Essays on supplier responsiveness and buyer firm value - Nyenrode ...

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2.1 Introduction A central tenant of marketing is market orientation. The most important facet of market orientation in a business-to-business (B2B) context is the supplier’s response to the buyer’s needs (Kohli & Jaworski, 1990). This responsiveness is described from the seller or supplier’s perspective as a business philosophy by McNamara (1972). Other scholars have conceptualized it as a business strategy with performance implications (Narver & Slater, 1990), whereas some argue that it is an approach with which to reduce business relational idiosyncratic risk. From a customer’s perspective, market orientation is the perceived supplier’s market responsiveness to their needs, both latent and explicit (Slater & Narver, 1998). 1 Both the supplier and customer recognize market orientation as an important framework for remaining competitive. The importance of market orientation in the academic marketing domain can be gauged by the 3,835 instances in which, according to Google Scholar, Kohli and Jaworski’s (1990) article has been cited. From a managerial perspective, it can be judged by the performance of highly market-oriented companies such as Apple (iPod/iPhone), Sony (Walkman), Philips (Senseo coffee machines) and Google (search engines). These companies illustrate the positive link between a firm’s market orientation and market performance. Despite the importance that market orientation has in both academic and business contexts, the influence of strategic supplier responsiveness on customer marketplace performance is an academic area that is in its nascent stages. In this regard, recent evidence from the business world suggests that a lack of strategic supplier responsiveness or market orientation could be disastrous for the customer. Toyota is one such example; the automobile manufacturer’s strategy of leaner and more efficient suppliers was a global managerial mantra. However, its supplier’s recent breaking system fiasco in the United States caused Toyota to lose a fifth of its market value and prompted an expensive automobile recall (Kim & Krolicki, 2010). The current study investigates whether supplier responsiveness reduces idiosyncratic relational risk (IdRR) and if it generates value for both the supplier and the buyer. We use two different sets of metrics to assess the value that is generated for the supplier and buyer. For the supplier, we assess whether the value that is generated ameliorates intangible market-based intellectual assets. This is because in times of trouble, intangible non-financial benefits usually bind buyers to their sellers (Narayandas, 2005). Therefore, such non-financial tangible assets provide the firm with valuable resources. For the buyer, we assess the expected cash flow, which is a widely accepted and frequently used measure of firm value. In the next section we define the five key constructs of this paper, namely: IdRR, supplier responsiveness, buyer satisfaction, supplier brand value, and buyer firm value. The first construct is IdRR. We borrow the term idiosyncratic risk from the finance literature and modify it to IdRR. Two kinds of risk are explored within the finance literatures. One form is diversifiable, which means that adopting a portfolio strategy in which companies may invest can eliminate idiosyncratic risk. The mechanism that eliminates the investor’s risk is that some of the security prices of their portfolio may fall, whereas other companies’ prices will rise. Overall, this leads to a reduction in the investor’s risk, as he has avoided placing all eggs in a single investment basket. Hence, the idea of diversifiability is essentially the act of diversifying investments so that risk can be 1 For the purpose of this dissertation, supplier responsiveness refers to the customer’s perspective of the supplier’s market orientation. 22
educed. Another kind of risk is one that cannot be diversified by a portfolio strategy, and that phenomenon affects all firms within the market. An example of such undiversifiable risk would be the threat of sudden fuel price increases. An undiversifiable risk that affects the whole market is called a systematic risk, and the other form a diversifiable risk that affects individual firms but not the whole market, is called idiosyncratic risk (Sharpe, 1964). Idiosyncratic risk is the more important of the two kinds of risk because it typically comprises eighty percent of the risk that firms face on the stock market (Srinivasan & Hanssens, 2009). We refer to buyer IdRR as the risk that exists because of entering into a specific relationship with another company. On the continuum of customer and supplier relationships that range from transactional to strategic alliances, those that are strategic involve the most customer risk (Kraljic, 1983). The reason why the risk in strategic relationships is mostly idiosyncratic is because it is reduced by an understanding of the partner’s idiosyncratic business needs and willingness to take steps to meet those needs or in other words, it can be diversified. This perspective is different from systematic risk, where the firm has no ability to control such risk. In a way, our conceptualization is parallel to the concept of idiosyncratic risk on the stock market. The second construct is supplier responsiveness or market orientation. Broadly speaking, market orientation is the implementation of the marketing concept (Kohli & Jaworski, 1990). There are two widely accepted conceptualizations of market orientation in the extant literature; the first considers market orientation to be a process that is composed of three core components: intelligence generation, dissemination, and supplier response (Kohli & Jaworski, 1990). The supplier’s response or responsiveness is considered the most important of the three because it is the sum of all of the market orientation efforts by the supplier to provide the buyer with a solution (Kohli & Jaworski, 1990). The second approach considers market orientation as a firm culture which gives rise to market-oriented behaviors. For instance, Narver and Slater’s (1990) cultural perspective of market orientation considers three sets of market-oriented behavior, namely customer orientation, competitor orientation, and interfunctional coordination. These behaviors are linked to the firm’s profitability. In spite of the conceptual differences of both approaches, they are geared towards the same goal of creating superior customer value through a response that is based on market intelligence. Moreover, supplier responsiveness is the only component by which a customer can judge the level of the supplier’s market orientation. The other two components of intelligence generation and intelligence dissemination are not always visible to the customer; hence, the customer cannot directly assess the quality of intelligence generation and dissemination. But the customer can judge it indirectly through the supplier’s responsiveness. Therefore, for the purpose of our research, we consider supplier responsiveness as the accumulative supplier response that is created by internal supplier firm intelligence generation and dissemination processes to meet their buyer’s needs. Our third construct is buyer satisfaction, which is an important relational outcome of the supplier’s responsiveness (Kohli & Jaworski, 1990). An analysis of the strategic context of the buyersupplier relationship is incomplete without considering the customer’s evaluation of the supplier’s response. Customer satisfaction represents the customer’s evaluation and some scholars consider satisfaction as a measurement of the cumulative buyer experience. Thus, buyer satisfaction has been defined as “an overall evaluation based on the total purchase and consumption experience with a good or service over time" (Anderson, Fornell, & Lehmann, 1994). This study uses cumulative buyer satisfaction instead of measuring transactional satisfaction because we are interested in the overall buyer assessment of the strategic supplier. The drawback of a transactional definition is that it would 23
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Page 4 and 5: Examination Committee Supervisor: P
Page 6 and 7: 2.3 DEVELOPMENT OF THE CONCEPTUAL M
Page 8 and 9: 5.1 RESEARCH FINDINGS 114 5.2 OVERA
Page 10 and 11: List of Tables Table 2.1 Representa
Page 12 and 13: PREFACE Oscar Wilde once said, “I
Page 14 and 15: Chapter 1 Introduction to the Thesi
Page 16 and 17: Figure 1.1 Mckinsey Survey Results
Page 18 and 19: 1.4 Scope PhD thesis This thesis fo
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Page 44 and 45: Table 2.2 Modified Items of the MAR
Page 46: Table 2.2 Modified Items of the MAR
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important finding because it provid
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3.1 Introduction The Netherlands, d
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possibility that firm size may infl
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Figure 3.1 The Netherlands and Unit
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comprehensive agreement on each oth
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Why do we pay more for an orange wi
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constructs, for cross-cultural fact
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will discuss the SEM analysis of th
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BFV Hypothesis 4 IdRR->SBV Hypothes
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products. Overall, the effects of s
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more diverse comparison. China is a
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Chapter 4 The Quest for Performance
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insurance premiums. Hence, perceptu
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theoretical contribution regarding
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should reinforce objective measures
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Table 4.2 Standardized Regression W
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Table 4.5 SEM Results Construct Dir
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4.7 Discussion We start this discus
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Jaowrski and Kohli (1993) provided
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Using the findings of our current s
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iii) iv) Indeed, there may not be m
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uyer firm performance through a ser
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specifically highlighted the import
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5.5 Practical Implications From a m
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Summary in English This dissertatio
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is that, when developing marketing
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isk by 0.98 standard deviations. Su
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collectivist culture and a Confucia
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Overwegende dat Verhoef en Leeflang
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van de waarde te communiceren dat d
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erkennen dat dit niet altijd een mo
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ij de vraag of cultureel risico voo
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Businessweek. (2012). S&P/BusinessW
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-industry-09012011.html Grewal, R.,
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Langerak, F. (2001). Effects of mar
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Quelch, J. (2007). How to brand an
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Verhoef, P. C., & Leeflang, P. S. H
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1. The name of the company where yo
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9.The supplier seems to have good i
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17. The supplier takes a very long
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25. If the supplier were to find ou
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33.Does your strategic supplier als
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41.To what degree do those specific
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Supplier Brand Value 51.How likely
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Appendix B Scatter Plot Diagrams fo
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