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

255 Pages·2004·3.4 MB·English

by  Andrew Cox

Business Relationships for
Competitive Advantage
Managing Alignment and Misalignment in
Buyer and Supplier Transactions
Andrew Cox, Chris Lonsdale,
Joe Sanderson and Glyn Watson
Business Relationships for Competitive Advantage
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Business Relationships for
Competitive Advantage
Managing Alignment and Misalignment in
Buyer and Supplier Transactions
Andrew Cox
Chris Lonsdale
Joe Sanderson
and
Glyn Watson
© Andrew Cox,Chris Lonsdale,Joe Sanderson and Glyn Watson 2004
Softcover reprint of the hardcover 1st edition 2004 978-1-4039-1904-5
All rights reserved.No reproduction,copy or transmission of this
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as the authors of this work in accordance with the Copyright,
Designs and Patents Act 1988.
First published 2004 by
PALGRAVE MACMILLAN
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PALGRAVE MACMILLAN is the global academic imprint of the Palgrave
Macmillan division of St.Martin’s Press,LLC and of Palgrave Macmillan Ltd.
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and other countries.Palgrave is a registered trademark in the European
Union and other countries.
ISBN 978-1-349-51441-0 ISBN 978-0-230-50919-1 (eBook)
DOI 10.1057/9780230509191
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managed and sustained forest sources.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Business relationships for competitive advantage:managing alignment and
misalignment in buyer and supplier transactions/by Andrew Cox…[et al.].
p.cm.
Includes bibliographical references and index.
1. Business logistics.2.Industrial procurement.3.Supply and demand.
4.Business logistics – Case studies.5.Industrial procurement – Case studies.
6.Supply and demand – Case studies.I.Cox,Andrew W.
HD38.5.B87 2004
658.7(cid:2)2—dc22 2003061155
10 9 8 7 6 5 4 3 2 1
13 12 11 10 09 08 07 06 05 04
Contents
List of Figures viii
Preface x
Notes on the Contributors xii
Part I Business Relationship Management
in Theory and Practice
1 Current Approaches to the Analysis of
Business Relationships 3
1.1 Current approaches to business relationship management 3
1.2 Business transactions and relationships in
theory and practice 23
1.3 Conclusion 26
2 Power,Leverage and the Strategic Purposes of
Business Relationships 32
2.1 Managing strategic ends in circumstances of buyer
and supplier power 33
2.2 The power matrix: understanding the power circumstance
between buyers and suppliers 40
2.3 Using leverage to improve power positions and
commercial results 45
2.4 Conclusion 50
3 The Operational Means for Successful Business
Relationship Management 52
3.1 The commercial and operational sourcing choices
of the buyer 52
3.2 The commercial and operational customer/account
management choices of the supplier 62
3.3 The ideal and the optimal: selecting appropriate
relationship management styles 75
3.4 Conclusion 92
v
vi Contents
4 A Framework for the Alignment of Buyer and Supplier
Relationships 95
4.1 Value appropriation outcomes in buyer and
supplier exchange 95
4.2 Six ideal-typical frameworks for the successful
alignment of buyer and supplier relationships 103
4.3 Conclusion: using ideal-typical frameworks to
understand and correct relationship misalignments 127
Part II Alignment and Misalignment in
Business Relationship Management
5 Cases in Aligned Buyer and Supplier
Relationship Management 135
5.1 Aligned arm’s-length buyer dominance: the closures case 135
5.2 Aligned arm’s-length reciprocity: the consumables case 139
5.3 Aligned arm’s-length supplier dominance: the
decision-control case 145
5.4 Aligned buyer-dominant collaboration: the
sub-assembly outsourcing case 149
5.5 Aligned reciprocal collaboration: the fan cowl doors case 154
5.6 Aligned supplier-dominant collaboration: the
flow management case 158
6 Cases in Misaligned and Sub-Optimal Buyer and
Supplier Relationship Management 163
6.1 Misaligned and sub-optimal arm’s-length buyer
dominance: the licensing case 163
6.2 Misaligned and sub-optimal arm’s-length reciprocity:
the air travel case 168
6.3 Misaligned and sub-optimal arm’s-length supplier
dominance: the pipeline case 172
6.4 Misaligned and sub-optimal buyer-dominant
collaboration: the construction case 176
6.5 Misaligned and sub-optimal reciprocal collaboration:
the IT outsourcing case 181
6.6 Misaligned and sub-optimal supplier-dominant
collaboration: the bio-materials waste case 187
Contents vii
7 Cases in Dysfunctional Buyer and Supplier
Relationship Management 193
7.1 Dysfunctional arm’s-length buyer dominance:
the telecommunications case 193
7.2 Dysfunctional arm’s-length reciprocity:
the reverse auction case 198
7.3 Dysfunctional arm’s-length supplier dominance:
the insourcing case 203
7.4 Dysfunctional buyer-dominant collaboration:
the rings and prismatics case 207
7.5 Dysfunctional reciprocal collaboration:
the engine controls case 213
7.6 Dysfunctional supplier-dominant collaboration:
the logistics case 218
Part III Decision Support Tools for Improving
Business Relationships
8 A Way Forward for Managers 225
8.1 Winning internal support for relationship
management strategies 225
8.2 A decision-tree for aligning buyer–supplier
relationships 229
8.3 The outcomes of relationship opportunism in
different power scenarios 232
8.4 Conclusion 236
Index 239
List of Figures
1.1 Purchasing portfolio management 6
1.2 Opportunism, bounded rationality and
governance mechanisms 10
1.3 The customer classification matrix 13
1.4 Relationship portfolio mapping 16
1.5 The IMP interaction model 20
1.6 Business relationships as transaction and outcome 24
2.1 Alignment, misalignment and conflict in
business relationships 34
2.2 The power matrix 40
2.3 Attributes of buyer and supplier power in the power matrix 44
2.4 Repositioning buyer leverage in the power matrix 46
2.5 Repositioning supplier leverage in the power matrix 49
3.1 Buyer value propositions 53
3.2 The competence and congruence matrix 55
3.3 The four sourcing options for buyers 57
3.4 The range of sourcing outcomes for the buyer 61
3.5 Supplier value propositions 62
3.6 The four commercial outcomes for the supplier 64
3.7 Customer and competitor strategies for the supplier 71
3.8 The range of account management outcomes
for the supplier 74
3.9 The four basic relationship management styles 79
4.1 Value appropriation, power and relationship
management styles 97
4.2 The ideal alignment of buyer and supplier in
arm’s-length buyer dominance 105
4.3 The ideal alignment of buyer and supplier in
arm’s-length reciprocity 109
4.4 The ideal alignment of buyer and supplier in
arm’s-length supplier dominance 112
4.5 The ideal alignment of buyer and supplier in
collaborative buyer-dominant collaboration 115
4.6 The ideal alignment of buyer and supplier in reciprocal
collaboration 119
viii
List of Figures ix
4.7 The ideal alignment of buyer and supplier in
supplier-dominant collaboration 124
4.8 The causes of alignment and misalignment in
business relationships 129
5.1 Aligned arm’s-length buyer dominance in the closures case 137
5.2 Aligned arm’s-length reciprocity in the consumables case 143
5.3 Aligned arm’s-length supplier dominance in the
decision-control case 148
5.4 Aligned buyer-dominant collaboration in the sub-assembly
outsourcing case 153
5.5 Aligned reciprocal collaboration in the fan cowl door case 156
5.6 Aligned supplier-dominant collaboration in the flow
management case 161
6.1 Alignment and misalignment in the licensing case 166
6.2 Alignment and misalignment in the air travel case 170
6.3 Alignment and misalignment in the pipeline case 175
6.4 Alignment and misalignment in the construction case 179
6.5 Alignment and misalignment in the IT outsourcing case 185
6.6 Alignment and misalignment in the bio-materials
waste case 189
7.1 Alignment and misalignment in the
telecommunications case 196
7.2 Alignment and misalignment in the reverse auction case 201
7.3 Alignment and misalignment in the insourcing case 206
7.4 The supply chain structure 208
7.5 Alignment and misalignment in the rings and
prismatics case 211
7.6 Alignment and misalignment in the engine
control systems case 215
7.7 Alignment and misalignment in the logistics case 221
8.1 The power of internal actors 227
8.2 The structure of internal power and support
in organisations 228
8.3 Understanding internal buy-in 230
8.4 A decision-tree for relationship alignment 231
8.5 Relationship outcomes under conditions of
symmetric and asymmetric competence 234