David with Goliath: getting the best out of imbalanced supplier-customer partnerships

The growing trend for business co-creation means that the number of partnerships involving heavyweights and smaller organisations is inevitably rising. Multi-echelon international supply chains invariably involve firms with differing profiles, specific expertise, and rarely the same resources. It is tempting to presume that this imbalance (or “asymmetry”) between suppliers and customers will lead to the smaller party being eaten up by the relative size, resources and demands of the larger one. Not necessarily so, provided both parties make it clear what they want out of the partnership.

Identifying the challenges

Power has been assumed to be the main obstacle to a profitable partnership. If the smaller partner firm feels they do not have the room to express their opinion or make proactive suggestions, the success of the partnership is under threat. On the flipside, the smaller partner may provide so specific an expertise that the larger partner is very much dependent upon them. The so-called “power struggle” should therefore not be perceived as one-way traffic to the advantage of the larger firm.

Beyond the issue of control, the main challenge is clear – keeping all parties satisfied by ensuring their interests are met. For the smaller firm this is likely to focus on economic gain, whilst the larger partner may also be keen to exploit the strategic and operational opportunities of the collective project. Getting the smaller partner to invest time, energy and resources that they may not necessarily have is a major part of the ball game.

Characterising the relationship

As well as establishing who is directing the partnership, other factors must also be considered, starting with exclusivity. If the smaller partner is dedicating a large chunk of their operations to the partnership, this not only offers a certain guarantee to the latter but also considerable kudos to the former. Being associated with a business heavyweight reflects well upon their business operations.

The level of cooperation and conflict cannot be overlooked when defining a partnership between supplier and customer, as well as how intense the partnership is, measurable by the frequency of contact and exchange of resources and knowledge. Trust is also key. The partner firms can tick all the previously-mentioned boxes but a crisis of confidence can endanger the whole process, especially for the smaller firm that has more to lose if their larger partner does not inspire trust.

Helping yourself and the partnership

Not only has previous research focussed too heavily on the power issue, it has also failed to dig deeper into the types of imbalanced supplier-customer relationship. Recent conceptual research, tried and tested via practical application to the Danish food industry, reveals the emergence of two types, both of which are underpinned by the crucial theme of interest. An asymmetric relationship driven by self-interest places economic performance at the heart of operations, while the collective interest-driven model also brings network structure and performance to the fore, for financial gain but also partnership efficiency.

The case study into the Danish food industry, involving data collection as well as interviews, focus groups, and internal and external research into the participating firms, examined the afore-mentioned characteristics of supplier-customer relationships between the likes of suppliers Arla Foods, Espersen and Gram Slot and customers including Singapore Airlines and REMA1000. In all cases, partnerships with an imbalance in supplier-customer size were under the microscope. Above all, the study sought to identify how firms of differing size tap into one another’s knowledge and resources and the conditions required to make such an operation work.

Findings, implications and suggestions

What emerges is the importance of communication within asymmetrical customer-supplier relationships, be it the product/technology-based model where contact is very much on a project needs basis or the more regular flow of ideas and resources that characterises the more collective model based on complementary competencies. Trust is one of the building blocks of both types and the study reveals that the transparent expression of self-interests by all parties is just as key to success as establishing the overall common business objectives. Time and resources remain an issue for smaller partners who buy into the collective concept but, all in all, the findings from the multi-firm analysis suggest that power is perceived as an important issue by managers rather than a hindrance.
For managers who have grasped and applied the importance of making the collective interest of a partnership clear whilst also giving due opportunity for all involved to express their individual goals, the final piece in the puzzle is the strategic selection of partners. What is clear is the need to establish a framework that will help practitioners identify the appropriate strategies to employ within a working partnership where a gap in size and resources exists but no longer represents a threat to effective business performance.

This article draws inspiration from Knowing me, Knowing you: Self- and collective-interests in goal development in asymmetric relationships written by Rhona Johnsen, Kristin Munksgaard and Charlotte Patterson and published in Industrial Marketing Management 48 2015.

Rhona Johnsen is a Professor of International Marketing at Rennes School of Business, France. Her research interests include business-to-business marketing, customer-supplier relationship development, the internalisation of firms in business networks, and the internationalisation process of SMEs.

Kristin Munksgaard is an Associate Professor in the Department of Entrepreneurship and Relationship Management at the University of Southern Denmark. Her research areas include collective bargaining, relationship marketing, and managerial economics.

Charlotte Patterson works as an Innovation Consultant at Syddansk Sundhedsinnovation

David with Goliath: getting the best out of imbalanced supplier-customer partnerships

Rhona Johnsen – Rennes School of Business, France

Kristin Munksgaard – University of Southern Denmark, Denmark

Charlotte Patterson – Syddansk Sundhedsinnovation, Denmark