How to Develop and Sustain Relationships between Companies in Value Chain for Competitive Advantage

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How to Develop and Sustain Relationships between Companies in Value Chain for Competitive Advantage1.0IntroductionAs the global business context is becoming more and more complex, many global companies generally recognize that building value-chain networks are of importance for them to keep good relationships with other companies and to achieve more competitive advantages such as efficiency and low cost to succeed in the intensified global market competition. It is believed that business relationships based on value-chain networks will be a must for global companies to increase market share through the promoted capacity of competition with competitors. Relationships between companies usually refer to the relationships between the companies including these suppliers and partners and other companies a company can find valuable sources. There are both internal and external factors influencing business relationships between countries. Based on previous studies on the factoring influencing the relationships between companies, this paper tries to provide suggestions for global companies to develop and sustain relationships in value chain. According to Porter’s Value Chain theory and a shared value approach, this paper believes that information-driven value chains can be built and operated by companies to achieve more advantages through coordination and cooperation with other companies. Mutual trust, being honest, open and full communications and keeping innovative are of significance for global companies to sustain the beneficial relationships with other companies in value chain.2.0Background and Importance2.1BackgroundIn the global market, the incredible bounty and speed of the delivery of products or services have made companies become more intimate with each other. This has resulted in a high level of dependence between all the people and organizations involved in the global market. In a recent study, argued that the intensified market completion has enabled global companies to face more and more challenges for business. In 21 century, influence by globalization and interconnectivity, changes in global market are taking place with an accelerating rate. To survive and prosper, organizations can no longer rely on their old strategies and they need new business models to achieve continual growth. Instant communications and greater operational flexibility become more and more important for modern organizations to achieve outcomes through effective cooperation with other companies. Keeping innovative has also become essential for global companies to succeed in global competition. The emergence of global supply chains has been regarded as an effective business to improve the management of risk.As many global companies have worked hard to expand their business in overseas market, it means that these companies have to find more available resources and attract more consumers in the overseas market to achieve higher market share. Also to win a stand in overseas markets, these global companies also should have more which refers to competitive advantages to rely on to succeed in market competition. In a recent study Kothandaraman and Wilson (2001) argued that management of supply chains, management of relationships with consumers and partners and management of the relationships with others that can affect the development of a company are all the important aspects in the value chain that companies should emphasize to establish long-term and sustainable relationship with other companies.To improve key supply chain processes, design, planning, and procurement to manufacturing and fulfilment, global companies must rely on effective information to make effective business strategies. In the information age, information delivery, exchange and update all can make significant influence on the decision-makingprocesses. In a recent study Normann and Ramirez (2003) argued that information-driven value chains are of significance to help companies to predict market requirements and risks, response to volatile market conditions with innovative technologies and strategies. By aligning the value chain across global networks, global companies can not only power today’s extended supply chains but also cam meet consumer demands through the information provided by other companies. Many leaders have recognized that relationships between companies are of importance for the companies to obtain more resources to support their suitable development.3.0How Relationships Between Companies in the Value Chain may beDeveloped and Sustained for Competitive Advantages3.1Theories and ModelsPorter’s Value Chain Theory (see the following chart) gives good explanation on how value chain between organizations is created. Porter requires that firm infrastructure, human resource management, technology development, procurement and supply chain management should be developed with the same efforts for organizations to improve competitiveness. According to this theory, there are many activities a company should pay attentions to and make strategies to achieve more values through the effective management of these factors influencing a company’s business status in global market competition. Hill (2010) concluded that Porter’s Value Chain Model indicates that in today’s business environment, information exchange between every department in a company is of special importance for organizations to gain more competitive advantages to succeed in global market competition.A shared value approach nowadays has been highlighted by global companies to gain great achievements through the help of others companies whose products or services can make influence on the development of as company. This approach requires that a strategic business relationship between companies is necessary for global companies to exchange ideas and grow together. This approach plays a critical role in building strategic business relationships between global companies based on mutual trust, shared vision, information and value. Bartlett, Ghoshal and Birkinshaw (2007) concluded concluded that cooperation with other companies not only helps a company to reduce the influence of risks but also enables a company to develop by relying the resources provided by other companies.3.2How to Develop and Sustain Relationships in Value Chain4.2.1 A Global Vision and Though Leadership to Develop Strategic AlliancesA global vision means that company leaders should be able to predict risks and opportunities in global market and they are capable of taking the changes in all aspects of the global market to make effective global business strategies to help companies to succeed in global market competition. Also to build strategic relationships with other companies, a leader should develop thought leadership, whichmeans that a leader should be able to discover the demands of other companies by cooperation with a company and to meet their needs. Also a leader should take other companies’ interests into consideration wh en making business strategies. Only in this way can a company build long-term value chains through the cooperation with others.Strategic alliances through acquisition, joint venture and other forms of cooperation allow companies to gain competitive advant age through access to a partner’s resources such as technologies, capital, people and market. A company can grow and expand more quickly and efficiently through cooperating with other complementary resources and capabilities. Toshiba’s approach is to dev elop strategic alliances with different partners who are able to provide different technologies found that by aligning with other companies who can provide access for more resource in skills, assets and technology, Toshiba has achieved an increased rate growth every year. Bamford, Gomes-Casseres & Michael (2003) concluded that strategic alliances should be emphasized to help to develop strong relationships between companies in value chain to help companies and their partners and suppliers to extend their technical and operational resources and boost productivity. In this way, a company can save more time and investment which can be spent on innovation and the core business. The mentioned benefits are also the competitive advantages that help to improve a com pany’s competitiveness.4.2.2 Supply Chain Collaboration and Technology DevelopmentSupply chain collaboration is an approach for companies to develop good relationships with both suppliers and partners. This approach requires that companies should develop a single, global product-creation process, provide suppliers with greater access to senior managers, and build shared commitment and capacity through the use of new technologies to improve sustainability and efficiency in supply chains. In a recent study, Al-Mudimigh, Zairi and Ahmad (2004) argued that that efficiency of supply chains has become an important competitive advantage for companies tokeep competitive in global business market. It requires that both suppliers and partners should relay on the use of technology to work together to improve their capacity to manage the rapid changes in global market. In this way, it is necessary for a company to invest in technology to provide technological support for the maintenance of relationships between companies.4.2.3 Business Process Outsourcing (BPO) StrategyThe increasing demands on low cost has forced global companies to outsource in these overseas markets. But this is also a. good opportunity for companies to cooperate with companies who are able to provide access to resources with low cost. In a recent study, Globerman and Aidan (2004) argued that that the business process outsourcing decision is a wise decision for modern companies to establish partnerships with more companies to reduce the cost of overcoming difficulties. To build good relationships with these companies, effective BPO strategies are necessary for a company achieve significant improvements in business performance. Business process outsourcing should be transformed into a long-term business strategy instead of a temporary strategy for companies to create and defend competitive advantages. It is important to leverage global sourcing to enhance a company’s ability to gain long-term process optimization.4.2.4 Consumer PartnershipCompany’s relationships with consumers can make direct influence on the continual growth of a company. To build customer partnership, it means that the decision-makers should give priority to the consumers’ needs and satisfactions. Foss and Stone (2001) concluded that customer is the foundation of a company’s success, considering the codex business environment, no thing is more important that a partnership with customers to help companies to maintain their focuses and makegood decisions. Through collect ion information and data on the consumers’ response to the products or services sol by a company, mutually satisfactory solutions to shared problems will help companies to maintain their good reputation and status in the global market. Also it is important to improve loyalty of consumers to the company. Culpan (2002) concluded that long-term partnerships with consumers can create synergies of knowledge and adaptability security for both parties which also reduce the risks of from consumers’ dissatisfaction.So it is better to forge long-term relationships with consumers. For a global company who sell products or services to consumers from all over the world, it is of importance for the decision-makers to establish partnership with consumers to share benefits and risks together.4.2.5 Build and Operate Information-driven Value ChainsThe concept of shared value requires that modern organizations should not only response to conventional economic needs through good definition of the market but also recognize that societal needs including the social weaknesses such as wasted energy or raw materials frequently increase internal costs for firms. Hitt, Ireland and Hoskisson (2010) concluded that remedial training to compensate for inadequacies in education are important for companies to reduce both economic and social harms in the value chain. As the societal harms and constraints raise costs for firms, it is necessary to use new operation methods, new technologies and management approaches to increase productivity and expand markets. During this process, it is necessary for a company to keep up with these latest economic and social trends which can give beneficial instructions. Also Exchanging ideas with suppliers, partners are essential for companies to gain competitive advantage through the operation of information-driven value chains.3.3How to Sustain3.3.1Building Mutual Trust and Being HonestMutual trust and being honest are also a basic business ethics for a company to win respect from other companies. Only when the decision-markers can really make decisions also for the good of other companies, can a company show the desire for good business relationships. Before a company tries to develop relationships with other companies, it should show trust and honest for the other companies to have a good impression on the company. Since a company decides to build long-term and sustainable relationships with companies in values chain, building mutual trust and being honest will be the basis for a company to sustain the business relationships. A company should build mutual trust and show honest with consumers, partners and suppliers. In this way, companies are required to make it transparent in supply chain management, consumer relationship management, partnership management and management of the internal structure of the company to help other companies to have a better understanding of everything in a company. Also trust between companies and their employees can also help to build relationships between companies through collaborated efforts from employees.3.3.2Open and Full CommunicationsOpen and full communications mean that a company should provide all the necessary information that needed for effective communications between companies to achieve expected outcomes. The company who want to build strategic relationships with other companies should be willing to take every effort necessary for the other companies to attract other companies’ attention and makes them to understand the current situation of the company better and to attract them to be willing to develop long-term relationships with the company. Face to face communication is a better choice for global companies to make the relationships between companies stronger and stronger. Cavinato and Kauffman (2000) concluded that a basis for effective communications between companies is transparency. It means that to build long-term and sustainable relationships with other companies, a company should try to make every developmentprocess transparent and easy for the other companies to find and understand. In this way, a company can sustain the relationships in value chain through effective communications.3.3.3 Keeping innovativeInnovation is believed to be an approach for companies to gain sustainability in the relationships with other companies in value chain. A company should be able to sustain the relationships with other companies in the value chain through innovations. Managerial and technological innovations should be emphasized. In a recent study, Pil and Holweg (2006) argued that to keep innovative, a company should be able to predict the development trends in global business market and keep up with times. And it should be able to flexible in dealing with changes in global market.4.0ConclusionLong-time and sustainable relationships between companies in the value chain are of significance for companies to gain competitive advantage through improving companies’ capacities, business performance and productivity. Also as the risks in global business environment can be resolved with collaborated efforts, it is becoming more important for a company to build partnerships with all the stakeholders involved in the development of the company. Mutual beneficial relationships in the value chain should be developed and sustained with collaborated efforts. To develop and sustain relationships between companies in the value chain, it is believed that leadership with a global vision, collaboration in supply chain management, strategic alliance and innovations are the most important things a company should give priority to achieve sustainable development in the global market.5.0ReferencesAl-Mudimigh, A. S., Zairi, M., & Ahmad, A. M. M. (2004). Extending the concept of supply chains: The effective management of value chains. International Journal ofProduction Economics, 87(3), 309-320Bamford, J. D., Gomes-Casseres, B., & Michael, S. (2003). 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