Improving power position with regard to non-mediated power sources – The supplier's perspective

https://doi.org/10.1016/j.indmarman.2017.08.013Get rights and content

Highlights

  • There is a need for suppliers to control risks associated with the dynamics of asymmetrical relationships with strategic customers.

  • By implementing 15 detailed practices, the suppliers in this study were able to improve their non-mediated power position.

  • Improving the power position does not have to come at the cost of decreasing relationship benefits or losing key customers.

  • The industry and the relationship features influence potential and intensity of power-related tactics that suppliers apply.

  • A dual approach is recommended: dedicating resources within relationship and improving position towards new counterparts.

Abstract

Power asymmetry is commonly treated as an inherent feature in relationships between sellers and buyers within an industrial setting. This study aims to explore suppliers' practices oriented towards balancing power within asymmetrical relationships with large business customers, as well as understanding how these practices bring some important benefits for suppliers. Our research structures these practices into four general tactics, namely: ‘orientation towards product specialization’, ‘making extraordinary efforts’, ‘learning to work together’ and ‘maintaining a reasonable share of customer sales’. This study contributes to existing knowledge on asymmetrical business relationships by illustrating empirically how these supplier tactics influence benefits acquired by suppliers through different power sources, specifically non-mediated power sources such as: referent, informational and expert power.

Our research proposes a dual tactical approach towards business partners, especially towards big, dominant customers: on the one hand, dedicating resources as long as this is safe and beneficial, but on the other hand, learning, developing own competencies and being open to new counterparts. Our research illustrates that these two orientations are not contradictory, but complement each other, because their joint implementation empowers a supplier and does not occur at the cost of losing an existing key customer.

Introduction

Cooperating companies are rarely similar in terms of their resources and competencies. Actually, one would even demand business partners to be meaningfully different, because such differences enable synergy effects (e.g. in joint product development, or supply chain integration). Therefore, an important management task for the smaller company would be to implement tactics that mitigate power asymmetry in relationships with big, valued partners and, at the same time, maximize the benefits acquired from such relations. In this paper, we explore power asymmetry-related tactics using the example of SMEs supplying multinational companies, and we provide evidence that such tactics may be beneficial for SMEs and do not come at the cost of losing business partners.

Empirical research on balancing power by suppliers dealing with bigger business customers is very limited. Only recently, Lacoste and Johnsen (2015) and Pérez and Cambra-Fierro (2015) applied case study research to identify process-related practices leveraging performance of suppliers and improving their power position in relation to powerful customers in the FMCG industry and computer software industry. Our study follows the same research avenue and assumes that even if a power imbalance is typical in relationships with big customers, it should be carefully managed to protect the seller from effects related to the dark side of a relationship, and to safeguard relationship investments. Thus, our study has two interrelated objectives. Firstly, it is aimed at exploring supplier tactics related to non-mediated power which improves the suppliers' power position in relationships with big customers. Secondly, our study provides an understanding of how these power-related tactics leverage benefits acquired by suppliers in relationships with their key customers.

We utilize a longitudinal case study approach with regard to Polish small and medium-sized suppliers selling to big customers that have recognizable brands and occupy strong positions within international supply chains. We focus on exchange relationships that take place within two industries: SMEs providing manufacturing outsourcing to big manufacturers, and SMEs developing real estate facilities for international retail brands such as supermarkets. All the business dyads that we focused on were characterized by clear power asymmetry and strong inter-cultural differences between sellers (Eastern Europe) and buyers (Western Europe).

Section snippets

Power asymmetry and the power sources perspective in B2B relationships

Although power utilization and power asymmetry are commonly perceived as typical features of exchange business relationships (Belaya & Hanf, 2009; Ford, Gadde, Håkansson, & Snehota, 2003; Wilkinson, 1973) and utilizing power may increase satisfaction in the supply chain (Benton & Maloni, 2005), remaining in asymmetrical relationships and maintaining a strong dependence on a business partner are treated as risky and demand the application of management tools. This is mainly because power

Research method

We applied a longitudinal multi-case approach to explore and understand specific interrelations between suppliers' tactics, their power position in relation to key customers, and the relationship benefits acquired by these suppliers. The case study method was often used in prior studies of power asymmetry in B2B relationships (e.g. Cox, Watson, Lonsdale, & Sanderson, 2004; Pérez & Cambra-Fierro, 2015). Our study focuses on the evolution of a dyadic relationship between suppliers and their key

Research results

We analysed the relationships between the suppliers located in Poland and their key customers – mostly companies with recognizable brands located in North-Western Europe. We studied the history of these relationships to understand the distribution of power between such different partners, and Polish suppliers' practices in improving their power position and leveraging various relationship benefits. Following the research approach that we described above, we identified 4 main suppliers'

Discussion and conclusions

This research contributes to our understanding of how companies should be managed within a complex environment comprised of business relationships and networks (Ford et al., 2003), by proposing 4 general tactics and 15 sub-tactics that may be applied by small and medium-sized suppliers oriented towards leveraging their power position and benefits in relationships with powerful business buyers. Our longitudinal case studies have provided evidence that these tactics improved the position of

Managerial implications

This research motivates business practitioners involved in relationships with powerful customers to implement a set of management tactics that may help them to maximize relationship benefits and mitigate risks connected with deep cooperation and a strong dependence on key customers. The set of supplier practices should be adjusted to the specific industry features influencing the supplier – the buyer relationship and the specific features of every buyer itself, although our study illustrates

Research limitations and future research

Our qualitative research findings are restricted to the small number of business relationships we investigated, and therefore cannot be uncritically generalised. Further research can overcome these limitations by studying the power balance in the context of other industries, regions and countries (e.g. the high-tech industry, where there are usually strong dynamics in alliancing). Apart from the methodological approach, our research is also limited in terms of its scope. In this research we

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    The research project undertaken by Dariusz Siemieniako as a co-author of this paper has been financed by Bialystok University of Technology Statute Research Grant no. S/WZ/1/2013.

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