Major Stages and Variables of Business Relationship Development - Literature review Example

A REPORT ON BUSINESS RELATIONSHIP DEVELOPMENT TABLE OF CONTENTS TABLE OF CONTENTS 2 Introduction: 3 2. Review of the various stages in developing a good supplier relationship: 3 3. Cultural dynamics and its role in facilitating a good business relationship: 6 4. The linguistic requirements to establish and maintain long-term business relationships: 7 5. Review of the related theory associated with the business development within the context of sourcing a new supplier overseas: 9 6. Conclusion: 11 Reference List 13 1. Introduction: This report focuses on assessing the necessary aspects for developing sustainable relationship between the concerned DIY furniture provider (do it yourself) firm and its business. In the existing competitive business scenario, corporate houses are trying not only to generate profit but also to establish long-term relationships with their stakeholders (Chan and Kumar, 2007). Maintaining a good relationship with the stakeholders has become an integral part of business strategy over the last few decades. According to (Araz and Ozkarahan, 2007), the conceptual process in developing a good association requires an integrated model of business relationship. Any organization specialising in the production of a particular goods has a number of supplier who supplies raw materials and equipments to the company. Thus, stages for widening supplier relationships are the focus of the current study. This report gives insights into the essential steps and ideas required in attaining an effective supply chain management strategy in the concerned DIY furniture company. 2. Review of the various stages in developing a good supplier relationship: The concept of business relationship management deals with linking the organization with various stakeholders in order to fulfil business requirements as efficiently as possible (Krause et al. 2007). In order to develop a new supplier relationship, organizations like DIY furniture provider, can implement the supplier relationship model. The Supplier Relationship Model (SRM) consists of planning and maintaining a constructive relationship with the suppliers who supply materials and goods to the business (Hakansson, 1982). SRM is a part of supply chain management that provides major focus on developing and nourishing a strong relationship with the organizational suppliers. As per the model, when a business communicates with its suppliers, it needs to manage its entire supply chain in an efficient manner. Buying SRM software is a good option to start. Apart from that, there are four other stages that can be taken into account to build a good partnership with the suppliers and increase an overall organizational performance. Steps for building new supplier relationships: Some steps that can be implemented to build a good supplier chain overseas are described in below: Invest in the supplier relationships management software ~ In order to develop a good supplier relationship, business organizer can purchase Supply Chain Management Software (SCMS) that contains features of SRM or apps (Wilson, 1995). This type of software includes invaluable features to perform a task of building a good relationship, such as deifying and accommodating new suppliers, monitoring supplier’s performance, providing all suppliers’s updated business profile etc. This software helps to keep track of all of the suppliers and thereby, makes it easier to contain all supplier relationship in a single centralize location. Acquire trust of the supplier ~ Supplier component can provide both positive and negative impacts on the quality of products. Aquarian trust of the customer ensures better supplier resources in comparison to other rival firms. There are basically two important way that business enterpriser can to prove to be a good customer and earn respect from the suppliers (Lin, 2001). The first one is, pay bill on time, where business organizer figure out all the terms of payment and then abide them by rules. Due to any reason, if it is not possible to make instant payments, the suppliers should be informed as soon as possible. The second one is, giving time to the supplier as much as possible, so that they can make a good contribution to the projects. It helps to be knowledgeable about the supplier’s needs and business procedure. Reducing the number of vendors ~ According to (Rogers et al. 2007), it is not possible for an organization to tackle down too many suppliers simultaneously as it leads to impose higher administrative cost. Having close relationship with few numbers of suppliers allows both the parties to work together and control cost of their projects. However, sometimes businesses are surrounded with large number of suppliers and are not sure which one to eliminate. Implementation of SRM software also helps in measuring performance of the supplier and in taking correct decisions. Maintain line of communication ~ In this stage, business organizer needs to form both, formal and informal relationship with their supplier to keep them aware of the business strategy, new product development, promotional activities and so on (Wouters et al. 2007). It helps in developing a good supplier relationship deals with communication needs and processes. In many cases, it has been found that, suppliers help to find new customer. Thus, personalising supplier relationship and getting more upfront with the suppliers helps to satisfy business needs and improve the weak areas. Each step in supplier relationship management is very important for the DIY furniture provider to ensure the performance of the suppliers and run the business more efficiently. Thus, to find out a new range of supplier in Romania economy, the considered business can invest in SRM software and maintain all the above mentioned steps carefully. 3. Cultural dynamics and its role in facilitating a good business relationship: With the advent of globalization, the interaction of people from different background has become a growing business trend. Cross cultural interaction is a vital issue for international trade, and success of the business depends on smooth interaction among the stakeholders from different regions and cultures. A growing number of companies such as, Johnson, Delphi Automotive, German Group Rochiling etc. have already devoted their resources to foment a good cross cultural experience with the Romanian suppliers. In order to appoint Romanian companies as future supplier, the DIY furniture company needs to include cultural dynamics as a behavioural relationship that integrates people of different cultural group who are assigned to perform a common task within a business, into a single platform. At business meeting with Romanian companies, it is very important to behave in a manner that is linked with the culture of the nation. Things such as drinking directly from bottle, smoking without partner’s consent or chewing gum could offend the business partner and thereby hamper the business relationship. Hence, these small activities need to be avoided for better relationship. Cultural Dynamics affects roles and responsibilities of the people and direct them towards a higher productivity and thus it is important for creating effective business technique and emergence of new ideas. Negotiation is another important component of doing business with Romanian supplier. Formation of good cultural dynamics will help the DIY furniture company to know how to behave and how to negotiate with the Romanian supplier to establish a good business deal. For example, Romanian companies execute a serious approach towards business and thus it is very important for the company to be well prepared with all documentation and relevant information necessary in doing business. As first impression is crucial to success, the furniture company needs to give major focus on facial expression, attitudes and commitments. Further, gifting is normal practise in Romanian culture. Thus, when the management team of the company goes to a Romanian home with the purpose developing a good supplier relationship, should carry a small bouquet of flowers and chocolates. In order to maintain international supply chain in good manner, cultural dynamics plays an important role. It helps to build bridges of trust, understanding and respect with the multicultural suppliers. When a business aims to develop business relationship with the supplier from a different culture, it needs to add creative and analytical spirit to make proper agreements and contracts with them. As a means of communicating values and customs, cultural dynamics has an important social function to form solidarity. Lastly, Romanian companies can be very tough in negotiate with in terms of business. Deals are mostly dominated by senior decision maker or Romanian parties and they know how deals can be turned to their side. Thus it can be recommended to save concession and speak directly with them regarding any business deal. 4. The linguistic requirements to establish and maintain long-term business relationships: Knoppen and Christiaanse (2007) illustrated that; language barrier is a common challenge in international business settings and developing business relationships overseas. Linguistic Multilingualism is likely to have long term indirect effects on the development of business worldwide. Overseas diversification has already been considered as an essential part to develop business internationally. In the global multicultural location, businesses are simply expecting to maintain its supply chain effectively in a globalised economy. Language proficiency is not only important to maintain a safer work environment, but also to facilitate foreign business relationships. In order to develop supply chain in Romanian Economy, the management team of DIY Furniture Company needs to give a closer look to form long term relationships and ensure value for both the parties. Strong relationships generally derive from active collaboration, trust and value throughout the supply chain. Thus, to nourish business relationships and develop a collaborative relationship, it is very important to overcome linguistic problems. There are various ways that can be applied to overcome the linguistic barriers and stimulate business relationships in long run. Some of them are discussed in below: Communication: According to Lee and Humphreys (2007), communication is a essential way for the successful execution of the business deals. It is easier for a foreign buyer to deal with the Romanian companies as most of them are able to speck good English and several other languages. However, the DIY furniture company may find some difficulties to develop a good negotiation with the Romanian supplier particularly on prices. They often quoted their prices in some illogical terms, which is very difficult to understand. Thus, it is crucial to learn standard accommodation practice with the Romanian clients. Further, Romanian people are also familiar with the some other common languages, such as French, Italian, Spanish and German. When in conversation with Romanian nationals it is essential to maintain eye-contact and shake hands during introductions and speak in a gentle manner. At the first meeting with the Romanian partner, the management team should address them with “Mr.” Or “Miss”. The conversation style is very important to ensure smooth running of the meeting. Frequently check for understanding: Another way to reduce linguistic barrier is to eliminate misunderstanding among the stakeholders. In order to form a strong business relationship, mutual understanding is a prime factor. Both parties need to fully understand the actual theme of the conversation. Through this, both sender and receiver can convey their thoughts and ideas effectively. Internal Training ~ Cross cultural communication takes a lot of time to communicate a simple message over to its listener. If the content of the communication are not expressed clearly, misunderstanding takes place. In order to deal with the international supplier, business organizer can promote internal communication training on Romanian language. 5. Review of the related theory associated with the business development within the context of sourcing a new supplier overseas: The emergence of global economic integration has created new challenges to manage supply chain globally (Knoppen and Christiaanse, 2007). Massive concentration on the core business strategy has increased the importance of managing supplier relationship overseas. At the same time, the global consolidation and grouping increases the complexities of supply chain management. In present days, firms often face the question of how to manage supplier relationships in proper organizational manners, who are the key suppliers, what product needs to be brought locally and globally etc. The literature related to global purchasing has used in various terms and definition. According to Rogers et al. (2007), global purchasing includes all the phases of the strategic responsibilities, phases of purchasing process, and firm’s ambitions to influence competitive advantage via organizational alignment. Wilson (1995) presented an extensive literature study about the antecedents of global supply management. He has classified the antecedents into three categories, namely, driver, facilitator and barriers. Drivers are the factors that influence companies towards global purchasing decisions. Facilitator describes conditions for the implementation of the global purchasing. Barriers are the factors that prevent to form global purchasing. Further, the product level concentrates on improving supplier relationships. The buyers always aim to purchase better quality product at lowest price and thereby, manage the relationship in such a way so that it leads to a better condition. The firm management level concern with managing the supplier relationship in efficient way and align it with the firm’s goal. Lastly, at network level, firms focus on integration of global network and find global supplier. The antecedents concerning to the supplier relationship management in global purchasing are summarised in the following table. Antecedents of Supply Chain Management in Global Context Level of analysis Driver Facilitator Barriers SRM focus Product Cost Advantage High Quality Technology Supplier’s Certification Low Quality Product Modification Influencing relationship Firm management Organizational flexibility Global orientation Integration of activities Knowledge of foreign business and planning Lack of capable resource Transition Cost Organizing and internal capabilities Network Diversification of supplier base Long term business relationship Difficulties to find qualified suppliers Integration and deploying synergy (Source: Araz and Ozkarahan, 2007) Concepts and views derived from previous supply chain literature suggest that, the primary task of supply chain management is to manage the external resources, such as collaborative business partners, suppliers etc. Firms are successfully managing their supply chain to have greater level of cooperation with the suppliers. Implementation of effective supply management increase firm’s ability to respond with the changing requirements of the customers and thereby, creates large supplier base in global economy. Thus, it is very important to analyse and identify the capabilities that will generate values for the firm’s suppliers. Rogers et al. (2007) argued that, business relationship with its supplier consists of two main dimensions, namely, buyer’s way to interact with its supplier and how buyers and suppliers compete over the decision making process. He concluded that, the share of surplus varies according to the dominant position of the actors and in case of interdependence, surplus value is balanced. 6. Conclusion: This paper contributes a robust line of communicating a good supplier relationship that facilities smooth flow of information between a DIY furniture provider and Romanian supplier. This paper provides information on various aspects to develop and maintain a sustainable business relationship. Every business process is synchronized and there is an appropriate level of interdependency between suppliers and buyers. Considering all aspect of business relationship, managers can attain operational efficiency. Involvement of a responsive supplier relationship model is helpful in developing a strong business relationship with the international suppliers, which will in turn, is very important to gain competitive advantage. In addition to that, cultural dynamics and elimination of linguistic barrier is an effective source to create sustainable value for both, buyers and supplier. Besides, the paper also provides evidence of specific conditions that are necessarily important to attain a good supply chain management overseas. A subjective assessment between buyer and supplier relationship can be obtained by maintaining steps about the strengths and direction of the business relationships. More specifically, intention to expand business with suppliers serves as the reverse course proxy for the development of supplier-buyer relationship. Thus, it can be inferred that, companies should invest a sufficient amount of money to find out qualified and best supplier in the global market. And once the company secures a relationship with such supplier, it should cultivate them with the intention of future growth. This will help to accomplish a mutually acceptable strategic relationship. Reference List Araz, C. and Ozkarahan, I., 2007. Supplier evaluation and management system forstrategic sourcing based on a new multicriteria sorting procedure. International Journal of Production Economics, 106 (2), pp.585–606. Chan, F. T. S., and Kumar, N., 2007. 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