Developing Relationships in Business Networks

Developing Relationships in Business Networks This book is the first to apply the network approach to the analysis of business relationships in a global context. Drawing on a wide variety of international case. studies, a `network approach' is developed, giving rise to far-reaching theoretical and practical managerial insights and a different way of conceptualizing companies within markets. New angles emerge on traditional problems of business management, with some novel implications which will challenge established ways of analysing business markets. Building on previous research in the area, this thought-provoking work will be of great interest to researchers and students in industrial marketing, business strategy and purchasing, as well as to marketing specialists and consultants. Håkan Håkansson is Professor of Industrial Marketing, University of Uppsala. Ivan Snehota is Associate Professor, also at the University of Uppsala. Developing Relationships in Business Networks Edited by Håkan Håkansson and Ivan Snehota First published 1995 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 © 1995 Håkan Håkansson and Ivan Snehota Typeset in Times by Solidus (Bristol) Limited Printed and bound in Great Britain by T.J. Press (Padstow) Ltd, Padstow, Cornwall All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Developing relationships in business networks / edited by Håkan Håkansson and Ivan Snehota. p. cm. Includes bibliographical references and index. ISBN 0—415—11570—1 1. Business communication. 2. Export marketing. I. Håkansson, Haan, 1947— . II. Snehota, Ivan. HF5782.D48 1994 94—19938 658.8'12—dc20 CIP ISBN 0—415—11570—1 Contents List of figures List of tables List of contributors Preface 1 Relationships in business 1 1.1 The starting point 1 1.2 Business relationships — what do we know? 6 1.3 Interdependencies and connectedness in business relationships 12 1.4 Business relationships in market networks 18 2 Analysing business relationships 24 2.1 The concept of relationship 25 2.2 The substance of business relationships 28 2.3 Functions of business relationships 36 2.4 Development of business relationships 42 2.5 Coping with relationships 46 3 Activity links 50 3.1 The activity dimension in business relationships 52 3.2 Case histories: SweFork, Glulam and Swelag 63 3.3 Management implications 119 4 Resource ties 132 4.1 The resource dimension in business relationships 133 4.2 Case histories: Vegan, NME and Radex 147 4.3 Management issues 182 5 Actor bonds 192 5.1 Actor dimension in business relationships 193 5.2 Case histories: MTF, Omega, Measuretron, Sunds and Svitola 204 5.3 Management issues 261 6 Stability and change in business networks 269 6.1 The process of networking 271 6.2 Vectors of change in business networks 275 6.3 Case histories: Datacorp, Inteq and Fujitsu 284 6.4 Management issues 319 7 Analysis of relationships and networks in complementary 330 approaches 7.1 Developing a medical equipment innovation within a complex network 7.2 Product development within networks 347 7.3 Comments 356 7.4 Governance mechanisms in a network organization 357 7.5 Authority and trust in network relationships 368 7.6 Comments 379 7.7 Summary 381 8 Economy of business relationships and networks 382 8.1 Economy of networks — the macro level 383 8.2 Economy of relationships — the micro level 384 8.3 An effective network actor 396 Notes 398 Bibliography 402 Index 413 Figures 1.1 Main supplier and customer relationships of NC Co. 12 1.2 Business relationships as elements of a network structure 19 2.1 Activity structures, links and pattern over five companies 29 2.2 Resource ties, resource collections and resource constellation 31 over five companies 2.3 Actor bonds, organizations and the web of actors 33 2.4 Interplay of the three substance layers of business relationships 35 2.5 Dyadic function of a business relationship 37 2.6 Single actor function of a relationship 38 2.7 Network function of a relationship 40 2.8 Relationship as a dyad 43 2.9 Relationships and the company 43 2.10 Relationships in a network 44 2.11 Scheme of analysis of development effects of business 45 relationships 2.12 Critical issues in coping with business relationships 47 3.1 Change in activity chains in SweFork Co. 51 3.2 Theoretical bases of the activity link concept 53 3.3 Activity linkages in a hypothetical situation in relation to three 54 customers 3.4 Activity chain over five companies — SweFork Co. 57 3.5 Examples of activity pattern — SweFork Co. 58 3.6 Activity links of a company 61 3.7 Organization of activities during phase 1 66 3.8 Organization of activities during phase 2 67 3.9 Organization of activities during phase 3 67 3.10 The companies involved and the relationships between them 69 3.11 The activities performed and resources used by SweFork and 72 Systech 3.12 The activity chains before and after their reorganization 75 3.13 The time from order to delivery between the actors before the 77 change 3.14 Relationships influencing the Swelag—Materials relationship 98 3.15 The production process for component C 104 3.16 Volumes of purchasing and production in tons 114 3.17 Activity structure of Vallsjo Co. and the critical activity links 126 4.1 The concept of resource ties 136 4.2 Ties within a relationship between two resource units 137 4.3 Connected ties between resource units forming a resource 139 constellation 4.4 Resource ties in the resource collection of a company 145 4.5 Vegan's network backcloth 150 4.6 The main identified links and relationships in the 156 Vegan/Screwco relationship 4.7 The main identified links and relationships in the Vegan/Carco 160 relationship 4.8 The NME Group 164 4.9 NT' s relationship with MPA 167 4.10 NT's relationship with UKOL 168 4.11 NT's relationship with GEI 169 4.12 NT's relationship with JAN 169 4.13 NT's relationship with CAB 171 4.14 NT's relationship with Fron 172 4.15 NT's relationship with GER 173 4.16 Resource ties activated by Vegan in relationships to new 184 customers 4.17 Balance of resource ties to different users/providers 187 5.1 The actor dimension in business relationships 196 5.2 Second phase: a local relationship with coordination 210 5.3 Fifth phase: global corporate action to exit the conflict 216 5.4 The network 222 5.5 The main actors 245 6.1 Factors of change and the process of networking 274 6.2 Dimensions of change in business networks 275 6.3 The network 287 6.4 Amount of information investment 312 6.5 Structure of IT industry 313 6.6 Interorganizational relationship of SPARC 318 7.1 Different types of exchange relations 331 7.2 The three major parties involved in developing new medical 333 equipment 7.3 The innovation in relation to the whole system 337 7.4 The process of product development in three parts 338 7.5 The complete network 345 7.6 Network organization 359 7.7 Laboremus' value chain 363 7.8 Laboremus and cooperating companies 364 7.9 Laboremus' core and peripheral competence 367 7.10 A classification of different theoretical approaches 381 8.1 Cost consequences of relationships393 Tables 3.1 Actors and activities influenced by the change 7.1 Summary of measures 7.2 Authority and trust 7.3 Experience, dependence and frequency 7.4 Authority and trust by experience, dependence and frequency 7.5 Trust and authority by experience, dependence and frequency Contributors Maria Asberg, Uppsala University Bjorn Axelsson, Uppsala University Wim G. Biemans, University of Groningen Anna Dubois, Chalmers University of Technology Krzysztof Fonfara, Wielkopolska Business School, Poznan David Ford, University of Bath Kjell Gronhaug, Norwegian School of Economics and Business, Bergen Sven A. Haugland, Norwegian School of Economics and Business, Bergen Naoto Iwasaki, Obirin University Mats B. Klint, University of Sundsvall Karin Ljungmark, Uppsala University Randi Lunnan, Norwegian School of Economics and Business, Bergen Florence Mazet, Institut de Recherche de 1'Entreprise, Lyon Jacqueline Pels, Bocconi University, Milan Torger Reve, Norwegian School of Economics and Business, Bergen Robert Salle, Institut de Recherche de 1'Entreprise, Lyon Kate Searls, Penn State University Robert Spencer, Institut de Recherche de 1'Entreprise, Lyon Tohru Takai, Waseda University Yoshiya Teramoto, University of Tsukuba Richard Thomas, University of Bath Alexandra Waluszewski, Uppsala University David T. Wilson, Penn State University Finn Wynstra, Eindhoven University of Technology Preface This book is about how to read industrial markets. It is about what is happening underneath the visible flows of products, enquiries, sales visits and negotiations, and beyond the visible growth and prosperity of some companies and failure of others. For more than twenty years we have been looking over and into this field as researchers and consultants searching for answers to the many questions that the working of industrial markets raises. Unlike consumer markets, industrial markets are often not much known either to the wider public or, we are tempted to say, to many management scholars. We have been amazed by the complexity of the industrial markets and at the same time by the apparent smoothness of their working.

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