he Impact of Trust, Power, Communication Negotiation, and Relationship Commitment

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The Impact of Trust, Power, Communication Negotiation, and Relationship Commitment
on a Supply Chain Integration Strategy
Salahideen M. Alhaj, Linda R. Alnaqeep
Computer Information Systems Department, Management Information Systems
Department
Faculty of Information Systems & Technology, Arab Academy,
Amman-11942, Jordan.
Abstract
Supply Chain Integration was the main issue for many research works
and received increasing attention from scholars and practitioners in recent
years, despite the importance of trust, power, communication, negotiation, and
commitment in relationship marketing. The understanding that commitment is
crucial to the long-term success of a business relationship provides one of the
core concepts in the understanding of organizational success. A lot of research
work has been produced in this regard, but yet none has covered all factors of
the integration process except [Alhaj and Alnaqeep 2008].
This paper proposes model and investigates the impact of the trust,
power, communication, negotiation, and relationship commitment on the Supply
Chain Integration Strategy (SCIS) between manufacturers and their customers,
based on the critical importance of negotiation in e-commerce applications
where the supply chain is dynamic and reconfiguring and a holistic perspective
of customer integration by employing transaction cost theory, social exchange
theory and using power–relationship commitment theory.
Index Terms: Communication, Negotiation, Trust, Power, Relationship
Commitment, Supply Chain Integration.
Introduction
Supply chain or logistics network is the system of organizations, people,
technology, activities, information and resources involved in moving a product
or service from supplier to customer [1]. Supply chain activities transform
natural resources, raw materials and components into a finished product that is
delivered to the end customer [1].
A typical supply chain is very complex [2]. However complicated [3], a
supply chain could be implemented through three elements: the supply chain
processes, the supply chain network structure, and the management components
[2]. A supply chain involves a variety of processes: customer relationship
management, customer service management, demand management, order
fulfilment, manufacturing flow management, supplier relationship management,
product development and commercialization, and returns management [3]. In
planning and optimizing a supply chain network structure, three aspects are
considered to be of major importance; the members of the supply chain, the
structural dimensions of the network, and the difference types of process links
across the supply chain [3]. The management components in the supply chain
setting include physical-technical management components and managerialbehavioural management components [2].
Enterprises adopt supply chain practices and cope with concerned areas
of supply chain implementation, they would develop diverse supply chain skills
and expertise and would learn to better integrate their social and technical
systems [2]. This collective learning experience is the key to improved business
performance [2].
Continuous learning is very important foundation for developing supply
chain competence [4], composed of nine constructs: learning encouragement,
learning structure, integrative mechanisms, shared culture, commitment, trust,
communication, joint decision making, and win–win approach. Improvement in
service levels and reduction in costs are necessary in improving organizational
performance [5].
Managers would be in a better position to meet the challenges of global
supply chain processes if they understand the implementation issues and their
roles on supply chain effectiveness [2].
In the other hand, social and technical systems of a supply chain are
essential to improving supply chains’ overall success [6]. A good social system
enables enterprises to enhance supply chain coherence, while a solid technical
infrastructure helps a supply chain to gain competitive positions [2].There are
some factors that influence the social side of supply chain systems [7] .The
quality of supply chain practices is significantly correlated with the supplier
participation strategy and influences tangible business results and customer
satisfaction levels [7].
Current trends in the design and the implementation of supply chain
planning and scheduling systems were reviewed; Enterprises thus need to focus
on both social and technical systems of a global supply chain [2]. Supply chain
management practices involve suppliers in strategic and operational decision
making, encouraging information sharing and searching for new ways to
integrate upstream activities [2]. It also involves developing customer contacts
through the use of customer feedback to integrate the downstream activities and
delivering orders directly to customers at points of use [2]. Many issues that
might adversely impact supply chain performance [8] , The integration of supply
chain partners may be affected by insufficient flow of information, lack of trust,
lack of know-how, lack of flexibility, management problems, lack of cost
visibility, partners not being EDI capable, lack of reliability, and low quality [8].
The core competencies of a firm can be described as the collective learning of the
organization [4].
The emphasis is on how to coordinate diverse skill sets and integrate them
into the technical system [2]. Conducting supply chain diagnostics on: integrated
systems, balanced performance measurements, aligned organization structure,
efficient distribution; demand driven planning, agile manufacturing, and the
order to cash process proposed on [9]. In the globalize market scenario,
companies need to understand and challenge the competitive markets they
operate in , in addition to escalating customer expectations from point view of;
delivery speed, dependability, and flexibility.
Supply
Chain
Integration
Strategy (SCIS) is one approach to achieve boundaries less market
competitiveness. Supply chain integration (SCI) received increasing attention
from scholars and practitioners in recent years [10], despite the importance of
trust and commitment in relationship marketing [11]. Based on authors review,
supply chain integration (SCI) process needs it’s own tools which is still very
limited. Some research works have focused on studding the influence of interfirm relationships factors. Supply Chain Strategies and practices depend on not
only the nature of the business, the competitive environment, and technological
intensity of the product, but also on product and market characteristics
[12].Consequently, supply chain integration (SCI) strategies should be evaluated
in the light of a company’s market and product strategies [12]. In this paper, we
investigate the relationship between trust, power, relationship commitment,
communication and the integration of manufacturers with their customers,
establishing the mechanisms of SCI based on the perspectives of power–
relationship commitment theory, social exchange theory, and transaction cost
theory.
Specifically, our objectives are: 1.To identify the antecedents of customer
integration, 2.To propose a model that represents the relationship among
customer trust, power, relationship commitment, communication and customer
integration in a Supply Chain, 3. To justify and develop power–relationship
commitment theory in the context of an emerging economy that has a high
power distance and collectivist national culture, and 4. To offer guidelines for
practicing managers to enhance their performance through understanding the
role of trust, power, communication in SCI and better management of customer
relationships. In Section 2 authors discuss literature review. In Section 3 we
proposed our SCIS Model which is the main part of the paper. In Section 4 we
point out the future work. in section 5 we point out the importance of SCIS .
Brief concluding remarks in Section 6 close the paper.
literature review
Commitment defined as the desire by a party to a business relationship to
maintain and strengthen that relationship [13].The understanding that
commitment is crucial to the long-term success of a business relationship
provides one of the core concepts in the understanding of organizational success
[14,15]. Commitment provides the basis for a cooperative spirit in marketing
channel relationships and leads to an overall stronger partnership [16].The
highly committed distributor is more likely to provide market intelligence to the
manufacturer based on the trust that has built up in the relationship.
Trust
Trust and commitment are central factors that contribute to successful
relationship marketing because of their ability to lead indirectly to cooperative
behaviour and produce outcomes that promote efficiency, productivity and
effectiveness [13]. From its root in social exchange theory [17] , commitment is
one of the key concepts in relationship marketing research [18]. Commitment is
an exchange party's long-term desire to maintain a valuable ongoing relationship
with another [13].
In the services marketing area, relationships are built on the basis of
mutual commitment [19]. Following the literature, we define customer
commitment as an exchange partner's willingness to maintain an important
enduring relationship [18, 20]. The literature recognizes trust as a prerequisite to
building customer relationships and as a preceding state for the development of
commitment [13, 20]. Trust will occur when one party has confidence in an
exchange partner's reliability and integrity [13]. Because of its salience in the
context of uncertainty, trust plays a critical role for service providers and B2B
marketers [19].
At the same time it very clear that effective services marketing depends
on the management of trust because the customer typically must buy a service
before experiencing it [20]. From point view of this paper, authors define
customer trust as the customer's overall perception towards the ability,
benevolence and integrity of the provider [21]. Interacting with other
individuals, who are inevitably independent and not fully predictable, combined
with an inborn need to understand the actions of others, presents people with an
overwhelming complexity. The impossibility of controlling the actions of others
or even just fully understanding their motivation makes this complexity so
staggering that it can actually inhibit intentions to perform many behaviors.
Since people need, nonetheless, to interact on a continuous basis under such
unpredictable circumstances, they apply a variety of methods for reducing this
crushing complexity. Without these complexity reduction methods people could
not interact with others on more than a onetime and uncommitted manner, and
probably would not wish to, either [5]. Trust precedes the development of
commitment. This is important to bear in mind because the two notions,
although closely related, are quite distinct [11].
A.1 Quality
A major prerequisite for trust is the ability to interpret the other’s true
intentions .Trust leads to a high level of affective commitment. Social exchange
theory explains this causal relationship through the principle of generalized
reciprocity. Trust leads the involved parties to focus more on the ‘‘positive’’
motivation because of a sense of affiliation and identification with each other,
and this may be a stimulus to focus less on calculative reasons for attachment to
a supplier firm [11] .Trust, in a broad sense, is the confidence a person has in his
or her favourable expectations of what other people will do, based, in many
cases, on previous interactions [22], Based transaction cost analysis (TCA)
framework, TCA scholars have argued that trust has the important effect of
lowering transaction costs.
However, TCA related constructs also influence the level of trust in the
economic exchange. In continuous, inter-organizational transaction, trust can be
either an antecedent or a consequence of any constructs, including TCA-related
ones [23] the degree to which the supplier could meet the functional
requirements of the purchasing managers influenced the extent to which the
latter trusted their supplier [11]. Similar in the financial sector. The impact of
three specific quality dimensions on trust between suppliers and buyers of hightech products investigated in [24]. That study was based on both normative and
empirical assertions that trust depends on the credibility of the product and the
quality of the service.They concluded that quality influences trust because hightech products are complex, technologies change rapidly and malfunctions are
frequent [11].
A.2 Bonding
Before trust develops, some guarantees should exist. Efficient customer
bonding techniques may serve in this direction by reducing the uncertainties of
the outcome of the relationship because it is a process through which the buyer
and the provider build a relationship to the benefit of both parties. Writers in
the field distinguish between two broad categories of bonds: structural and social
[11]. Structural bonds describe ties at corporate level that, if severed, they incur
considerable costs for the party responsible.
They last beyond the relationships that grow between the interacting
individuals [11, 25]. Specifically, in a study of the bonds that develop in the
advertising industry, apart from the social bonds, identifies three more types of
bonds [11]. The confidential information the agency gains about the client’s
goals, internal policies or business; the inter-organizational agreements, routines
and norms of conduct that develop in a relationship, making coordination easier
and more efficient and the costs (monetary and not) that the client can expect to
suffer if switching from its current agency [11].
Customer power
Customer power is the ability of a customer to influence the decisions of a
manufacturer in a supply chain [26]. Seminal work classifying power into five
sources holding up to extensive empirical testing for almost 50 years.
B.1 Non-Mediated Power
Non- Mediated Power sources, which are more relational and positive in
orientation, include expert, referent, and traditional legitimate [15, 27, 28].
Expert power Customer has knowledge, expertise or skills desired by the
manufacturer, Legitimate power Manufacturer believes customer retains
natural right to influence it, Referent power Manufacturer believes customer
retains natural right to influence it [10, 28]. Expert, referent and legitimate
power are considered non-mediated, because the manufacturer, itself, decides
whether and how much it will be influenced by a customer [10].
B.2 Mediated
Mediated power sources, which include reward, coercive, and legal
legitimate, involve influence strategies that the source (buyer) specifically
administers to the target (seller). Mediated bases represent the competitive and
negative uses of power traditionally associated with organizational theory [29].
Reward and coercive power are considered mediated because their use is
controlled by the customer, which can reward a manufacturer by creating
positive consequences, such as placing customer orders [10]. In reward power
Customer has the ability to mediate rewards to manufacturer, where in coercive
power Customer has the ability to mediate punishment to manufacturer [10, 28].
National culture may play an important role in supply chain power. In a high
power distance national
[30] Because non-mediated power is based on the
perception of the source’s power, rather than on its exercise [10]. In addition,
members of high power distance national cultures are more willing to accept the
use of coercive and reward power because the use of power needs less
legitimization in a high power distance national culture [10].
Communication
Extant research has demonstrated the necessity of two-way interorganizational communication for successful supplier relationship [31, 32].
Effective inter-organizational communication can be characterized as frequent,
genuine, and involving personal contacts between buying and selling personnel
[33] , at the same time communication can be classified as; Technical and
Semantic.
Relationship commitment
Relationship commitment is the willingness of a party to invest financial,
physical or relationship-based resources in a relationship [13]. In most business-
to-business (B2B) exchanges, achieving a sale is not the fulfillment of an effort
but rather an event in a broader endeavor to build and sustain a long-term
relationship with the customer and see that sales keep coming [11]. Thus, the
major issue is to examine what influences the customer’s willingness to remain
with the existing supplier and furthermore to advance the relationship by
investing in strengthening the ties with the supplier [11].
Product quality has traditionally been considered a major prerequisite for
gaining this kind of behavioral response from the customer. However, as
technology in many industries becomes a commodity, the importance of quality
alone in deriving loyalty diminishes rapidly [11]. Marketing scholars have been
responsive to this need. In most occasions, practitioners are advised to refocus
from transactions to relationships [11]. This eventually led to the introduction
and systemization of a new paradigm in marketing, that of relationship
marketing [34]. Put it simply, relationship marketing seeks to cultivate a close
relationship between the customer and the supplier and a sense of commitment
of the former to the latter [11].
In return, the goal to obtain this sense of commitment brings the notion of
trust on the top of the supplier’s agenda [11]. Within this framework, substantial
empirical contribution has been derived from studies conducted within the
international marketing and purchasing (IMP) group of mainly European
researchers who investigated the management of relationships between suppliers
and buyers [35].
Within this broader stream of research, trust and commitment are two
highly interrelated notions [36]. which stimulating a relational bond between the
supplier and the customer that facilitates the establishment of productive
collaborations. Therefore, uncertainty in the relation is reduced, resource
utilization efficiency is increased and value, for both parties, is generated
[37].Despite the importance of trust and commitment though, the scholarly
inquiry on the issue is hampered in three ways. One is the limited academic
research to empirically document the factors that affect trust and commitment
in marketing exchange relationships.
Rather, the mainstream of the research effort has been directed toward
the study of inter-organizational relationships such as joint ventures or less
institutionalized relations with the members of the channels [37,38]. A second
issue relates to the failure to distinguish trust from related factors, i.e., factors
that precede the development of trust and influence it [39] On the contrary, with
the notable exception of a limited number of empirical studies [13,24,37] , many
empirical studies assess trust by measuring sincerity, goal congruence [40],
honesty, beliefs about information sharing [41], etc. Consequently, the
conditions, which vest the relationship with trust and commitment, remain
veiled. Finally, a third reason is the conflicting evidence regarding the
directionality of the relationship between trust and commitment. [13, 24] , for
instance, suggest a causal relationship from trust to commitment,.
Furthermore, when it comes to the marketing of services and specifically
to B2B markets, with the exception of the study of [39], the empirical
documentation is even slimmer. Yet, services are increasingly becoming a vital
component of the product that the customers buy, even when it comes to such
tangible products as computers or cars [42]. In view of these difficulties to
underpin our understanding of trust and commitment development in B2B
services marketing relationships, an investigation of two specific factors and
their role in cultivating trust and commitment is attempted: The quality of the
service, as it is perceived by the client, and the customer bonding techniques
used by the supplier. In doing so, the causality of the relationships between the
various constructs is also examined. The next of the paper is organized as
follows. First, the hypotheses of the study are developed based on relevant
literature. Then, the methodology that guided the research effort is discussed.
Next, the analysis used to test the hypotheses is presented followed by the
discussion of the findings, the implications and the suggestion for future
research. The degree of trust that develops between companies has been
described as a ‘‘fundamental relationship building block’’ [43] and a ‘‘critical
element of economic exchange’’ [44] . The more the customer trusts the supplier,
the higher the perceived value of the relationship by the customer [45] ;
consequently, one can expect that the greater the chances will be that the
customer remains in the relationship, as for the customer of B2B services, trust
is an important element of the perceived quality of the service [46] .
Trust has been conceptualized as the self-assurance that the relationship
collaborators have developed reliability and integrity between them [13] and a
belief that the other company will only perform actions that will result in
positive outcomes [39] defined trust around the same notion: a state between two
parties that are involved in a relationship according to which the party that is
perceived as controlling assets (e.g., resources and know-how) that the other
party values will continue sharing them in a mutually beneficial manner. [47]
Suggests that trust develops successively; it is the result of a gradual deepening
of the relationship through a process of mutual adaptation to the needs of the
other party although not necessarily symmetrically. Research has also indicated
that multiple types of trust, with both behavioral and cognitive dimensions [44] .
In this study, trust is conceptualized as the confidence of the exchange actors in
the goodwill of each other. It is a non calculative reliance in the moral integrity
and goodwill of others on whom the exchange actors depend. Trust is then
considered as a deep-rooted belief in a partner’s altruism and in the moral order
of the relationship [44] .
This conviction leads to integrative behavior, which eventually prolongs
the duration of the relationship [48] by enhancing the dedication in the
relationship [13] and serving as a means for coordination. In addition, frictions
risen due to deficiencies that are inherent in all relationships are easier to solve if
trust has developed [47]. Commitment is the desire for continuity manifested by
the willingness to invest resources into a relationship. Many authors have
described commitment as a notion including developed cooperative sentiments
[49] , strong preference for existing partners [50] and propensity for relation
continuity [51] . Along the same lines, [13] define commitment as the belief of an
exchange partner that the ongoing relationship with another is so important as
to deserve maximum efforts at maintaining it indefinitely. Similar are the
opinions of [39] who conceive commitment along the same line. Interestingly
enough, commitment does not appear to be equally important for both suppliers
and customers. Empirical evidence exist [52] , which demonstrate that suppliers
are more concerned about gaining the commitment of their customers in the
relationship than vice versa. Several different motivations can underlie this
intention, thus leading to two different types of commitment: affective and
calculative commitment [53]. Both types are relatively stable attitudes and
beliefs about the relationship but stem from different motivations for
maintaining a relationship. The motive underlying affective commitment is a
generalized sense of positive regard for and attachment to the other party [54].
An affectively committed company desires to continue a relationship because it
likes the partner and enjoys the partnership [55].
It experiences sense of loyalty and belongingness [56].On the other hand,
calculative commitment stems from an anticipation of high termination or
switching costs associated with leaving from the relationship. It results from a
calculation of costs and benefits which is detached from the context of the
relationship itself [57] . Thus, calculative commitment is based on the perceived
structural constraints that bind the firm to its partner and not a cognitive
consideration of possible future opportunities provided by the latter.
Consequently, relations that are based on calculative commitment continue on
cost–benefit basis and after it is decided whether it is possible to leave the
relation. This motivation consider as ‘‘negative’’ as compared with the
‘‘positive’’ motivation underlying affective commitment [58].
Trust leads to a high level of affective commitment. Social exchange
theory explains this causal relationship through the principle of generalized
reciprocity [59] . Trust leads the involved parties to focus more on the ‘‘positive’’
motivation because of a sense of affiliation and identification with each other,
and this may be a stimulus to focus less on calculative reasons for attachment to
a supplier firm [24]. To this direction are also the findings of a study [48]
investigating the relationship between retail buyers and their vendors in the
United States, which showed that the more the vendor gains in trust, the more
committed the buyers become. Similar empirical findings can also be found in
the studies of [, 13, 24]. Relationship commitment can be classified as normative
or instrumental [27].
Normative Relationship Commitment
Normative relationship commitment is a mutual, ongoing relationship
over an extended period of time which is based on mutual commitment and
sharing. At the heart of normative relationship commitment is trust; Mediated
sources of power are inconsistent with normative relationship commitment
because they are manipulative by nature [10]. Customer’s exercise of reward
power manipulates the manufacturer through the provision of rewards for
desired behaviors, which flies in the face of the trust that is at the heart of
normative relationship commitment [10].
Negotiation Strategy
At the operational planning level the task of Master Planning (MP) plays
a crucial role [70]. It serves to balance supply with demand over the planning
horizon and to synchronize operations across the SC [71].The implementation of
a centralized MP however requires a high degree of integration among
participating organizational units [70]. In a supply chain network, all
manufacturing functions might be dispersed and carried out in diverse locations.
In addition, a number of business entities must be collectively responsible
for procurement, manufacturing and distribution activities associated with one
or more families of related products. This constitutes a dynamic supply chain
network design problem, where configuration of supply chain entities must
coincide with the product fulfillment process. To coordinate different supply
chain entities, negotiation decisions have been identified as crucial for a
successful supply chain network design [60], and of critical importance in ecommerce applications where the supply chain is dynamic and reconfiguring
[61]. New developments in electronic commerce promise to reduce the cost and
complexity of these supply chains while promoting fast and flexible configuration
[62]. From these requirements, a new class of problems has emerged and is being
addressed by cooperative frameworks for manufacturing networks [63, 64, 65,66
].We consider that a negotiation is successful, if a mutually acceptable contract is
reached within reasonable time [67]. The negotiation environment considered
covers multi-issue contracts and multi-party situations, while being a highly
dynamic one, in the sense that its variables, attributes and objectives may change
over time [67]. Second, to provide an efficient negotiation strategy, for the case
where the negotiators face strict deadlines, which is in most cases private
information [68].
In contrast to traditional centralized control and management systems, a
supply chain network becomes a distributed paradigm, where different
participants collaborate and negotiate with one another to achieve the overall
functionality [69].
Why supply chain integration STRATEGY?
Global competition and escalating customer expectations have forced
manufacturing companies to focus more and more on delivery speed,
dependability and flexibility to meet changing customer requirements [72, 73].
To enhance these capabilities, many companies have implemented supply chain
integration (SCI) strategies [74]. SCI is defined as the degree to which a firm
strategically collaborates with its supply chain partners and collaboratively
manages intra and inter-organization processes, to achieve effective and efficient
flows of products, services, information, money, and decisions, with the objective
of providing maximum value to customers at low cost and high speed [74, 75]. At
the tactical level, the literature suggests that there are two interrelated forms of
integration that manufacturers regularly employ see figure 1.
Fig .1 two interrelated forms of integration
Proposed model
The proposed model, see figure.2, proposes the impact of the Trust, Power
[Mediated (Med) and Non-Mediated (Non-Med)], Negotiation (Neg.), and
Communication(Comm.) on Relation Commitment at the first stage and the effect of
on Relation Commitment [normative and instrumental] on customer integration on
the second stage, based on a holistic perspective of customer integration by
employing both transaction cost theory and social exchange theory and using
power–relationship commitment theory, see figure 2.
Figure.2: Proposed Model
Future work
The future work is going to be defining the hypothesis, designing the
questionnaire, collecting data to examine the proposed model. We aim to target
the Arabian Gulf Area.
Conclusion
Authors have provided a holistic perspective of customer integration by
employing both transaction cost theory and social exchange theory, and
investigated the impact of trust , communication , power, negotiation and
relationship commitment on customer integration, using power–relationship
commitment theory. This paper makes a significant contribution to the SCI and
relationship management literature by proposing a model for the influence of
power on relationship commitment in a supply chain context. This paper
proposed that power, trust, communication negotiation, and relationship
commitment are especially important for customer integration.
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