Inter-organisational relationships

Marketing Channels

Value Chains

Value-delivery networks

Marketing Channels

• Sets of interdependent organisations involved in making a product available to the end-user customer (Stern and El Ansary 1996)

Supplier Manufacturer Distributor Retailer

Channels

• Carry not only flows of product but information, promotion, payment and ownership

• Offer the suppliers ‘contactual efficiency’ in reaching the end customer (Rosenbloom1995)

• Make the product available in the ‘utilities’ of form, time and place required by the customer (Bucklin)

• require members to subordinate their own needs to the success of the channel (Stern)– issues of control and leadership, power and dependency

Channel Leadership

• Control = the ability to influence the way the end product is marketed – price, image, form, availability etc

• Power can be based on– ability to reward/coerce (economic power)– expertness (technological expertise)– referent power (ownership of brand)– legitimacy (official or accepted status)(Hunt and Nevin 1974, Johnson et al 1993)

Dependency

• Availability of alternative channels

• switching costs

• contractual obligations

Channel Conflict

• Goal incompatibility

• differences in expectations/perceptions

• roles and responsibilities

• domains and decision making

• allocation of resources

• poor communication

- importance of relationships and regular contact between decision makers

The value chain• All channel members add to the costs and so must also add

value to justify their use

• The VC devised by Porter (1980) to analyse what happens inside companies - where the value is added to the end product

• Applied by Kogut (1985) to the whole external supply chain (made up of each member’s internal value chain)

• Marketing is designing and managing a superior value-delivery system to reach target segments (Kotler)

The Value Added ChainTerpstra and Sarathy (2000)

ManufactureAssembly RetailingDesign Components Distribution

Marketing

Specialisation

Where does your expertise lie?

Where can you add most value to the product?

Which activities should be contracted out?

Who can best perform them for you?

Formalising the relationshipDistribution is too important to be left to ad-hoc transactions

• Vertical marketing systems– administrative co-ordination– contractual - franchises, co-operatives– corporate - vertically-integrated companies

VMS formalise leadership

control and manage conflict

Commitment

Strategic alliances

• Co-operation between competitors to share– markets/technology/marketing/logistics

A wider term than VMS horizontal cooperation and integration

a partnership of equals

Consortia

Joint venturessee Johnson and Scholes Ch 7

Network theory

• Looks at markets in terms of relationships, networks and interactions (Gummesson1988)

• not just suppliers and buyers in a straight-line channel

• a complex web of influences on the quality of the product (Holmund and Kock 1995)

• these influences can conflict with each other

Network relationships within the sports channel

NGB

Minor clubs

Major clubs

SponsorsBroadcasters

Other NGBs

WGB

Players

Seasonticketholders

Local media Sponsors

Investors

Elements of a network analysisHakansson and Johanson 1992

• Resources needed to create the product• Actors - firms, organisations involved• Interactions - between actors to create..• Activities that produce the product• Relationships that develop to ensure long-

term commitmentsDraw a network map of a company’s relationships

and identify conflicting interests

Systems theory (see Laws 2001)

• Based on biological, ecological systems

• each component is affected by and in turn affects the behaviour of the others

• inputs, processes and outputs

Includes interaction between the industryand the host society and environment

• organic growth optimum size and efficiency

decline and decay

Inter-organisational relationshipsWhat each model reveals

• Inter-dependent channel members – efficiency

• Value-adding chains - value, profit

• Complex and conflicting networks– understanding, trust

• Organic and evolving systems– flexibility, responsiveness

Understanding the dynamics of the industry as a whole will help you understand the needs and perceptions of your client

• Competition is between ‘networks of value-delivery systems’ (Kotler 1998) rather than individual firms

• co-operation and alliances can be more effective than competition