The Emergence of Trust and Power within a Business Network - Essay Example

The Emergence of Trust and Power within a Business Network The business world today is complicated and competitive than ever before and operates in a very volatile external environment. Economies are collapsing and global crisis has taken over due to which there is shortage of cash and businesses are dealing on credit basis and trust. Due to this building healthy and strong relationships is very important for laying the foundation of the business, moreover the long term success and growth of the business networks depends on trust and commitment. Trust is the factor of reliability, strength, commitment and hope; without it one cannot sustain or survive in the business for a long term (Farhoomand, p21, 2005). It is critical and strategic issue which needs to be dealt very carefully, this element of trust is vital in all kinds of relationships whether it is within the business or with the external stakeholders. It is very hard to make this trust however one mistake can hurt the reputation very badly and create serious consequences for the future of the business. Power is the acquisition of assets and its control which gives dominance to a party over the other. It is to have the control and ability to influence the decision of the other party. Power has its own benefits and draw backs within a business network. Too much or less of it has its own effects. However it has been seen that where there is trust there is less likelihood of power causing any harm to the social or business network (Group H.R., 2000). Positive Business networks When we talk about long term success of the business then this success is dependent on the development of positive networks in the industry. Business networks are an opportunity for the owners of the business and the team of employees to improve themselves continuously. They are a collection of companies linked through agreements for business purposes who work together to get over all benefits for the members in doing so they need to make business dealings and work together and invest and divest money Thinking Made Easy, p21, 2009). A company in the business network tends to learn from one another’s mistakes and successes and based on that they derive solutions to their own problems. Apart from the business perspective networking helps in social activities and events. It leads to strong bonds and close relationships with the business partner which is good for the business in the long term (Daft, p110, 2001). The relationship must be enduring and permanent in nature. Trust is by all means the most critical and significant factor in enhancing the relationship and strengthening it. This development of trust comes with the passage of time and honesty in business. It may take a long time period to develop but once it is lost one can end up loosing the chances of success of further business with any particular group or team. Countries all around the world have realized the importance of business networking and the role of relationship building, trust and power within a network. Therefore they have been working on this, such as the Australian has developed a Business Network Program (BNP) for the promotion of networks in Australia. The government has granted $24 million for this in order to increase the competitiveness and growth of SMEs (Australian Government business Initiative, 2009). Trust is a valuable asset for a business and leads to competitive advantage over the rival businesses. Where there is trust then more people would like to work with you. It will lead to increased sales, profits and turnover for the business. Trust gives more power to the business and enhances its market position. Trust facilitates the learning process within a network and moderates the effects of power and makes a positive continuation to the network as a whole. In times of global crises a lot of firms are going through losses but in order to counter the current state of the economy businesses do not stop their production. They operate on debt basis and they are able to get the raw material on debt and move on with the production only because in the past they had a good credit history and their clients and suppliers trust them, thus they are willing to supply to them (Hyman, Mason & mason, p155, 1995). Had their been no trust then it would be impossible to get hold of raw material in times of recession, as a result the production would have to come to a halt. Trust encourages information sharing within a network which can be very useful for the other members of the network and can be useful for the concerned party (Gilgeous & Clambers, p98, 2001). Levels of Trust There are certain levels of trust and many dimensions of it that need be present in a business network or any kind of relationship as it leads to enhanced relationship building model, it depends on the leader or the management of the business that how do they develop this trust in their trading partners and integrate it within their culture and strategies for enhanced, healthy and strong relationships within the network (Robbins & Judge, p108, 2004). These characteristics of trust are as follows: Trust is a duty and a promise that you give another party for meeting their expectations and you do everything possible to accomplish the goal. Another level of trust is the ethical code and conduct of the business. The firm should have a positive reputation and should not affect the honesty and integrity of the business leader or the company as a whole. The third level of trust is based on the interpersonal relationships. This means that your clients should trust you enough to tell you any form of information and you should keep it confidential and with utmost respect so that it does not get leaked out through any means. The fourth level is the trust for one being transparent in its dealings. The lack of being open and transparent can lead to damaging of the business reputation and relationship with others. It can create doubts among the partners which can be very harmful from the business point of view. The fifth level of trust is being accountable for your own actions within the domain of the business and keeping your word. This means to stick with your decision and do not back out at the last minute and take the charge and accountability in situation of damage and concern too (Robbins & Judge, p122, 2004). It has been seen that networking is becoming integral for the survival of businesses. Research has shown that it has a huge impact on the success of the business. It is due to the increased complexity at work place that businesses find it difficult to deal with problems individually therefore the business partners collaborate in order to share and counter the problems together by using one another’s expertise and knowledge. Trust is related to risk, it reduces risk. When you do business within a network then you are familiar with the associated partner and probably have a past experience of working with them, therefore you would be able to rely on them for timely delivery and good quality. This reduces the risk of fraud or any other mishaps such is the power of trust. Having reliable business partners will ensure you better quality and production. Trust is an essential ingredient in the way buyer and supplier behave in the relationship (Heller, p67, 2007). Power Firms tend to depend on their trading partners. There is a mutual dependence from both buyers and sellers side. Power is generated through the possession and control of critical assets by a business. The dependence of one party over the other determines the relative power over one another. Usually where there is more power in a business network there are chances of more instability and conflict. Too much of power dominance can adversely affect the performance of a network as one can misuse the power. As long as the power is not being misused then it is not bad for a relationship. The turbulent and unstable business environment of today has also lead to learning organizations within the business networks (Campbell & Garry, p101, 1998). However dominant and powerful parties tend to control the behavior of other partners. Power can have a negative impact on the organizational learning in a business network. This is because if one party is strong then they will try to impose their decision and learning on others. Supply Chain relationships Trust and commitment are two important keys for building customer and the supplier relationship within a network. Trust exists where one of the parties has confidence over the other party. In today’s competitive working environment the success of the firm depends on the managing the supply chain of the business. This chain is linked towards the relationship between the buyers and sellers where trusts plays an important role. However studies have shown that power too tends to have a critical influence on the trading partners relationship. It is necessary to distinguish the difference between the possession and actual use of power. Research has shown that the power position of the trading partners within a network should be balanced in order to have coordination and cooperation and to develop an optimal exchange relationship (Nishimura, p49, 2001). Many scientific works have been done on the relationship between power and trust in determining supply chain relationship and how the link between them can be used for the successful management of businesses. Supply chain relationship exists with a combined implementation of competitive and a co operative strategy where power alone doesn’t play a role but trust is equally important. These two factors are used as a mechanism for having a successful supply chain relationship. Power and Trust Many scientists have worked to find out the effectiveness of power and trust in relationship building. In order to develop and have a consistent governance of a network both of these factors are equally important. Power will affect the expectations of the parties within a network and over that the willingness to trust too. For example a powerful retailer who has gained the power through whatever means but treats his partners fairly then all the other partners in the network would cooperate with in and would like to work with him again in the future too. Where there is trust it is not necessary that the power will be misused. This is how trust negates the affect of dominance of power in the relationship of businesses (Goyal, p167, 2007). It has been seen that the companies that have a high level of trust among their business partners tend to do well as compared to the ones that have a low level of trust. Moreover in the unstable business environments firms have to compete in order to survive and bring constant innovation and improvement in the work. This idea has given rise to the concept of learning organization where the information is hared with one another, which is only possible within a network when there is trust among the trading partners so that they give opportunities to each other to learn and grow. Trust is important because businesses need to make quicker decisions, they have to cooperate and communicate the information. This indicates that the foundation of each concept of business networks revolves around trust. If there is no trust in a business then it would be very hard to survive in the complex business environment of today. It would be very hard to find reliable buyer or a supplier to make business dealings with. The business world works on credit and similarly the lack of trust would lead to no credit and pertaining to the current scenario only cash basis business dealings are not possible. Conclusion Building the trust has the power to change the brand and its image. It is very hard to find the reliable people to deal with in a business if one is deprived of a positive network. In the long term the success of any business is dependent on positive network that the business has developed over the period of time. In order to build this network you will have to be honest, open and sincere in your trading so that your reputation does not get damaged and it plays a positive role in the running of the organization. Positive networking as a result will lead to learning organizations and increased profits and sales for the business as a firm with a reputation of trust is likely to get more business and related businesses would like to work with them and form partnerships too (Robbins & Judge, p141, 2004). Strong and reliable trading relationships will enhance the running of the business as they will provide better ways to find solutions to problems and knowledge is shared through strong bonds with a business partner. The association with long term commitment and hard work would pave its way for long term growth of the business. Power is the ability to influence others on the basis of market share or dominance. The foundation of trust is such that it will negate the effects of all the other negative impacts through itself. Where there is trust among the members within a network then one will not break it through mere imposition and dominance (Daft, p144, 2001). Knowledge based decision making will take place. You don’t want to miss your chance of losing the reputation and sustainability of your business therefore you will work hard to develop that trust among your associates. Excess power can be used to mislead the trading partners; however the element of trust does not let this happen. Even the governments in different countries are working for the development and promotion of such business networks so that they are bale to achieve competency and better efficiency in their operation. This is very important for the small businesses too which rely on business networking to do their business. References Campbell, C. S., & Garry. (1998). Canadian Gambling: Trends and Public Policy Issues. American Academy of Political and Social Science. Daft, R. (2001). Organization Theory and Design, 9th ed. Chicago: South-Western. Equal employment opportunity & Anti-Discrimination Law. (n.d.). Retrieved September 10, 2008, from Business.gov.au: An Australian Government Initiative: http://www.business.gov.au/Business+Entry+Point/Business+Topics/Employing+people/Hiring+people/Equal+employment+opportunity+anti-discrimination.htm Farhoomand, A. (2005). Small Business Management and Entrepreneurship in Hong Kong. Retrieved March 30, 2009, from http://books.google.com/books?id=x9u59RecnFwC&pg=PA63&dq=%22Lee+Kum+Kee%22#PPA65,M1 Gilgeous, V., & Chambers, S. (2001). Initiatives for Managing Resistance to Change. Journal of General Management , 44-58. Goyal, M. (2007, December 13). 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