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United We Stand: The Impact of Buying Groups on Retailer Productivity
Abstract
In diverse industries, from grocery retailing to health care, retailers join buying groups to achieve better terms with suppliers. The authors track the buying group membership of Europe's largest grocery retailers over a 15-year period and evaluate why some buying groups are better than others in increasing retailer performance and why different members belonging to the same group do not always benefit equally from their membership. They find that, on average, buying groups indeed generate scale advantages for their members: group scale increases group members' productivity and sales and decreases their cost of goods sold. Still, bigger is not always better. Retailers benefit less from buying group scale when the group is more heterogeneous in terms of member size and when it extends its scope across too many markets. Moreover, the smaller a member is within the group and the more it overlaps with fellow members, the less it benefits.
... Buying groups thus are vital links in buyer-supplier relationships and crucial to firm profitability. Yet, as Geyskens, Gielens, and Wuyts (2015) lament, marketing scholars have paid scant attention to this topic. Our article intends to address this gap. ...
... Thus, Chen and Roma (2011) assert that bundling group members' requirements is efficient only if their needs are homogeneous. Geyskens, Gielens, and Wuyts (2015) find that participation in buying groups enhances member productivity, but benefits vary by heterogeneity in members' market scope and geographic spread. Difference in member size often creates friction, as larger members demand superior terms (Nagarajan, Sošic, and Zhang 2010). ...
... Most studies view demand aggregation as the major function of buying groups. Geyskens, Gielens, and Wuyts (2015) thus focus on the "scale advantages" that buying groups generate. ...
This paper examines the impact of business-to-business (B2B) buying groups on buyer-supplier relationships. The authors outline two distinct initiatives — monitoring and community building — through which buying groups help govern buyer–supplier exchange and impact supplier performance toward buyers. Two boundary conditions are identified for the performance efficacy of the buying group's governance efforts, namely, the buyer's own governance of the supplier and the dependence relations among the focal parties. Analyses using two-wave primary data collected from the U.S. healthcare sector and replications using secondary outcomes suggest support for the proposed framework. A conjoint experiment is conducted to further enhance the generalizability of the findings. We find that a buying group's monitoring of suppliers enhances supplier performance both by itself and with increasing supplier monitoring by the buyer firm. Further, the supplier’s dependence on the buying group and the buyer’s dependence on the supplier, both sharpen the efficacy of the buying group’s monitoring program. However, the performance effects of community building are weakened as the buyer–supplier relationship becomes stronger and as the buyer grows more dependent on the supplier. The paper thus uncovers novel interplays between B2B buying groups and B2B dyads, and documents their consequences for firm performance.
... Consequently, when the buying group's brand equity is improved, member retailers' buying group benefits or advantages obtained from the affiliated organization become enhanced. Potential SMRs also become members of a retail buying group for sustainable survival or growth in fiercely competitive markets (Geyskens et al., 2015). Member retailers can use these benefits to strengthen their economic situation (Hern andez-Espallardo and Navarro-Bail on, 2009) or financial performance (Geyskens et al., 2015;Reijnders and Verhallen, 1996). ...
... Potential SMRs also become members of a retail buying group for sustainable survival or growth in fiercely competitive markets (Geyskens et al., 2015). Member retailers can use these benefits to strengthen their economic situation (Hern andez-Espallardo and Navarro-Bail on, 2009) or financial performance (Geyskens et al., 2015;Reijnders and Verhallen, 1996). Therefore, this study postulates that member retailers' strategic integration increases the buying group's brand equity, which leads to improved benefits for member retailers. ...
... This study provides two key theoretical contributions to the literature regarding retail buying groups, which are often neglected in B2B literature despite their pivotal roles in the national economy (Geyskens et al., 2015) and social community (Smith and Sparks, 2000). First, this study offers evidence on how member retailers' strategic integration affects their performance consequences through improved brand equity of horizontally allied groups. ...
Drawing on the resource-based view, this study aims to investigate the conditions under which small- and medium-sized retailers can improve competitive benefits through the lens of brand equity and strategies for competitive advantage in retail buying groups.
This study collected 241 samples from small- and medium-sized supermarket retailers who joined retail buying groups in Japan.
This study offers two key findings. First, the results indicate that a buying group’s brand equity partially mediates the relationship between member retailers’ strategic integration and their buying group benefits. Second, member retailers with a stronger differentiation orientation strengthen the positive impact of strategic integration on the buying group’s brand equity and buying group benefits. The moderating effects of low-cost orientation were not found to be significant.
To highlight the sustainable growth of small- and medium-sized retailers in retail buying groups, which are often ignored in the extant literature, this study offers practical guidance on the importance of a buying group’s brand equity. In addition, based on the findings, this paper postulates that member retailers pursuing differentiation orientation, rather than low-cost orientation, are more beneficial to retail buying groups in terms of relational outcomes and performance consequences.
By conceptualizing brand equity in retail buying groups, this study suggests a novel approach for retail management that investigates how a buying group’s brand equity is linked to strategic integration, strategies for competitive advantage and buying group benefits from the viewpoint of member retailers.
... In line with this reasoning, the brand equity of a retail buying group is considered a relational outcome built by the strategic behaviors (e.g., strategic integration) of multiple member retailers. However, despite the significant contributions of retail buying groups to the national economy (Geyskens, Gielens, & Wuyts, 2015), they receive limited practical guidance on how headquarter managers should manage the member-retailers' strategic behaviors in shaping their buying group's brand equity. Against this background, this study aims to investigate the impact of member-retailers' strategic behaviors on the buying group's brand equity and the association of such behaviors with their financial performance. ...
... With respect to the issue of subjective measures, a few studies (e.g., Geyskens et al., 2015;Reijnders & Verhallen, 1996) recommended objective measures to assess financial outcomes. However, given that the object of our study analysis is small independent retailers, small businesses' reluctance to divulge financial metrics is well-known (Campbell, Line, Runyan, & Swinney, 2010). ...
... To maintain the high quality of merchandise with low supply costs, it is essential for SMRs to achieve economies of scale. Thus, SMRs often join retail buying groups to capitalize on the benefits of these groups' economies of scale (Geyskens et al., 2015). Retail buying groups, also known as voluntary chains, are loosely connected cooperative networks where SMRs collaborate voluntarily on joint activities . ...
... Since the performance of the retail buying group is directly related to the member retailers' financial and non-financial performance (Geyskens et al., 2015;Rokkan and Buvik, 2003), their innovative activities underpinned by member retailers' strategic integration are critical. Strategic integration captures a firm's valuation of extending its organization through inter-organizational relationships (Hernández-Espallardo, 2006), and such integration provides benefits to member retailers, including the use of combined resources, having expanded joint capabilities, and enhanced competitive positions (Johnson, 1999). ...
Drawing on resource-based view, social exchange theory, and organizational justice theory, this study tests the link between high-performance member retailers (HPMRs) and strategic integration to retail buying groups, and the mediation and moderation of social integration and organizational justice, respectively. Using structural equation modeling, we analyze data from 241 independent retailers participating in retail buying groups in Japan. Results reveal that although HPMRs are negatively associated with strategic integration, they also increase strategic integration via enhanced social interaction with other member retailers. Additionally, organizational justice by buying group headquarters weakens the negative link between HPMRs and strategic integration. The study newly shows how member retailers’ past performance characteristics, the role of buying group headquarters, and member retailers’ interactions affect strategic integration to retail buying groups. The findings contribute to resource-based view, social exchange theory, and organizational justice theory by examining how retail buying groups can encourage HPMRs’ strategic integration using social interaction and organizational justice as boundary conditions. Practical and theoretical implications are described.
... In line with this reasoning, the brand equity of a retail buying group is considered a relational outcome built by the strategic behaviors (e.g., strategic integration) of multiple member retailers. However, despite the significant contributions of retail buying groups to the national economy (Geyskens, Gielens, & Wuyts, 2015), they receive limited practical guidance on how headquarter managers should manage the member-retailers' strategic behaviors in shaping their buying group's brand equity. Against this background, this study aims to investigate the impact of member-retailers' strategic behaviors on the buying group's brand equity and the association of such behaviors with their financial performance. ...
... With respect to the issue of subjective measures, a few studies (e.g., Geyskens et al., 2015;Reijnders & Verhallen, 1996) recommended objective measures to assess financial outcomes. However, given that the object of our study analysis is small independent retailers, small businesses' reluctance to divulge financial metrics is well-known (Campbell, Line, Runyan, & Swinney, 2010). ...
Drawing on brand equity literature and transaction cost economics, this study investigates the impact of member-retailers' strategic behaviors on the retail buying group's brand equity and how such behaviors are associated with their financial performance in the context of horizontal strategic alliances. The hypotheses were tested using survey data collected from 241 small- and medium-sized supermarket retailers joining retail buying groups in Japan. The study offers evidence that relationship-specific investment directly improves the buying group's brand equity as well as strengthens the brand equity's positive effect on financial performance. Additionally, while contract-based passive opportunism weakens the positive effect of the buying group's brand equity, response-based passive opportunism directly depreciates such brand equity. Our results generate implications for headquarter managers to design and govern retail buying groups.
... The retail announcements were sourced from Edge Retail Insight (formerly Planet Retail), a dedicated retail specialist that tracks retailers' websites, press releases, news web-sites, and blogs of more than 2000 leading retailers worldwide ( Dekimpe 2020 ;Geyskens, Gielens, and Wuyts 2015 ;Lamey et al. 2021 ). It represents one of the most complete sources of retail news. ...
This research presents a novel, conceptual perspective on distinctive opportunities available to retailers with a physical location to create reasons for customers to visit the physical store. A multi-method approach is used, where we combine the study of more than 25,000 online announcements of new approaches implemented in physical stores with 12 interviews with retail experts from around the globe. The result is an integrative framework with five key benefits and 14 subdimensions which retailers can use to create reasons for customers to visit their physical store. The five benefits are discovery, convenience, customization, community, and shoppertainment. In discussing the framework, the authors provide rich examples which illustrate different ways retailers can establish these benefits. This research also details the value and challenges of collaborating with partners when implementing new approaches to leverage such benefits. The paper concludes with a discussion of external and internal contingency factors that can impact the decision (of when) to implement (which) new approaches and offers a list of questions for further research.
... From that perspective, greater dependencies and openness among members may create uncertainty among some platform members. Those especially vulnerable may suffer from disadvantages due to a lack of technological competence, undesirable location, or small size (Geyskens, Gielens, & Wuyts, 2015). These uncertainties are fuelled by the platform's interconnected nature's modular structure and ripple effects (Nambisan et al., 2019). ...
Interfirm collaboration and exchange relationships are fundamental to how value is created , managed, and exchanged between firms. In this paper we first identify three major research themes (nature, governance, and outcomes) that existing research has focused on and then propose three structural shifts (technology, platforms, and globalization) that might influence nature, governance, and outcomes associated with interfirm collaboration. We also synthesize a research agenda for the future and develop multiple research propositions that might become the foundation to integrate the structural shifts into research on interfirm collaboration. We provide guidance on how existing theories can help scholars address new research questions arising due to the structural shifts. Finally, we provide insights to managers on the type of data that they need to access to make more effective decisions related to interfirm collaboration in a dynamic business environment.
... Second, cannibalization effects may occur when purchasing from another partner reduces the purchase behavior at a focal partner. This is especially likely if the newly adopted partner is competing in the same industry (Geyskens, Gielens and Wuyts 2015) because customers can gain the same rewards by buying the same products from a competitor (Dowling and Uncles 1997;Roehm, Pullins, and Roehm 2002;Sharp and Sharp 1997). This argument reflects a fear that partners might fund member discounts at another partner, thereby "paying a percentage of members' next purchase somewhere else" (The Loyalty Box 2017). ...
The implicit promise of a partnership in a loyalty program (LP) is that the partners will gain new customers and the LP will reinforce the loyalty to focal partners. Although customers may be encouraged to cross-purchase from partners (which may create positive synergies), they can also switch among partners without forfeiting rewards (which may lead to the cannibalization of sales among partners). To explore these cross-partner effects, we analyze the evolution of customer purchases in a partnership LP across 33 partners from 16 industry sectors. We find that cannibalizations arise more frequently than synergies among partners, contributing to a “rich-get-richer” effect for high-penetration partners; e.g., 10% increase in transactions at department stores reduce transactions at apparel partners (by .04% for new transactions and by 1.18% for recurring customers); but in turn, they attract positive synergies from apparel (.11% increase in transactions by new customers and .37% for recurring transactions).
... In addition to the data described previously, we created a control group to allow us to perform a before-and-after-withcontrol-group analysis. We identified seven retail banners (e.g., Deen, Deka-Markt, Hoogvliet) that carried the same category- specific PL brands (with the same brand names) as SPAR and Attent (as they were members of the same buying group, a situation described in more detail in Geyskens, Gielens, and Wuyts 2015), but that did not change to an umbrella brand name. For each of these retail banners, we have weekly data for the same categories and time as for SPAR and Attent. ...
The authors study the consequences of rebranding multiple category-specific private-label (PL) brands by “opening the umbrella” and unifying them under a common brand name. Retailers expect positive consequences that may manifest themselves in two ways: (1) an increased intrinsic brand strength and (2) an improved marketing-mix effectiveness. The authors analyze three substantially different retailers that rebranded one of their PL tiers. Consistent with the national-brand literature on umbrella rebranding, all three retailers realized an increase in the rebranded PL tier’s intrinsic brand strength, along with a reduced price elasticity. However, and in contrast to the national-brand literature, the effectiveness of both price-promoting and assortment size dropped for all three retailers after they unified their category-specific PLs under a common umbrella name.
... The network perspective is a vital component to fully understand the nature of dyadic relationships (Wathne and Heide 2004). For example, buying firms can create a buying group or a buying consortium (e.g., ProGroup in hardware industry), which can be considered a major force for other actors in the SCN (Geyskens, Gielens, and Wuyts 2015). Wuyts and Dutta (2014) refer to this perspective as alliance portfolios that can have various consequences in the market (e.g., effects on superior product innovation). ...
Purpose: This paper develops a conceptual framework to analyze the impact of a supply chain network (SCN) structure on relationship management strategies (RMS) that focal firms apply to manage sustainability issues within the SCN.
Design/methodology/approach: This paper is based on a comprehensive review and analysis of the industrial marketing and purchasing (IMP), sustainable supply chain management (SSCM), and SCN literature.
Findings: The conceptual framework expands the network perspective in the SSCM context by considering the important role of the SCN structure in the firm’s decision-making process. Four factors (dependency, distance, power, and transparency) were found that are useful in conceptualizing the SCN structure. The conceptual framework also categorizes various sustainability practices into four RMS (noncompliance, transactional, dictatorial, and collaborative), which are needed to make an SCN more sustainable. In addition, 16 propositions are developed based on how firms may identify the most effective RMS to implement appropriate sustainability practices through examining their SCN structure.
Research limitations/implications: The conceptual framework, developed as a result of a comprehensive review of the literature, led to the development of 16 propositions, which can assist in furthering a research agenda on RMS to diffuse various sustainability practices within SCN structures.
Originality/value: The relationship between SCN structure and RMS in the sustainability context remains an under-researched but emerging area of interest. This paper leverages existing research to develop a conceptual framework suitable for empirical testing.
... Our sample consists of data for 18 retailers obtained from Planet Retail, an international aggregator of retail data often utilized in retail research (see Geyskens, Gielens, & Wuyts, 2015;Mohr & Batsakis, 2014b;Mohr & Batsakis, 2018;Oh et al., 2015;Swoboda & Elsner, 2013). Per suggestions of Harzing and Pudelko (2016), the chosen retailers were associated with several home countries (e.g., United States, the Netherlands, South Africa, Chile, Slovenia (see Table 1)) and host countries in Europe, Asia, Africa, and the Americas. ...
The performance outcomes of retail internationalization have attracted considerable scholarly interest, but studies have offered differing perspectives and findings on this relationship. In an effort to fill this gap on the topic, we posit that the relationship between the degree of retail internationalization and performance exhibits an S-curve shape. Using a sample of 18 international retailers with operations on six continents for the period 2001–2015, we find evidence of the S-curve dynamic where international retailers tend to experience declining performance after initial expansion beyond the home market, improving performance with continued expansion, and declining performance with further international expansion. We also examine two moderating variables on this relationship—foreign market growth and store format diversification. Our findings show that foreign market growth reinforces the hypothesized S-curve relationship while store format diversification reverses it. We offer theoretical and managerial implications based on the results of our study.
... Usually, a candidate needs to be approved by the existing members before joining a buying group. 23 In terms of stability, there are significant differences between the six largest buying groups. Although information about membership size and composition over time is difficult to gauge from public sources, some buying groups (like EMD and Alidis/Agecore) have been highly stable, while others expanded, such as AMS, or decreased. ...
... As noted by Geyskens, Gielens, and Wuyts (2015), while buying groups have emerged as an important member of the supply chain, they have not been the subject of systematic empirical inquiry. This research is an attempt to add to the current research stream on buying groups by understanding whether small independent opticals want to maintain relationships with buying groups because they want to (i.e., with respect to repurchase intentions) or whether they maintain the relationship because they have to (i.e., with respect to relational tolerance). ...
This study extends the existing stream of research on channel relationship by examining the antecedents and consequences of firm commitment (i.e., affective and calculative) among small-sized firms in the United States (US) eyecare industry. Achieving strong growth in today’s primary eyecare market presents a challenge for many independents as they face new uncertainties from competition and regulatory reforms. Compounded by their inability to offer lower prices as well as lacking individual negotiating power with manufacturers, many small independent opticals have turned to buying groups to help reduce product acquisition costs as well as to stay competitive as independent entities. A mail survey of 200 independent opticals was conducted, and the data was analysed using structural equation modelling. The two dependent variables of interest are repurchase intentions and relational tolerance. The effect of affective commitment is positive and significant for both repurchase intentions and relational tolerance while calculative commitment only had a positive impact on relational tolerance. Findings further suggest that both transactionaland relational-specific investments help govern the relationship between buying groups and independents in an uncertain environment. Transaction specific investment increase independents’ calculative commitment as it creates value in the form of cost saving and profit enhancement. At the same time, this study corroborates arguments from social exchange theory regarding the role of relational mechanisms in reducing opportunism by enhancing independents’ affective commitment. However, while the bright side of social capital has often been the focus on buyer-seller relationships, the positive relationship between relational embeddedness and calculative commitment supports the emergent notion of the dark side of social capital. © Asian Academy of Management and Penerbit Universiti Sains Malaysia, 2017.
... A product-harm crisis in one category can then spill over to all categories with that name, and tarnish the banner's overall image. To complicate matters further, retailers are often involved in buying groups to achieve better terms with suppliers (Geyskens et al. 2015). As such, production problems with a given supplier may spill over to multiple retailers across different countries. ...
A product-harm crisis is a discrete event in which products are found to be defective and therefore dangerous to at least part of the product’s customer base. Product-harm crises are not only dangerous for consumers; they also represent a major threat to the reputation and equity of brands or companies, which often struggle with how to best respond. The marketing literature has witnessed a surge in interest on the consequences of product-harm crises for a variety of stakeholders, including consumers, the brand or company itself, its investors, as well as competitors. This article offers a systematic review of research on product-harm crises in the marketing literature. We discuss the antecedents and consequences of product-harm crises, their moderators and mediators, and the theories and methodologies used. We identify commonalities and differences between the studies, as well as gaps in the literature and avenues for future research. Finally, we synthesize the managerial implications across studies.
... Although there are many unique aspects to the healthcare industry, it is not so unique from the business-to-business supply chain setting that the findings of the current research cannot be generalized to other sectors, such as industrials and materials, especially those such as food service, retailing, and the public sector, that already extensively utilize group purchasing (e.g., Chen and Roma 2011;Geyskens, Gielens, and Wuyts 2015;Nollet and Beaulieu 2003). ...
... A product-harm crisis in one category can then spill over to all categories with that name, and tarnish the banner's overall image. To complicate matters further, retailers are often involved in buying groups to achieve better terms with suppliers (Geyskens et al. 2015). As such, production problems with a given supplier may spill over to multiple retailers across different countries. ...
P roduct-harm crises are among a firm's worst nightmares. A firm may experience (i) a loss in baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) an increased cross sensitivity to rival firms' marketing-mix activities, and (iv) a decreased cross impact of its marketing-mix instruments on the sales of competing, unaffected brands. We find that this quadruple jeopardy materialized in a case study of an Australian product-harm crisis faced by Kraft peanut butter. We arrive at this conclusion by using a time-varying error-correction model that quantifies the consequences of this crisis on base sales, and on own-and cross-brand short-and long-term effectiveness. The proposed modeling approach allows managers to make more informed decisions on how to regain the brands' pre-crisis performance levels. History: This paper was received July 29, 2005, and was with the authors 3 months for 3 revisions; processed by Bart Bronnenberg.
The purpose of this study is to investigate the conditions under which small independent retailers can improve their business performance by adopting a merchandising information orientation and strategically integrating into retailer buying groups. This study tests hypotheses using a hierarchical multiple regression model and data obtained from 241 supermarket retailers that are existing members of buying groups in Japan. The results indicate that merchandising information orientation alone may not be a beneficial strategy for small independent retailers to improve their business performance; however, by combining a merchandising information strategy with strong strategic integration with a buying group, optimal benefits can be achieved. The findings highlight the potential benefits small independent retailers can gain from buying groups when pursuing a merchandising information orientation, which may prompt such retailers to actively integrate the policies and activities of the buying group into their business strategy. The authors conceptualise retailers’ merchandising information in a model that demonstrates the link between a firm’s information strategy and its performance from the perspective of resource-based theory. Thus, this study advances the knowledge of the strategic behaviours of small independent retailers and provides valuable information for buying groups in the retail sector.
Standard private labels (PLs) have been the topic of multiple prior reviews. Having been leapfrogged by business practice, the marketing literature has only recently witnessed a surge in interest in multi-tier PL offerings. These typically include a budget and/or premium tier in addition to the omnipresent standard PL tier. This study offers a systematic review of recent empirical findings on budget and premium PLs. Our review is structured along the following four research questions: (i) why do retailers introduce budget and premium PLs, (ii) who buys budget and premium PLs, (iii) what is the nature of the competition among the different tiers and with national brands, and (iv) what are the budget and premium PL tiers’ respective success drivers? While standard PLs still generate the largest volume sales, premium PLs (which are not only characterized by a higher dollar margin but which are also most beneficial to the retailer's image) are currently driving PL growth. Budget PLs, in contrast, are hardly growing in volume share, have a lower absolute and percentage margin, and are found to be less effective in fighting discounters than initially thought. We identify some commonalities across the different tiers but also report on many differences. Various avenues for future research are presented.
Interfirm collaboration and exchange relationships are fundamental to how value is created, managed, and exchanged between firms. In this paper we first identify three major research themes (nature, governance, and outcomes) that existing research has focused on and then propose three structural shifts (technology, platforms, and globalization) that might influence nature, governance, and outcomes associated with interfirm collaboration. We also synthesize a research agenda for the future and develop multiple research propositions that might become the foundation to integrate the structural shifts into research on interfirm collaboration. We provide guidance on how existing theories can help scholars address new research questions arising due to the structural shifts. Finally, we provide insights to managers on the type of data that they need to access to make more effective decisions related to interfirm collaboration in a dynamic business environment.
To survive in the competitive retail landscape, retailers launch service innovations designed to grant additional value to consumers. This study investigates whether and in which circumstances retail service innovations create shareholder value, using stock returns to capture investors’ point of view. An event study is used to analyze a broad, varied set of 350 service innovation announcements by publicly listed retailers. The study shows that the customer value benefit(s) aimed for by the retail service innovation (i.e., its level of convenience and engagement) has an impact on shareholder value. Moreover, this impact is contingent upon the stage of the consumer purchase process that the innovation targets, and upon the hedonic or utilitarian nature of the products offered by the retailer that initiates the innovation. The impact on retailer shareholder value is more positive for service innovations high on convenience that speed up and simplify the shopping process, when implemented at the purchase stage or by retailers offering utilitarian products. Service innovations high on engagement that focus more on non-transactional initiatives instead fare well in the post-purchase stage.
By integrating sociological factors, this study explores novel causal mechanisms to broaden the understanding of subjective economic well-being (SEWB). The results of a probit regression analysis of Indian Human Development Survey (IHDS) cross-sectional and panel data reveal a positive, significant effect of successful upward intergenerational occupational mobility on improved perceptions of SEWB. The findings remain robust and significant irrespective of changes in the acquisition and possession of household material assets. The empirical evidence presented herein showcases the utility of adding sociological factors to the discourse on SEWB. Additionally, the present study offers an alternative perspective on the primacy accorded to material possessions in the SEWB literature in marketing. The functionings-capabilities framework is offered as an explanatory framework to interpret the findings. Together, the study offers clear theoretical and managerial contributions to a more nuanced understanding of SEWB.
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Homemade salted egg production leading to one of agro-industry products has been identified as profitable, yet processing technology of salting needs to be improved. The objective of the study was to analyze the length of salting application of salted eggs, marketing reach, and association between the lengths of salting application with marketing reach. Forty respondents determined by purposive random sampling was carried out on agro-industry center of salted eggs in Brebes, Central Java. The primary data (length of salting and marketing reach) were collected by interview using questionnaire and observation. The levels of NaCl of salted eggs were measured by Argentometri Mohr method. The secondary data were collected by recording relevant documents. Data of length of salting and marketing reach were analyzed descriptively. Relationship between the length of salting and the marketing reach of salted eggs were analyzed using contingency tables with the X2 test. The result showed that all respondents applied length of salting with time duration of salting varied from 12 to 30 days, during which period 52.5% respondents did the salting in >14-18 days. The salinity was still relatively higher than that of recommended by the Indonesian Industry Standard (SNI), which is 2.0%. The respondents also functioned as marketing components; such as consumers, retailers-consumers, and collectors - retailers - consumers with the percentage of 52.5, 35, and 12.5%, respectively. As conclusion, the length of salting technology application might influenced marketing reach and the length of salting technology application mostly could only reach the short marketing.
CSR’s beneficial roles on firm financial performance have been well documented. However, the relationships existing in the literature are largely assumed to be linear. In this research, we propose a U-shaped relationship between CSR and firm cash flow volatility to demonstrate CSR’s dynamic implication on the performance instability and therefore extend the understanding of CSR into a new area involving firm performance risk factors. Further, we incorporate another key firm characteristic, marketing capability, to formulate the interactive associations between CSR and firm market-side ability toward better risk management. The results show that CSR may reduce firm cash flow volatility at low and moderate levels but will increase the volatility when the engagement is high. However, a firm with high marketing capability will eliminate the negative impact of CSR.
Currently, there is no systematic evidence showing that, 15 years or more after entry, all multinational retailers provide lower prices than domestic buying groups. In the short term, some multinational retailers may lower prices to deter local competitors and attract consumers in a ‘loss leader’ strategy. However, domestic competitors can integrate buying groups to share the benefit of economies of scale with multinational retailers, while holding lower profitability requirements and overhead costs than multinational retailers. We compared multinational retailers to domestic buying groups in a jurisdiction that had one of the highest proportions of Walgreens and Walmart stores in the world. Despite their market power, in our representative samples of goods, there is no evidence that the prices of multinational retailers in the sectors of pharmacies, supermarkets and hardware stores are lower than domestic chains.
JEL Codes: M3, R1, L8, F2
Building trust in buyer–seller relationships is a focal issue in relationship marketing. However, there are mixed results concerning the performance outcomes of trust. Also, no attention has been given to linking supplier performance aspects to the development of trusting relationships. In this study we propose a conceptual model of supplier performance drivers and customer loyalty consequences of trust in supplier–organizational customer relationships. We test the model relationships using data from three different countries, namely, France, Hungary, and the U.K., in an effort to assess the extent to which the development and outcomes of trust are consistent across different countries. The results suggest that supplier performance in product quality and sales service quality is conducive to trust building across all three countries. Supplier performance in technical repair service support enhances trust in the market contexts of France and Hungary, but has no significant effect in the case of the U.K. Nonetheless, supplier performance in complaint handling has a positive effect on trust in the U.K. and French contexts, but no link is established in the context of Hungary. Further, the results show that trust enhances customer loyalty across all countries. Moreover, we find that firm size negatively moderates the trust–loyalty relationship in all the countries, with this link being not significant among larger firms in France and Hungary. The results have important theoretical and practical implications for international relationship marketing.
This paper proposes an easy-to-implement econometric method for inferring salesperson capability from archival panel data, namely stochastic frontier (SF) analysis. We demonstrate this method with a sample of salespersons provided by a life insurance company. Using the proposed SF model, we are able to estimate each salesperson’s capability. Furthermore, we examine the relationship between the estimated salesperson capability and three future outcomes (i.e. future sales performance, future customer attrition, and future salesperson turnover) under different time horizons. We find that, in general, the estimated salesperson capability has a stronger explanatory power for the near than for the more distant future. Since an individual salesperson’s capability cannot be directly observed by researchers (and thus is typically omitted), traditional analyses of sales performance suffer from an omitted-variable problem that can lead to biased estimates of focal variables. The SF model can significantly mitigate this omitted-variable problem. Statistical tests indicate that our sales performance model with estimated salesperson capability results in a statistically significant improvement in model fit. Of note, our model differs methodologically from SF models previously used in the marketing literature in that it is based on a three-component model that disentangles unobserved individual heterogeneity, efficiency, and random shocks.
Purpose
– The article deals with issues such as the size of a purchasing group, the types of benefits aimed for, and the real beneficiaries of purchasing groups.
Design/methodology/approach
– The observations are based on the literature, as well as on interviews, mostly with Canadian and US health‐care managers.
Findings
– Although often associated with the public sector, purchasing groups are also an alternative considered more and more by managers of the private sector. A purchasing group increases volume consolidation, making it possible to have only one negotiation, in order to increase the purchasing group members' power vis‐à‐vis that of its suppliers. However, a purchasing group also constitutes an additional link in the supply chain and its objectives could go contrary to those of some of its members. This is why organisations considering joining a purchasing group should analyse this option strategically, in order to assess correctly the potential long‐term benefits.
Originality/value
– This article suggests key questions and an analytical framework to help managers assess the potential benefits and drawbacks of joining a purchase group.
Channels research has consistently argued that asymmetric channel relationships are more dysfunctional than those characterized by symmetric interdependence. The authors propose that the degree of both interdependence asymmetry and total interdependence affect the level of interfirm conflict, trust, and commitment. Using survey data from automobile dealers, they demonstrate that, with increasing interdependence asymmetry, the dealer's trust in and commitment to the supplier decline while interfirm conflict increases. In addition, they demonstrate that relationships with greater total interdependence exhibit higher trust, stronger commitment, and lower conflict than relationships with lower interdependence. The effects on conflict are consistent with those predicted by bilateral deterrence theory, and the effects on trust and commitment are in accord with the authors’ bilateral convergence predictions.
In a sample of Canadian investment bank cliques from 1952 to 1990, we examined whether social similarity and cohesion reduced exits of members from these cliques; whether complementarity through differentiated roles reduced such exits; and whether inequality in structural holes increased exits. We found that complementarity and inequality were more powerful antecedents of clique exits than similarity and cohesion. Our results suggest that clique stability is a function of three social and instrumental processes: building social attraction to govern exchanges, developing complementarity to accomplish collaborative tasks, and distributing the value created by a clique among its members.
Multimarket competition refers to competitive situations in which the same firms compete against each other in multiple markets. The theory of multimarket competition suggests that the phenomenon of mutual forbearance may reduce the market-level intensity of competition between two firms when the multimarket contact between them (the number of markets in which they compete) increases. Mutual forbearance, a form of tacit collusion in which firms avoid competitive attacks against those rivals they meet in multiple markets, is proposed to occur because multimarket competition increases the familiarity between firms and their ability to deter each other. In this article, the authors examine how multimarket contact increases familiarity and deterrence. Furthermore, they provide an extension of the theory of multimarket competition by developing a conceptual model that identifies competitive and market factors that moderate the relationship between the degree of multimarket contact and the intensity of competition. The authors also examine the implications of multimarket competition for marketing strategy in the context of two marketing strategy issues: product line rivalry and entry strategy.
Channels research has consistently argued that asymmetric channel relationships are more dysfunctional than those characterized by symmetric interdependence. The authors propose that the degree of both interdependence asymmetry and total interdependence affect the level of interfirm conflict, trust, and commitment. Using survey data from automobile dealers, they demonstrate that, with increasing interdependence asymmetry, the dealer's trust in and commitment to the supplier decline while interfirm conflict increases. In addition, they demonstrate that relationships with greater total interdependence exhibit higher trust, stronger commitment, and lower conflict than relationships with lower interdependence. The effects on conflict are consistent with those predicted by bilateral deterrence theory, and the effects on trust and commitment are in accord with the authors' bilateral convergence predictions.
To survive and prosper in today’s highly competitive environment, firms are increasingly engaging in cooperative alliances with their rivals. However, the impact of these competitor alliances on financial performance is largely unknown. This research examines this issue. Using both survey and archival data, the authors conduct two studies that reveal that the intensity of a firm’s alliances with its competitors has a curvilinear (inverted U-shaped) influence on return on equity. In addition, the authors find that a firm’s competitor orientation, as embodied in its strategies and objectives, can strengthen or weaken this curvilinear effect. Overall, these findings indicate that both competition and cooperation have dark sides that a firm must carefully manage when working with rivals.
Prior research has found that the announcement of marketing alliances tends to produce no effect on firm value creation In a high-tech context. This article reexamines this issue and Investigates whether the characteristics of a firm's network of alliances affect the firm value created from the announcement of a new marketing alliance. The authors investigate whether network centrality, network density, network efficiency, network reputation, and marketing alliance capability influence firm value creation. They examine this question using an event study of 230 announcements for marketing alliances in the software Industry. The results Indicate that, in general, marketing alliance announcements create value (i.e., abnormal stock returns) for the firm in the announcement period event window. Furthermore, network efficiency and network density have the strongest positive Impact when they are moderate; network reputation and network centrality have no effect. These results point to the greater role of relational network characteristics than size-/status-based benefits. Finally, marketing alliance capability, which reflects a firm's ability to manage a network of previous marketing alliances, has a positive impact on value creation.
In this article, the authors examine the acquisition and utilization of information in new product alliances. Drawing from research in social network theory with a focus on the strength-of-ties literature, the authors suggest that horizontal alliances have lower levels of relational embeddedness and higher levels of knowledge redundancy than vertical alliances. The authors then suggest that though embeddedness enhances both the acquisition and utilization of information in alliances, redundancy diminishes information acquisition but enhances information utilization. The authors test these ideas using a sample of 106 U.S. firms that recently have participated in new product alliances. Althouqh the results are broadly supportive of the predictions, they are also surprising because they question key underlying assumptions of the strength-of-ties literature. For example, closely tied individual actors are typically assumed to share both high levels of embeddedness and high levels of redundancy, but the present research finds that this assumption does not hold for organizational actors. The authors discuss the implications of these findings specifically for new product alliances and for research on tie strength among organizations in general.
Purpose
– The article deals with issues such as the size of a purchasing group, the types of benefits aimed for, and the real beneficiaries of purchasing groups.
Design/methodology/approach
– The observations are based on the literature, as well as on interviews, mostly with Canadian and US health‐care managers.
Findings
– Although often associated with the public sector, purchasing groups are also an alternative considered more and more by managers of the private sector. A purchasing group increases volume consolidation, making it possible to have only one negotiation, in order to increase the purchasing group members' power vis‐à‐vis that of its suppliers. However, a purchasing group also constitutes an additional link in the supply chain and its objectives could go contrary to those of some of its members. This is why organisations considering joining a purchasing group should analyse this option strategically, in order to assess correctly the potential long‐term benefits.
Originality/value
– This article suggests key questions and an analytical framework to help managers assess the potential benefits and drawbacks of joining a purchase group.
Under group buying, quantity discounts are offered based on the buyers' aggregated purchasing quantity, instead of individual quantities. As the price decreases with the total quantity, buyers receive lower prices than they otherwise would be able to obtain individually. Previous studies on group buying focus on the benefit buyers receive in reduced acquisition costs or enhanced bargaining power. In this paper, we show that buyers can instead get hurt from such cooperation. Specifically, we consider a two-level distribution channel with a single manufacturer and two retailers who compete for end customers. We show that, under linear demand curves, group buying is always preferable for symmetric (i.e., identical) retailers. For asymmetric retailers (i.e., differing in market base and/or efficiency), group buying is beneficial to the smaller (or less efficient) player. However, it can be detrimental to the larger (or more efficient) one. Despite the lower wholesale price under group buying, the manufacturer can receive a higher revenue. Interestingly, group buying is more likely to form when retailers are competitive in different dimensions. These insights are shown to be robust under general nonlinear demand curves, except for constant elastic demand with low demand elasticity.
The strategic importance of Business-to-Business (B2B) relationships is well recognized, but their financial impact remains equivocal. This study links social capital from three types of B2B networks of young technology firms with their Initial Public Offering (IPO) value. The authors identify three relevant types of absorptive capacity that facilitate the transformation of B2B social capital into IPO value. For the transformation to occur, the authors find that young firms need not only the opportunity to access the resources provided by B2B relationships, but also the ability to leverage them through the complementary capability, namely, absorptive capacity. The hypotheses are tested on a sample of 177 IPOs and the results are robust to endogeneity concerns and alternative measures. As one of the first studies in marketing-finance interface to focus on young firms, the findings provide novel insights such as the deleterious financial consequence of having marketing and R&D B2B relationships without the relevant absorptive capacity. Managerial implications regarding communicating the value of absorptive capacity, disclosure of marketing related information, and the importance of marketing for young technology firms are also provided.
Several studies have shown that pioneers have long-lived market share advantages and are likely to be market leaders in their product categories. However, that research has potential limitations: the reliance on a few established databases, the exclusion of nonsurvivors, and the use of single-informant self-reports for data collection. The authors of this study use an alternate method, historical analysis, to avoid these limitations. Approximately 500 brands in 50 product categories are analyzed. The results show that almost half of the market pioneers fail and their mean market share is much lower than that found in other studies. Also, early market leaders have much greater long-term success and enter an average of 13 years after pioneers.
Standardizing performance expectations across different outlets within a chain, differing in their individual features, their consumers, and the nature of competition they face, can be an onerous task. We develop an integrated, nonlinear, block group-level market share model of store expectations that draws upon the existing trade area as well as store performance literatures. By incorporating and normalizing a large number of external and internal factors impacting performance, we are able to offer a means for the retailer to determine equitable standards. The model is estimated using a variation of the maximum-likelihood estimation, on a data set fashioned from several sources and aggregated at the block group and store levels. Finally, we propose a set of indices that allows us to evaluate relative performances of stores and regions given the competitive environments they face. We find that a block group-level model offers a better fit, as well as significantly richer implications, than a traditional store-level model. Results show that a significant number of stores operate well below their expected levels, an insight not obvious from the raw numbers used to report store statistics to upper management.
We propose a conceptual framework—with the resource-based view (RBV) of the firm as its theoretical underpinning—to explain interfirm differences in firms' profitability in high-technology markets in terms of differences in their functional capabilities. Specifically, we suggest that marketing, R&D, and operations capabilities, along with interactions among these capabilities, are important determinants of relative financial performance within the industry. This paper contributes to the RBV literature by proposing the input-output perspective to conceptualize the notion of capabilities. Specifically, this approach entails modeling a firm's functional activities—viz., marketing, R&D and operations—as transformation functions that relate the productive factors/resources to its functional objectives, if the firm were to deploy these resources most efficiently. Any underattainment of the functional objective, then, is attributable to functional inefficiency, or equivalently, to a lower functional capability of the firm. The input-output conceptualization of a firm's capabilities is then estimated using the stochastic frontier estimation (SFE) methodology. SFE provides the appropriate econometric technique to empirically estimate the efficient frontier and hence the level of efficiency achieved by the various firms.
Our study contributes to a number of literatures, both methodologically and substantively. First, it contributes both conceptually and methodologically to the RBV literature. Conceptually, our study suggests that firm capabilities can be viewed in an input–output framework. Methodologically, the study suggests the use of stochastic frontier estimation to operationalize and estimate firm capabilities. This methodology is, to the best of our knowledge, the first to allow the researcher/manager to infer capabilities from archival data. Substantively, our study contributes to the literature on market orientation by suggesting that a stronger market orientation of a firm should be reflected in a higher marketing capability. It also adds to the literature on “design for manufacturability” by explicating the complementarity among the various functional capabilities and offering empirical evidence on their relative importance in influencing a firm's performance. Finally, our study builds on prior literature that has highlighted the importance of marketing–R&D coordination as important determinants of new product development and success. We highlight below some of our main findings.
• A strong base of innovative technologies enhances a firm's sales by favorably influencing consumers' expectations about the externality benefits associated with its product. This suggests that a past track record of consistent innovation is a credible signal to current and potential customers of the firm's continued excellence in a technologically evolving market. Given the importance of influencing customers, managers need to tailor their marketing activities around the need to inform customers of the technological excellence of their firm. Thus, customers need to be informed of the innovative technologies that the firm possesses and of the future R&D initiatives undertaken by it. Similarly, any potential applications of innovative technology developed by the firm, and of technologies under development, should be emphasized.
• Marketing capability has its greatest impact on the (quality-adjusted) innovative output for firms that have a strong technological base. In other words, firms with a strong R&D base are the ones with the most to gain from a strong marketing capability.
• Marketing capability strongly influences the width of applicability of innovations, i.e., a firm's marketing capability enhances its ability to generate innovative technologies that have applications across a range of industries. This result carries a strong message for managers: A strong market orientation is one of the most fertile sources of ideas for innovation. Thus, marketing needs to be involved from the beginning of the innovation process—namely, right at the stage when technological ideas are being generated.
• The most important determinant of a firm's performance is the interaction of marketing and R&D capabilities. This supports the assertion that firms in high-technology markets need to excel at two things: the ability to come up with innovations constantly, and the ability to commercialize these innovations into the kinds of products that capture consumer needs and preferences. This finding offers further evidence on the importance of coordination between R&D and marketing, as suggested in the extant marketing literature.
Finally, using archival data, our methodology can be used to benchmark a firm's capabilities, with other firms in the industry, along various functional dimensions. This would be an important step in making more informed resource-allocation decisions. Thus, the firm can spend more money on those capabilities where it most lags the competition, or on those capabilities that are shown to have the maximum impact on firm performance.
Retailers have not gained profitability at the expense of manufacturers in the last two decades, according to accounting and stock market measures of profits, despite substantial industry restructuring and new forms of channel rivalry. Both manufacturers and retailers have experienced reductions in profitability. Consumers may be the net beneficiaries these and other changes. In this study we survey the recent evolution of the grocery channel, examine the connections between changes in channel structure, conduct, and performance, and assess whether profitability has shifted as a result. We relate these findings to the issue of whether power has shifted in the grocery channel.
Over the past decade, trust has emerged as the central means of achieving cooperation in interorganizational relationships. Past empirical inquiries have largely focused on the role of trust within the context of vertical relations between channel members or service providers and their clients. Thus, little is known about the nature or the role of trust in horizontal relations. A number of interorganizational scholars suggest that the nature and the effect of behavioral norms such as trust may be widely different in horizontal versus vertical relationships. This study examines the effect of relationship form on organizational trust using data from a survey of 106 U.S. firms who have recently participated in either horizontal or vertical R&D alliances. The results of this survey indicate that participants in vertical alliances display higher levels of organizational trust than participants in horizontal alliances. In addition, while organizational trust enhances cooperation in vertical alliances, trust is unrelated to cooperation in horizontal alliances.
Interorganizational alliances are widely recognized as critical to product innovation, particularly in high-technology markets. Many new product development (NPD) alliances tend to be asymmetric, that is, they are formed between a larger firm and a smaller firm. As is the case with alliances in general, asymmetric alliances also typically result in changes in the shareholder values of the partner firms. Are the changes in shareholder values of the partner firms significant? Are asymmetric NPD alliances win-win or win-lose partnerships? Are the gains or losses symmetric for the larger and smaller partner firms? What factors drive the changes in shareholder values of the partner firms? These important questions remain largely unexplored as evidenced by the dearth of empirical research on the effect of asymmetric NPD alliances on shareholder value and on the apportionment of this value between the partner firms. We develop and empirically test a model of short-term changes in shareholder values of larger and smaller firms involved in NPD alliances, using the event study methodology on data covering 167 asymmetric alliances in the information technology and communication industries. In this model, we examine alliance, firm, and partner characteristics as potential determinants of the changes in shareholder values of the partner firms due to an NPD alliance announcement. Our model accounts for selection correction, potential cross-correlation across the residuals from the models of firm value changes for the larger and smaller firms, and unobserved heterogeneity. The results suggest that both the partners experience significant short-term financial gains, but there are considerable asymmetries between the larger and smaller firms with regard to the effects of alliance, partner, and firm characteristics on the gains of the partner firms. The results relating to alliance characteristics suggest that while a broad scope alliance enhances the financial gains for the larger firm, a scale R& D alliance (relative to a link alliance) contributes positively to the financial gains for the smaller firm. With regard to partner characteristics, while partner alliance experience positively influences the financial gains for the larger firm, it has no significant effect on the financial returns for the smaller firm. Further, partner innovativeness is positively associated with the financial gains for the larger firm, but partner reputation is unrelated to the financial gains of the smaller firm. Regarding firm characteristics, the magnitude of the financial gains accruing from a firm's own alliance experience is considerably higher for the smaller firm than it is for the larger firm. We outline the implications of the research findings for future research and management practice.
To survive and prosper in today's highly competitive environment, firms are increasingly engaging in cooperative alliances with their rivals. However, the impact of these competitor alliances on financial performance is largely unknown. This research examines this issue. Using both survey and archival data, the authors conduct two studies that reveal that the intensity of a firm's alliances with its competitors has a curvilinear (inverted U-shaped) influence on return on equity. In addition, the authors find that a firm's competitor orientation, as embodied in its strategies and objectives, can strengthen or weaken this curvilinear effect. Overall, these findings indicate that both competition and cooperation have dark sides that a firm must carefully manage when working with rivals.
This paper presents a dynamic, firm‐level study of the role of network resources in determining alliance formation. Such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed. Data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners, such resources are an important catalyst for new alliances, especially because alliances entail considerable hazards. This study also assesses the importance of firms’ capabilities with alliance formation and material resources as determinants of their alliance decisions. I test this dynamic framework and its hypotheses about the role of time‐varying network resources and firm capabilities with comprehensive longitudinal multi‐industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989. The results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms’ decisions to enter into new alliances. This study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior. Copyright © 1999 John Wiley & Sons, Ltd.
Several studies have shown that pioneers have long-lived market share advantages and are likely to be market leaders in their product categories. However, that research has potential limitations: the reliance on a few established databases, the exclusion of nonsurvivors, and the use of single-informant self-reports for data collection. The authors of this study use an alternate method, historical analysis, to avoid these limitations. Approximately 500 brands in 50 product categories are analyzed. The results show that almost half of market pioneers fail and their mean market share is much lower than that found in other studies. Also, early market leaders have much greater long-term success and enter an average of 13 years after pioneers.
Multimarket competition refers to competitive situations in which the same firms compete against each other in multiple markets. The theory of multimarket competition suggests that the phenomenon of mutual forbearance may reduce the market-level intensity of competition between two firms when the multimarket contact between them (the number of markets in which they compete) increases. Mutual forbearance, a form of tacit collusion in which firms avoid competitive attacks against those rivals they meet in multiple markets, is proposed to occur because multi-market competition increases the familiarity between firms and their ability to deter each other. In this article, the authors examine how multimarket contact increases familiarity and deterrence. Furthermore, they provide an extension of the theory of multimarket competition by developing a conceptual model that identifies competitive and market factors that moderate the relationship between the degree of multimarket contact and the intensity of competition. The authors also examine the implications of multimarket competition for marketing strategy in the context of two marketing strategy issues: product line rivalry and entry strategy.
Co-marketing alliances between firms afford fresh opportunity for strategic advantage. Data from 98 alliances show that gains in effectiveness can be obtained by reducing power and managerial imbalances. Careful project selection and better matching of potential partners also help to enhance alliance effectiveness.
Participants in research and development alliances face a difficult challenge: how to maintain sufficiently open knowledge exchange to achieve alliance objectives while controlling knowledge flows to avoid unintended leakage of valuable technology. Prior research suggests that choosing an appropriate organizational form or governance structure is an important mechanism in achieving a balance between these potentially competing concerns. This does not exhaust the set of possible mechanisms available to alliance partners, however. h? this paper we explore an alternative response to hazards of R&D cooperation: reduction of the 'scope' of the alliance. We argue that when partner firms are direct competitors in end product or strategic resource markets even 'protective' governance structures such as equity joint ventures may provide insufficient protection to induce extensive knowledge sharing among alliance participants. Rather than abandoning potential gains from cooperation altogether in these circumstances, partners choose to limit the scope of alliance activities to those that can be successfully completed with limited (and carefully regulated) knowledge sharing. Our arguments are supported by empirical analysis of a sample of international R&D alliances involving electronics and telecommunications equipment companies. Copyright (C) 2004 John Wiley Sons, Ltd.
This volume is a text-book for students of marketing, providing a basic understanding of the concept and techniques of marketing. It shows how basic background information relating to the UK market may be integrated into business planning and how information from other sources should be incorporated and used.
This paper examines the impact of group purchasing organizations (GPOs) on healthcare-product supply chains. The supply chain we study consists of a profit-maximizing manufacturer with a quantity-discount schedule that is nonincreasing in quantity and ensures nondecreasing revenue, a profit-maximizing GPO, a competitive source selling at a fixed unit price, and n providers (e.g., hospitals) with fixed demands for a single product. Each provider seeks to minimize its total purchasing cost (i.e., the cost of the goods plus the provider's own fixed transaction cost). Buying through the GPO offers providers possible cost reductions but may involve a membership fee. Selling through the GPO offers the manufacturer possibly higher volumes, but requires that the manufacturer pay the GPO a contract administration fee (CAF), i.e., a percentage of all revenue contracted through it. Using a game-theoretic model, we examine questions about this supply chain, including how the presence of a GPO affects the providers' total purchasing costs. We also address the controversy about whether Congress should amend the Social Security Act, which, under current law, permits CAFs. Among other things, we conclude that although CAFs affect the distribution of profits between manufacturers and GPOs, they do not affect the providers' total purchasing costs.
Group buying enables collective bargaining opportunity that individual buyers lack to negotiate prices with sellers. This potential negotiation capability has two opposing effects. On the one hand, the prospect of the group being able to negotiate price with its rival forces each seller to lower its price offer, as too high a price will induce the group to give its rival an opportunity to undercut its price via negotiation, likely taking away all the buyers. On the other hand, the potential negotiation opportunity may also discourage sellers from competing aggressively in their price offers, as the benefit of charging a low price could be offset by competitors in negotiation, thus yielding overall higher prices for the buyers. In this study, we find that compared to individual purchase, buyers benefit from collective bargaining opportunity by group buying only if sellers’ bargaining power relative to the buyer group is low and/or buyers’ preferences toward the sellers are sufficiently differentiated. Given buyers’ strategic choice of group purchase, sellers may be worse off with a further increase in bargaining power, and so may social welfare.
In contrast with previous research that emphasizes brokerage benefits by keeping other actors separated, this study investigates the conditions in which the degree of brokerage persists in subsequent network development when previously disconnected actors are no longer kept separate in a multipartner alliance setting. Analyses of longitudinal alliance data collected from 95 firms in the aircraft, airline, chemical, and energy industries suggest that after forming a multipartner alliance through an industry-sponsored e-marketplace, a firm with greater prior brokerage is more likely to remain influential and persist in its degree of brokerage in the subsequent alliance network when (1) the multipartner alliance has more partners and (2) size heterogeneity among partners is either low or high. The findings add to network research by offering a refined understanding of brokerage dynamics.
With increased competitive pressures in the grocery retailing industry, managers have greater interest in measuring the productivity of the stores of their own chain relative to the other similar stores. In this paper, we measure and compare the inefficiencies of major grocery retailers across various formats and pricing strategies using stochastic frontier (SF) methodology. Using a unique dataset covering 2500 stores across 50 chains, we find that the average inefficiency was about 28.59 percent. Kroger and Wal-Mart are found to be the least inefficient chains with inefficiencies of 2.18 percent and 3.06 percent respectively. With respect to pricing strategy, EDLP and hybrid stores are found to do better than HiLo stores in generating weekly sales and with respect to format strategy, supercenters are found to do better than supermarkets and limited assortment stores. Using SF analysis, we also find that stores could potentially reduce the proportion of inputs such as selling area, number of checkout counters, number of employees and store features without threatening outcomes (i.e., by holding the output level constant).
As inter-firm collaboration plays an increasingly important role in firm innovation, many firms are engaged in multiple partnerships forming portfolios of alliances. Research in marketing has predominately focused on dyadic relationships without considering the important interdependencies among different alliances. This study takes a portfolio approach to examine the resource diversity of multiple alliance partners and its contribution to firm innovation. It argues that resource diversity in an alliance portfolio can only benefit innovation when resources and information are shared across alliances. The authors examine factors that may facilitate or inhibit information and resource sharing across alliances and thus influence the realization of any benefit of portfolio resource diversity. The model identifies a variety of factors along three dimensions, including the composition of an alliance portfolio, alliance management, and the market environment, that moderate the relationship between alliance portfolio resource diversity and firm innovation. This study not only demonstrates the conditions for a firm to benefit from diverse partners, but also highlights the importance of coordination among different alliances, suggesting a portfolio approach for alliance research.
New products provide increased sales, profits, and competitive strength for most organizations. However, nearly 50% of the new products that are introduced each year fail. Organizations thus find themselves in a double bind. On the one hand they must innovate consistently to remain competitive, but on the other hand innovation is risky and expensive. Many organizations are forming business alliances to quicken the pace of and reduce risks associated with innovation. Yet by some estimates, 70% of these alliances fail. Many of the prescriptions for successful alliance management clash with recommendations for effective innovation management. The authors develop testable hypotheses by integrating the new products and alliance literature. A construct - cooperative competency - derived from related concepts of mutual adjustment, absorptive capacity, and relational capability is posited as the key factor affecting new product development success, regardless of whether it is an intra-or interfirm endeavor. The authors test the model with data from a sample survey in the semiconductor manufacturing context and replicate it in the health care sector. The antecedents of cooperative competency - formalized and clannish administration, mutual dependence, and institutional support - are revealed empirically and substantiated. The authors identify the importance and means of developing interfirm cooperation.
Co-marketing alliances between firms afford fresh opportunity for strategic advantage. Data from 98 alliances show that gains in effectiveness can be obtained by reducing power and managerial imbalances. Careful project selection and better matching of potential partners also help to enhance alliance effectiveness.
This study analyzed 119 strategic alliances formed during the period 1987-91. Using the event study methodology, we found that announcements of technological alliances enjoyed greater abnormal returns in the stock market than marketing alliance announcements. Consistent with our expectations, abnormal returns were negatively correlated with firm profitability and size, indicating that investors perceived more profitable, larger firms as capturing less of the gain generated in alliances, Indeed, the smaller partners in technological alliances appeared to benefit the most, Finally, investor uncertainty increased following alliance announcements for marketing alliances but not for technological alliances.
This paper examines the effect of diversification upon intra-industry performance. We propose that intra-industry diversification promises three sets of benefits, which, separately and in combination, provide firms with a competitive advantage: synergies arising from economies of scope; premiums from mutual forbearance enabled by multi-market competition; and efficiencies derived from market structuration. The additive and integrative effects of the first two have not been explored. The benefits of market structuration remain untheorized and thus untested. The test of our theoretical model in the Canadian general insurance industry indicates that mutual forbearance provides advantage under specified conditions, that market structuration also provides advantages, but that diversification per se does not. Copyright © 2004 John Wiley & Sons, Ltd.
Many industries have witnessed the formation of multiple-partner alliances or constellations competing against each other for both clients and members. Using the global airline industry as an empirical setting, I evaluate the proposition that membership in airline constellations allows carriers to capture externalities from other firms in the form of direct or indirect traffic flow, thereby enhancing their operational performance. I also distinguish between two ways to demarcate the boundaries of constellations: explicitly or implicitly. Analyzing patterns of membership in explicit constellations involving formal, multilateral agreements (such as the Star Alliance, Oneworld, SkyTeam), I find that membership benefits are greatest in groups involving large aggregate traffic and for carriers contributing with a large portion of the group's capacity. I also evaluate patterns of membership in implicit constellations, corresponding to groups of firms showing relatively more ties to one another than to firms outside their group. I find that carriers bilaterally linked with key players of such groups are able to increase their operational performance even if they do not belong to any explicit constellation. Thus, results show that it is worth analyzing distinct patterns of membership simultaneously, because they are likely to have distinct implications for firm performance. Copyright © 2007 John Wiley & Sons, Ltd.
This paper identifies retail firms as an economic institution which delivers explicit products or services to consumer together with a variety of distribution services that determine the levels of distribution costs experienced by consumers in their purchase activities. The demand for the retailer's product is derived from a household production model in which the levels of distribution services provided by the retailer play the role of fixed inputs in the household's production functions. The supply of the retailer's product is derived from a joint cost function which is non-decreasing in the levels of distribution services provided. Profit-maximizing behavior in monopolistically competive markets shows that retail firms have special economic incentives to become complex organizations by integrating backwards, offering multiple explicit products and operating in more than one market. In addition, monopolistically competitive retail firms in long-run equilibrium will exhibit excess capacity, price dispersion and product choice in distribution services.
In this article, we identify critical success factors for managing small and intensive purchasing groups by comparing successful and unsuccessful purchasing groups in a large-scale survey. The analysis of our data set suggests the following success factors: no enforced participation, sufficient total contribution of efforts, all members contribute with knowledge, continuity in member representation, communication, and fair allocation of savings. The findings suggest among other things that it is important that after a voluntary decision has been taken to cooperate, the members need to show that they are committed. Other factors such as interorganisational trust and formal structures are important when establishing interorganisational cooperation, but should otherwise be considered as necessary yet not sufficient in the management phase of a successful purchasing group.
The conventional wisdom that retailers have grown more powerful relative to packaged goods manufacturers in the packaged goods industry has not been supported by empirical analyses of the relative profitability of retailers and manufacturers. This is despite increases in trade and consumer promotion, and the prevalence of store brands, all of which were viewed as indicators of growing retail power. In recent years, researchers have developed a much better understanding of the role that these purported “indicators” play in manufacturer-retailer interaction. The objective of this article is to synthesize what this new research teaches us about the impact of promotions and store brands on the relative performance of manufacturers and retailers. It concludes that promotions are just as beneficial for manufacturers as for retailers, if not more so. Store brands do provide leverage to retailers and allow them to improve margins, but a competitive national brand assortment is still necessary for retail profitability. This helps explain why manufacturer profitability has not worsened relative to retailers even as trade and consumer promotion spending have grown and store brands have become strong in many product categories.
Certain purchasing groups do not flourish. A supposed reason for this is a creeping dissatisfaction among various members of a group with the allocation of the cooperative gains. In this paper, we analyze unfairness resulting from using the commonly used Equal Price (EP) method for allocating gains under the assumption of continuous quantity discounts. We demonstrate that this unfairness is caused by neglecting a particular component of the added value of individual group members. Next, we develop two fairness ratios and tie these to fairness properties from cooperative game theory. The ratios show among other things that being too-big a player in a purchasing group can lead to decreasing gains. They can be used to assess if EP is an unfair method in specific situations. Finally, we discuss measures a purchasing group could consider in order to attenuate perceived unfairness. Thereby, the group may improve its stability and prosperity.
Participants in research and development alliances face a difficult challenge: how to maintain sufficiently open knowledge exchange to achieve alliance objectives while controlling knowledge flows to avoid unintended leakage of valuable technology. Prior research suggests that choosing an appropriate organizational form or governance structure is an important mechanism in achieving a balance between these potentially competing concerns. This does not exhaust the set of possible mechanisms available to alliance partners, however. In this paper we explore an alternative response to hazards of R&D cooperation: reduction of the ‘scope’ of the alliance. We argue that when partner firms are direct competitors in end product or strategic resource markets even ‘protective’ governance structures such as equity joint ventures may provide insufficient protection to induce extensive knowledge sharing among alliance participants. Rather than abandoning potential gains from cooperation altogether in these circumstances, partners choose to limit the scope of alliance activities to those that can be successfully completed with limited (and carefully regulated) knowledge sharing. Our arguments are supported by empirical analysis of a sample of international R&D alliances involving electronics and telecommunications equipment companies. Copyright © 2004 John Wiley & Sons, Ltd. Peer Reviewed http://deepblue.lib.umich.edu/bitstream/2027.42/34617/1/391_ftp.pdf
This paper proposes a definition of generalised residuals for a large class of non-linear econometric models. These residuals are shown to have properties similar to those of the familiar residuals in the linear model and to be useful in many hypothesis testing problems.
- Gulati Ranjay
- Yin Xiaoli