Long Term Inter firm Relationships Lecturer – Shahed Rahman

Exchange Relationships: Bridging Transactions Why are exchange relationships so complex? First, all people are different Second, human interactions provide the only means through which exchange relationships can develop

Exchange Relationships: Bridging Transactions Three basic types of human interactions can arise in business domains Calculative Exchange Relationships Ideational Exchange Relationships Genuine Relationships

Calculative Exchange Relationships Entirely based on the economic returns derived from a transaction Does not last long In calculative exchange relationships behaviors must conform to precise transactions terms

Ideational Exchange Relationships Each exchange partner is viewed by the other as a conveyor of ideas, ideals and opinions Development of norms In the future it can improve performance

Genuine Relationships Genuine relationships are highly evolved interactions in which partners are willingly to share personal information Decision and behaviors in genuine relationships are no longer based on purely rational transaction criteria Share behavioral norms as well as personal affinity (likeness) for one another

Exchange Episodes Exchange episode is a separate and distinct transaction, such as Ford acquiring parts from Mazda When the channel participants have little allegiance (Commitment ) In marketing channels, exchange episodes are completed based on pre-specified terms of exchange

Four elements must be associated with any marketing exchange episode Products and services Information exchange Financial exchange Social exchange

Products and services Products or services are usually the primary object of interest in any marketing exchange episode

Information Exchange Information exchange is technical, institutional, market intelligence conveyed from one channel member to another through personal or impersonal means

Ultimate economic measure of exchange Mutual assignment of value Financial Exchange Ultimate economic measure of exchange Mutual assignment of value

Social Exchange Two things are necessary for social exchange Must be purposeful and adaptive (Each participants believes that objectives can be reached through taking part in the exchange) Willingness among the partners to adapt their behaviors or expectations to achieve outcomes sought through exchange.

The Discrete Relational Exchange Continuum Discrete exchange is a transaction that has little social or no information exchange and no significant past or likelihood of a future relationship with the other participant There are little interpersonal involvement between the exchange parties. Communication is functional and used only to complete the transaction

Stages of Channel Relationship Most relationships pass through four stages of development Awareness Exploration Expansion Commitment

The four stages of Channel Relationship You are the one Commitment Increasing Trust and Commitment; Decreasing technological or cultural distance between organizations Expansion Engage in trial transactions; closing time and technological distance between organizations Exploration Closing Social and or spatial distance between organizations Awareness

Exchange Governance Norms All behavioral contracts are governed by norms Five key governance norms are Reciprocity Relational communication Solidarity Role integrity Mutuality

Reciprocity

Exchange Governance Norms Solidarity (Team Spirit) Glue that binds exchange partners together Role integrity (Honesty) The degree to which each party to an exchange fulfill it promises and satisfies its partners Mutuality (Support) Each partners creates outcomes. Benefits must be distributed between them