University of Tampere

The role and value of long term relationships
in business to business environment

by

 Oliver Friede

Table of Contents

1. Introduction 1

2. Relationships between Companies 1
2.1 Problems, Uncertainties and Solutions 1
2.2 Changes and Development of Buyer-Seller Relationships 3
2.3 The Role of Relationships in a Reduction of Complexity 6

3. Strategy in Business Markets 7
3.1 Strategic Management and Business Relationships 7
3.2 What Relationships Mean for Strategy in Business Markets 8

4. Developing Strategy in Business Market 10

5. Business Relationships 12
5.1 Suppliers Relationships 12
5.2 Customer Relationships 13
5.3 Distribution Relationships 13
5.4 Managing Business Relationships 14

6. Building Long-Term Relationships 15

7. Summary 18

References III

Table of Figures

Figure 1: The development of buyer-seller relationships 5
Figure 2: Strategic options for revenue generation 10

1. Introduction

The profitability of any company and stability in its activity depends on the preferences of their customers. Marketing mix also plays a very important role. Analysing custom-ers company should choose the product to produce, price for which to sell, place of selling, the strategy of distribution and advertising. Company should not ignore their competitors. During recent years the importance of inter-company relationships has been widely recognised. Customers are always searching for suppliers that can and are prepared to meet their requirements. To make a right decision it is necessary to analyse the market. That is the work of departments. The relationships between buy-ers and sellers are rather like the relationships between people. Two companies are surviving due to each other. Relationships exist between all suppliers and their cus-tomers in business markets. The decision that managers of a company face are mainly how to achieve that relationship and what sort of relationships they would like to have. Company have to set priorities between their different relationships, allocate resources accordingly and manage them individually. An important task to build rela-tionships with the customers, which will span not just several months but be counted by decades. Long-term relationships company behave according to the values that create genuine trust over time: quality, honesty, accountability and fairness. To serve clients now and as far into the future as they may need a company. Company have to strive to build long-term relationships with our customers this enables both partners to share in the economic benefits and trust established by a continued relationship.

2. Relationships between Companies

2.1 Problems, Uncertainties and Solutions

How do companies relate to each other in business markets? A useful way to examine how companies relate to each other is to analyse the problems and skills that each brings to their relationship. How buying and selling companies face similar issues in buying markets and how the tasks of relationship management are similar for both of them?

Buyers′ uncertainties

1. Buyer has need uncertainty:
   A buyer company may have difficulty in specifying its requirements (especially when they are new, or when complex technologies are involved). These buyers are likely to value suppliers with a strong brand that they feel they can trust.
2. Market uncertainty:
   It may also be uncertain about the nature of the supply market it faces. The buyer will need to scan its supply markets widely and may use several suppliers and "keep its distance from all of them".
3. Transaction uncertainty:
   It may be faced with suppliers it does not know or trust, or might not get what it thought it ordered. The buyer will need to interact closely with a supplier to check it skills and resources and monitor such things as its deliveries, quality and price.

Sellers′ uncertainties

1. Capacity uncertainty:
   A selling company is often very uncertain how much it will be able to sell of a particular product or service a coming year. These companies will be keen to gain additional business from other customers, often at very low margins, in or-der to utilise their capacity.
2. Application uncertainty:
   The way a product is used by customers may also change rapidly and often in quite different direction. Sellers must develop strong mechanism for scanning its customer relationships and the changes that customers face.
3. Transaction uncertainty:
   A seller may not trust the buyer actually to take and pay for the volume it has ordered and it may also be uncertain that the buyer actually needs what it says it wants. The seller will need to interact closely with its customer to cope with this uncertainty and to try to limit its dependency on anyone relationships.
   
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