Relationships in an Electronic Environment. Jari Salo, University of Oulu, Finland. Abstract

Transcription

1 Relationships in an Electronic Environment Jari Salo, University of Oulu, Finland bstract This study was undertaken to increase the current understanding of relationships conducted in the electronic environment. We see electronic relationships as one form of relationships not as revolutionizing miracle that will change the course of marketing. Electronic environment should be understood as a possibility to create, maintain and manage business relationships in a novel way. In this paper, relationships and electronic environment are examined from the conceptual point of view. The main outcomes of our study are the concepts created and the model developed for understanding and managing relationships in the electronic environment. Introduction The purpose of the study is to increase our understanding of electronic environment and how it relates to relationships. We try to develop a model for effective management of business relationships that is based on our concepts and definitions. This study is structured as follows. Firstly we will present a review of the literature on electronic commerce, followed by an illustration of the concepts related to our study, i.e. electronic commerce, electronic environment, and the relationship management model. fter this we will introduce the managerial framework to reader. The paper concludes with a discussion of limitations and identifying future research areas. Literature Review Electronic commerce has many advantages compared to traditional commerce. These include efficiencies of business processes gained by using multiple software and hardware and the effectiveness of transactions obtained by re-engineered business processes (Brehmer and Johansson, 2001; Sharma, 2002). It also enables many new radical channel solutions and gives certain enhancement to whole organization (Wilson and bel, 2002). Business to business (B2B) electronic commerce (EC) according to Zwass (1996) has its roots in electronic data interchange (EDI) and electronic fund transfer (EFT) systems that where marginally adopted from the 1960 s (Easton and raujo, 2001). Today electronic commerce captures a wide array of topics from back to end office activities (Farhoomand and Lovelock, 2001). reas of lively discussion are also the different business models related to EC. There are B2B and business to consumer (B2C) models that are interested in pricing mechanism (Tapscott, Ticoll, and Lowy, 2000), other models that highlight ownership issues (Lucking- Reiley and Spulber, 2000), models that have emphasis on the vertical-horizontal (functional) dimensions (Sawhney, 2000 and Laudon and Traver, 2002). Several previous studies starting from Blau (1964) and Bagozzi (1975) pointed out that exchanges should be among the primary concern for marketers, in addition to customer needs (lderson, 1957). ccording to Blau (1964) exchanges can be divided into social and NZMC 2002 Conference Proceedings 2591

2 economic exchange. Exchange is in this paper defined as all forms of changes of tangible and intangible goods. Goods are something that is valuable to relationship parties. Both parties, the buyer and the seller, usually gain something from a particular exchange. In an electronic relationship the gain for both parties is even higher due to the fact that friction in electronic environment is less than in traditional exchange setting. ccording to Shapiro and Varian (1999) the increase in value for parties is even greater if the offering (product and service) can be digitalized and send through the interconnected digital networks. The main driver for the digital economy is the internet that is here defined as a network of interconnected networks (Turban et al. 2000). The main reason that Internet became so popular is the development of HyperText Markup Language (HTML) by CERN scientist who made World Wide Web (WWW) possible (fuah and Tucci, 2001). Internet along with WWW is a prime example of technology that facilitates exchanges (Porter, 2001). Technology itself is not the main focus on our study but instead we focus on how it can help sellers and buyers to create something valuable for both of them. The value created is a matter of a subjective evaluation of the clients in question (Dixon, 2002). uthor has created the electronic environment concept and it is presented next. Electronic environment is in this paper defined as a mixture of various electronic devices (PCs, PDs, mobile phones, digital television, etc.) and enabling technologies such as the internet, intranets, extranets as well as traditional media channels (TV, Radio) that facilitate exchanges. Conceptual Framework From the literature (Webster, 1992) we have identified six exchange types that are commonly used. These exchange types form the basis for our conceptual framework. These are elaborated on what follows. Market is formed when products sold are tangible, easy to measure and information needed to conduct business is low. This type of exchange is conducted in matter of seconds and monetary risks involved are usually low. Proper examples of offerings exchanged are office equipments and MRO goods. Usually there is no contract or simple contract is composed. Infant relationship involves high expectations about the future. The relationship has short history but still episodes/experience about each other is starting to cumulate. The offering exchanged is same type as in market institution. Mature relationship, quasi organization, is organized in a more stable relationship environment where organizations can meet, negotiate and organize their information, like in Covisint. These relationships are categorized in more complex terms than the office equipment example. The difference is that the goods exchanged have certain specific measures, adjustments and intensive collaboration is needed in exchange. Mature relationships have evolved from infant to mature. The evolution of buyer-seller relationships can be understood, for example, with the help of the model developed by Dwyer, Shurr and Oh (1987). Relationships can be described as ongoing flux of interactions between parties involved in electronic environment. NZMC 2002 Conference Proceedings 2592

3 Partnership and alliance types involve high expectations about the future collaboration. Partnership and alliance is formed because the exchange can not occur in any other exchange type or it is most effectively organized in partnership and alliance and not in hierarchy. Product or process research and development are activities that are hard to conduct in normal exchange. The need for partnership and/or alliance form derives from the complex interaction between buyer and seller. Management of the interactions and relationships between partnership and alliance parties is a crucial aspect. Spekman, Isabella, and Macvoy (2000) elaborate management of alliances in detail. Hierarchy is a special form of exchange where the power and control is centralized to one firm. Effective exchanges have lead to situation where one party has acquired the beneficial party. There are many ways a company can acquire another company. The hierarchy option includes the total control of the buyer party and total lost of power form the sold party. The buyer party continues business almost as usual but it has acquired something valuable for example resources, knowledge, patent or large installed base for future actions. Several times used example is Microsoft that has acquired many little prominent software companies. The exchange type classification created above only illustrates various different forms of exchanges and it only imitates actual exchanges. ll these exchange types can be organized in electronic environment where it decreases friction in exchanges. We have now described the exchange types and next we move on to identify the possibilities of exchange management. The management framework developed describes the dynamics of exchanges from the point of view of single company called. Framework is presented in figure one. It is composed of electronic environment context and the exchange types described earlier. These are integrated into current discussion about acquiring and leveraging of resources (arrow one). Resource is anything that can be thought of as a strength or weakness of given firm (Wernerfeldt, 1984). In opposite direction company can outsource or streamline activities (arrow two) that are not related to core competencies (Hamel and Prahalad, 1990). Exchange dynamics Market B Infant relationship B Electronic environment B 2 1 Mature relationship +B Partnership lliance Hierarchy and B= Companies involved in the exchanges rrow 1= cquiring and leveraging of resources rrow 2= Outsourcing /streamlining business processes Figure 1. Exchange dynamics. NZMC 2002 Conference Proceedings 2593

4 In figure one the company can organize exchange together with company B in six different exchange type which all have different consequences for the company and B. The company can choose which exchange type to use. If company perceives that company B has something more to give than pure goods, that are changed in market exchange, can try to move into a deeper interaction with company B and gain its trust. This can be done only if both parties are willing to do so. The transformation of the exchange types is a long process and takes time. Something that is perceived valuable can be analyzed with help of tools provided by Fiocca (1982). Customer analysis provides a great tool to categorize and prioritize between exchanges. Infant relationships can be managed so that they form mature relationships when people get experienced. This is again done only if something is perceived to be valuable, now or in future. Change to partnership and alliance type, where alliance may include many parties, is more radical than the previous changes. One reason is the adaptation of activities that is needed. Perceived value, i.e. the reason to make partnership or other institution form, is changing dynamically. What is valuable today for parties involved may not be that tomorrow. The value depends on the parties involved, their business contexts, processes, their future actions, connections to networks and of course on the something exchanged between parties. In hierarchy company has acquired company B. There are many reasons why company would acquire company B as elaborated in hierarchy paragraph earlier. The arrow number one describes acquiring and leveraging of resources that occurs between exchange types. It also describes the evolution of the exchange types between business parties. The control of the company increases over company B as it moves from market exchange to more hierarchy type of exchange. The arrow number two describes the voluntary lost of control of company. Control is given away because the activities that are outsourced are not as much needed as other activities. Companies operate with scarce resources. t the first phase, new outsourced unit may function together with company but it might be independent company forming relationships with rivals and other significant companies. We have developed conceptual framework that describes exchange possibilities that rational manager face. We assume that manager has all the knowledge needed in decision making. Ultimately manager has the possibility to choose and manipulate exchanges to occur in desired exchange type. Conclusion This research has contributed to existing literature by developing a conceptual framework that ponders on different types of exchanges and relates these exchange types to current discussion about electronic commerce. It goes without saying that this study has huge limitations. First of all the exchange theory assumes that the manager can act as an economic man. Secondly we assume that exchange types can be identified and manipulated. We have only created a conceptual framework and no empirical data is collected to defend our point of view. The future research in electronic environment and exchange type classifications will include further development of the conceptual framework and empirical testing of developed framework. NZMC 2002 Conference Proceedings 2594

5 References fuah,., and Tucci, C.L., Internet Business Models and Stategies. New York: McGraw-Hill Irwin. lderson, W., Marketing Behavior and Executive ction. Homewood Illinois: Irwin Inc. Bagozzi, R.P., Marketing as Exchange. Journal of Marketing. 39(4), Blau, P., Exchange and Power in Social Life. New York: John Wiley & Sons. Brehmer, P., and Johansson,., B2B-Marketplaces-Strategic Value for Whom? Proceedings of the 17 th IMP nnual Conference. Dixon, F.D., Emerging Macromarketing Concepts: from Socrates to lfred Marshall. Journal of Business Research. 55(2), Dwyer, F.R., Shurr, P. and Oh, S., Developing Buyer-Seller Relationships. Journal of Marketing. 5(pril), Easton, G., and raujo, L., Industrial Networks and B2B E-commerce: Conceptual and Contingent Exploration. Proceedings of the 17 th IMP nnual Conference. Farhoomand,., and Lovelock, P., Global e-commerce. New York: Prentice Hall. Fiocca, R., ccount Portfolio nalysis for Strategy Development. Industrial Marketing Management. 11(1), Hamel, G., and Prahalad, C.K., The Core Competencies of the Corporation. Harvard Business Review. 68(3), Laudon, K.C., and Traver C.G., E-commerce: Business, Technology, Society. New York: ddison Wesley. Lucking-Reiley, D., and Spulber, D.F., Business-to-Business Electronic Commerce. Journal of Economic Perspectives. 15(1), Porter, M., Strategy and the Internet. Harvard Business Review. (March), Sawhney, M., Business-to-Business E-Commerce: The Next Generation. Kellogg lumni Seminars. vailable from accessed 16 January Shapiro, C., and Varian, H.R., Information Rules. Strategic Guide to the Network Economy. Boston Massachusetts: Harvard Business School Press. Sharma,., Trends in Internet-based Business-to-Business Marketing. Industrial Marketing Management. 31(2), NZMC 2002 Conference Proceedings 2595

6 Spekman, R., Isabella, L., and Macvoy, T., lliance competence. Maximizing the Value of Your Partnerships. New York: John Wiley & Sons. Tapscott, D., Ticoll, D., and Lowy,., Digital Capital. Harnessing the power of Business Webs. Boston Massachusetts: Harvard Business School Press. Turban, E., Lee, J., King, D., and Chung, H.M., Electronic Commerce a Managerial Perspective. New Jersey: Prentice-Hall. Webster, F.E., The Changing Role of Marketing in the Corporation. Journal of Marketing. 56(4), Wernerfeldt, B., Resource-Based View of The Firm. Strategic Management Journal. 5(2), Wilson, S., and bel, I., So You Want to Get Involved in E-commerce. Industrial Marketing Management. 31(2), Zwass, V., Electronic Commerce: Structures and Issues. International Journal of Electronic Commerce. 1(1), NZMC 2002 Conference Proceedings 2596