Q1: Firstly, explain what is meant with the “substance” and “function” of a business
relationship. Secondly, use the network approach (ARA-model) to make an analysis of the
connections that exitsts between the focal actors in the case before, during and after Saab’s
bankruptcy. Make sure that you to also include other relevant business network actors in the
analysis. Include the concepts of “substance” and “function” in answering the second part of
the question (20p).
Within the realm of business connections, relationships can and have been researched from two
perspectives, the “substance” and the “function” of the relationship. The “substance” of the
relationship consists of the values within the relationships, tangible and intangible assets shared
and/or exchanged between parties (ie. goods, services, social capital) (Håkansson & Snehota,
1989). It has also been described by other researchers as the “content” of the relationship.
Various relationship models have investigated different aspects of business relaionships,
including but not limited to: trust, communication, social bonding, interaction process, and
atmosphere. The above constructs emphasize the social aspects of the “substance” of a business
relationship. Additionally, relationship “substance” also includes the resources committed and
activities conducted within a business relationship.
The “function” of a business relationship denotes the functional aspects the relationship has for
the actors, dyad, and network. To me, this would mean the purpose a specific relationship serves,
ie. providing one partner access to new markets, other networks, sharing risks, or enhancing
operations. Specifically, the “function” should be how these specific relationships help various
organizations achieve their strategic and business objections, including adapting their business
models or processes and systems to align with those of their partners.
As noted by various researchers, strategic management theory has inspired industrial network
thinking (Gadde et al., 2003, p. 358). Gadde and colleagues (2003) suggests also that industrial
network reasoning may offer insights to strategic management theorists. The Actor-ResourceActivity (ARA) model of relationships includes the actor bonds (social aspects), activity links,
and resource ties as a way of categorizing relationship substance. Actor bonds are the social
constructs and attitudinal measures of a relationship; Activity links are the connection of
activities and how these activities affect the relationship; Network constraints are the effect third
parties external to the dyad have on the overall relationship. Lastly, resource ties denotes linking
each of the firms’ resources and how they affect the relationship (Anderson et al., 1994).
To analyze the case study using the ARA model, I will be denoting the actors, resources, and
activites during each time period of the bankruptcy. Before Saab Automobile’s (Saab)
bankruptcy, key actors included Saab, their supplier Alpha, and other unnamed suppliers and
customers. In this period, Alpha supplied custom-made parts to Saab, while Saab provided Alpha
with custom tools necessary for production. This production was closely tied through a just-intime (JIT) system, requiring synchronization of activities between the focal dyad (Saab and
Alpha), which included frequent communication, exchanges, and adaptation to fit the processes
of each company.
During Saab’s bankruptcy, the trustees, Alpha, former Saab employees, as well as potential
acquirers like National Electric Vehicle Sweden (NEVS) start to play more prominently as actors
in the model. In terms of resources, Alpha had to store Saab-specific tools and manage leftover
parts, reflecting a significant resource tie. With Saab’s operations halted due to their billions of
krona debt, Alpha now had to shift their activities towards maintaining their assets, seeking new
business opportunities, and focusing on survival strategies for themselves.
After the year Saab announced its bankruptcy, NEVS acquired Saab’s assets, becoming a main
actor, as well as Alpha, who now have to consider re-engagement in the partnership with NEVS
at the helm. NEVS was looking to utilize Saab’s existing tools, resources, and relationships to
restart production by attempting to reestablish relations with Alpha by ensuring and emphasizing
financial stability and projected sales, even being willing to comply and adapt to payment
upfront due to Alpha’s past challenges with bankrupt Saab.
It is thus clear that the substance of the relationship with Saab and Alpha (tools, parts, production
capability) was largely intact post-bankruptcy and acquisition by NEVS, but the function
(operations, financial exchanges, partnership terms and negotiations) needed significant re-
evaluation, re-alignment, and re-building of trust and commitment to adapt to the new market,
partnership, and ownership realities.
Q2: NEVS managers faced some “surprises” when trying to reactivate the relationship with
the supplier Alpha. Based on the course literature one could argue that these “surprises” are
related to NEVS having a traditional strategic management approach to the acquisition. First,
describe this traditional strategic management approach and how it is connected to the case.
Second, explain what strategizing is about according to the business network approach, and
how using this approach in planning the acquisition may have helped NEVS management to
gain a better understanding of the challenges they were about to face with Alpha (20p)?
As cited by Gadde and colleagues (2003, p. 358), Johanson & Mattsson (1992) argued that the
strategic management approach on strategy usually concerns efforts by one actor to influence
relationships with an outer environment while the network perspective defines it as efforts of a
firm to influence its position in the network of which it is a part of.
In strategic management literature, it is commonly theorized that “strategy is about winning”
(Gadde et al., 2003, p. 358), and in a critical analysis of such literature on strategy, Ghoshal and
colleagues (1999) (as cited in Gadde et al., 2003, p. 358) even suggests that the destruction of
social welfare is not a coincidental by-product of strategy, but a fundamental objective, since a
managerial task in this theory is to prevent competition. This is followed by Porter (1980),
suggesting a five forces model — consisting of striving for independence and power over buyers
and suppliers, particies actually cperceived as representing threats to the success of any focal
firm. This view then provides a specific perspective on the relationship between ‘winning’ and
‘stragegy’, implying that winning means someone has to lose, while competition becomes the
strategic focus in and between conflicting and rival relationships (Gadde et al., 2003, p. 358).
Even in the case where more cooperation is acknowledged, strategic management theory is still
often defined as focusing on “how firms may improve their performance in competitive
interactions with other firms (Sanches & Heene, 1997), and Barney (2002) defines strategy also
as a “firm’s theory about how to compete successfully” (as cited in Gadde et al., 2003, p. 358).
Linking this to the case study, a traditional strategic management approach typically would focus
on top-down planning, emphasizing internal capabilities and market positioning without
extensive consideration of the broader business networks system. In NEVS’ case, this was an
evident approach due to their confidence in being able to immediately rekindle their supplier
relationships simply due to their financial abilities and business planning. The company acquired
Saab with the assumption that the past relationships Saab had (ie. Alpha as a supplier) would
similarly seamlessly transfer and reactivate with NEVS simply due to their financial backing
without substantial hurdles or negotiations.
According to the business network approach, perspective interdependence and coevolution are
crucial, while competition becomes less important. Recent developments also pertain to the idea
that at the core of strategy, the ability to build and maintain relationships with other actors is
vital, and how a firm handles its relationships with others is of the utmost importance (Gadde et
al., 2003, p. 358). The concept of “strategic identity” is also included in the network model. It
suggests that establishing and maintaining relationships with other parties is a means for
achieving fitness in a relationship. The performance of an organization in a relationship is also
perceived and evaluated by the other parter on a basis of previous experiences and present
expectations (Håkansson & Snehota, 1989). The action (or reaction) of the other party is only
triggered by the perceived exchange potential of the focal actor. This perception of exchange
potential is largely determined through social interaction — therefore is enacted, not
predetermined and given (Håkansson & Snehota, 1989). Firms thus, are embedded in various
networks where both economic and social factors are crucial to their success in strategy and
relationships. For instance, Ford et al., (1998, p.107, as cited in Gadde et al., 2003, p. 358)
argues that in such business network approach relationships characterized by collaboration and
mutual dependence, strategy thus takes on a different meaning: “[shifting] from that of pursuing
a victory over others to somehow making it together with customers and suppliers, distributors,
and development partners”.
As such, we can clearly see that strategizing in a business network approach involves a clear
understanding of the interconnectedness and interdependencies of various network actors. This
approach emphasizes the cruciality of relational strategies over competitive ones — focusing,
ultimately, on co-creating value through collaboration and mutual adaptaqtions. Had NEVS
employed this perspective on strategy, they would have been better prepared for the complexities
of reigniting the partnership with Alpha, and probably would have had better success much
quicker. By recognizing the history of Alpha’s relationship with Saab under different ownership
structures, specific adjustments needed post-bankruptcy would have provided NEVS with
insights and better pr4eparedeness into Alpha’s cautious stance with regards to finances and
upfront payment for their services. Understanding such network dynamics as well as their mutual
dependencies would have allowed NEVS to enter into negotiations more effectively,
acknowledging Alpha’s losses and need for financial reassurances about NEVS’ long-term
viability as a partner. Should NEVS had adopted a business network approach, they could have
approached rekindling the supplier relationship with Alpha with the aim to rebuild trust and align
strategic interests, alleviating and mitigating the “surprises” they encountered with Alpha.
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