship is often initiated at this stage of the relationship. The continuous busi-ness relationship increases the level of transactions between the actors thereby leading to a higher level of commitment and trust (Ellram, 1991)
Commitment / Integration Stage
The relationship reaches maturity here. It is expected that both the buyer and the suppli-er are deriving simultaneous benefits from the relationship. It is also referred to as the most advanced and enlarged stage of the relationship (Dwyer et al. 1987). The goal here is to stabilize and maintain the relationship as a result of the solid ground work initiated and achieved at the beginning. The relationship is further integrated and the firms can synergize to increase their performance and success. Additionally, product and/or pro-cess improvement, expansion and development are also achieved. At this stage, both firms increase their level of collaboration and involvement, and improve the chances of achieving innovation (Ellram, 1991). According to Palmer and Bejou (1994), within this stage of the relationship, some certain degree of exclusivity between both parties which ultimately results in minimal information search for alternatives could have been devel-oped
Disintegration / Decline Stage
Disintegration in a relationship occurs where problems begin to crop up in the relation-ship. Dissolution, according to Dwyer et al. (1987) begins in an “intrapsychic stage” that could be initiated by one of the parties after observing that the goals, either mutual or individual, are not being met and/or that the cost of continuation outweighs the bene-fits. The authors of this thesis believe the “intrapsychic stage” is the disintegra-tion/decline stage of the relationship. The argument of the researchers is based on the fact that dissolution, on its own, is a combination of stages, therefore, the need to create a stage preceding that.
There are diverging opinions regarding the final stages of the relationship life-cycle. Whereas some researchers fail to realize the disconnection between commitment / inte-gration stage before moving to the dissolution stage (Dwyer et al. 1987; Ellram, 1991; Baker et al. 2008), others like Hertz (1996) and Alajoutsijärvi, Möller and Tähtinen (2000) argued that there is disintegration or decline stage in relationships. Additionally, those relationships on decline could be revived and restarted at the disintegration / de-cline stage, thereby returning the relationship to the exploration/development stage (Figure 2.1). Wilson (1995) posits that the level of investment by both parties could also help revive an ailing relationship. However, Jap et al. (2007) suggested that when a rela-tionship in trouble is reconstituted, they may not fully recover and become as strong as they were initially. This to an extent may be true, but it also depends on the type of rela-tionship and the level of trust and commitment in the relationship in the first instance. Where the relationship cannot be salvaged, it then moves to the dissolution stage. As Hertz (1996) showed, a relationship does not abruptly end, but it disintegrates gradually before finally being dissolved.
Researchers, according to Baker and Hart (2008, p. 43), used different words to connote this stage of the relationship: “…switching, exit, dissolution, termination, fading, defec-tion, disengagement, breakup, divorce and relationship demarketing.” For the purpose of this thesis, the words can be used interchangeably. The understanding with these words is that the relationship cannot be revived, it has to end somehow.
If the world may view relationships in terms of marriage, there is a tendency that some may end up in divorce (Perrien, Paradis & Banting, 1995). In line with the above state-ment, Tähtinen and Halinen-Kaila (1997) stated that “a relationship is dissolved when all activity links are broken and no resource ties and actor bonds exist between the com-panies”. Furthermore, Giller and Matear (2001) postulated that interaction, as a result of a trigger event or scenario in addition to the existing state of the relationship, can lead to the dissolution of a relationship. Other reasons offered for the dissolution of a relation-ship, as Ellram (1991) argued could be: declining product sales or unprofitable product; unsatisfactory performance by one or both parties; or a self-fulfilling dissolution. When these events occur, and there is no turning back, the best option or only option left is to dissolve the relationship. At this stage of events, the parties may decide to bring the re-lationship to an end.
Dissolution of a relationship can be in two strategies, direct and indirect. By stating to the other party an intention to leave or end the relationship, the partner is using the di-rect strategy. On the other hand, the indirect strategy is accomplished when the breakup is executed without an explicit statement of aim (Dwyer et al. 1987 & Alajoutsijärvi et al. 2000)
Structural Bonds and the Constituents
Structural bonding can be defined “as the degree to which certain ties link and hold a buyer and seller together in a relationship as the result of some mutually beneficial eco-nomic, strategic, technological, and/or organizational objective, etc.” (Williams, Han & Qualls, 1998, p. 137). The development of structural bonding, in a strategic relationship, is not a sufficient reason to attain success, but it is necessary “for the maintenance and continuation of the relationship” (Rodriguez & Wilson, 2002, p. 7).
Structural bond “is the vector of forces that creates impediments to the termination of the relationship” and develops “over time as the level of investments, adaptations and shared technology grows until a point is reached when it may be very difficult to termi-nate a relationship” (Wilson, 1995, p. 339). Investments in structural bonds locks in both parties in the relationship and ties them together (Nahapiet & Ghoshal, 1998). It constitutes all complex economic, strategic and functional factors that develop during a strategic relationship. Structural bonds also represent irretrievable investments in a rela-tionship, pressures to maintain the relationship and contractual barriers (Rodriguez & Wilson, 2002). Furthermore, structural bonds are linked predominantly to economic ex-change and are most often defined by negotiated transactions (Emerson, 1981). This simply implies that, the type of investment the parties in a relationship decide to embark on depends on what they negotiated and agreed upon. This negotiation usually stems from what is needed in the relationship to enable or facilitate achievement of mutual goals.
Structural bonding can lead to interdependence in the strategic relationships. As Powers et al. (2007) emphasized, that structural bonding consists of the dependence of each partner in a strategic relationship on the other party’s accomplishment. In a strategic partnership the parties depend on “strong recognized skills and capabilities in design, engineering, and manufacturing” (Bensaou, 1999, p. 38). For example, by being part of a design team, suppliers add value to a strategic relationship as well as build structural bonds
1.2 Problem statement
1.3 Research purpose
1.4 Intended Contribution
1.5 Thesis structure
2 THEORETICAL FRAMEWORK
2.2 Structural Bonds and the Constituents
2.3 Synthesis / Research Model:
3.1 Research Approach
3.2 Case Selection
3.3 Measurement Instrument
3.4 Data Collection
3.5 Data Analysis Process
4 Presentation of Empirical Data
4.1 Lagermetall AB (Case One)
4.2 Atlas Copco Rock Drills AB (Case Two)
4.3 SAAB Training Systems AB (Case Three)
4.4 Husqvarna (Case Four)
5 Analysis of Empirical Data and Discussions
5.1 Structural bonds and the relationship life-cycle model
5.2 Reasons for structural bonds
5.3 The influence of Structural bonds
6.1 Theoretical contribution
6.2 Managerial contribution / Implication
6.3 Final reflection and suggestion for future research
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