Business Network
Abstract
Over the last decade, the competitive business environment has seen significant changes. Corporations use business networks instead of traditional marketing methods. High-tech companies and large industries have a challenge of aligning their management to suit this new trend. The management has to look far beyond regular clients and suppliers, into a complex web of companies establishing research and development networks, reliable supplier’s web and ambitious partnerships. SMEs are also adopting and implementing the business coalitions in their operations just like their large corporation counterparts. The goal of business networks is to enhance competitive advantage and draw closer to the end customer. Essentially, companies that have successfully implemented business networking survive in the ever-changing business environment. This paper focuses on the management abilities need in a business network environment.
1.0 Introduction
Though the control of the suppliers and buyers relationship is not new, it is a “hot-topic” in academics and organizations. There are remarkable revolutions on this subject whereby traditional marketing techniques are rapidly superseded by webs of related companies and other players such as government agencies.
Manufacturing firms are continuously subcontracting their activities, except the ones offering essential proficiency. This outsourcing of vital services aims at developing stronger supplier relationship in services that are very relevant to the client company. The subcontracting process results in a hierarchical structure comprising of various lines of suppliers creating an intricate supply chain network. Various aspects guide the externalization. Elimination of trade tariffs enhances global competition forcing companies to improve their performance efficiency. Clients are in demand of shorter and pliable delivery schedules at lower costs. Quality is also an important factor in the business networks. Corporations meet these requirements by streamlining their supply networks whereby members specialize in areas of competence. Shorter lead schedule results from the combination of current technologies and practical goals. Adopting network in supplier departments allows firms to provide better services and products at competitive prices within a short time.
Change in marketing-distribution and the marketer-client relationship is also an apparent show of the network age. Worldwide competition makes it challenging to reach the final customer. This condition improves that status of distributors who have created a strong chain.
Evolution of client database management, effective client feedback, and eminence client programs further strengthen the status of distributors since it gives them a good chance to act as a bridge between producer and end customer. For firms to reach the global clients, marketing departments rely on building distributor relationship where vital info about the end clients is discussed.
A valuable factor in the battle to reach and manage the end client is the Internet. In essence, the Internet acts as a tool to create a first-hand link to global customers. From that view, the Internet and birth of E-commerce websites will change the stable condition of distributor and marketer. It may lead to the emergence of virtual companies which outsource all vital services such as product design, creation, and execution except client development and client database management. Production of competitive service and product, suppliers mean that virtual corporations will run through business networks.
Creation of corporate network forces companies to set operation standards. This aspect is evident in the electronic and telecommunication fields due to the battle over third generation “mobile phones”. Even large competing firms seem to form relationships to enhance their competitive advantage. Additionally, companies are developing horizontal coalitions with non-commercial players like colleges, government agencies, and research and development institutions in a quest to enter new markets. The government partnership allows firms to access restricted markets.
As seen from the above discussion, companies are rapidly forming complex networks involving the supplier, customer, competitor and non-commercial actors. This process has led to the birth of new marketing techniques and reliance on the Internet. The Internet also allows firms to reach global customers directly. The worldwide operation, improving competition and utilization of new technologies shortens the link between big business and their clients. Also, it draws resources close to these firms. Evidently, no single firm can stand independently since business networks have become more relevant in day-to-day operation.
2.0 Levels of Business Networks
This paper proposes four levels of business network management; industry as business network, firm in networks, managing coalition portfolios, and managing exchange coalition.
2.1 Industry as business network
Industries and social partnership create a contingent context for individual firms. To know the behavior of organizations in such environments, the business management requires a viable theory that addresses industry as network and how it operates.
Network theory offers a contingent plan that illustrates industries in three dimensions: activities, actors, and resources. An actor is not necessarily a company; it can be any institute or individuals who are vital to the understanding of business networks. A core idea is the important activities by which a partnership produces the value appreciated by actors, mostly final clients. Ideally, business networks and company behavior are related.
2.2 Firm in networks
This level calls the management to know the relationship between the company and environment. The management has to understand role and position of the business in the environment. Moreover, there should be understanding of how competition, technology, and coalition affect the business and how the firm can develop, counter and adjust its position in the network. A fundamental notion is a central domain that illustrates environment context of an actor. From a corporation point of view, a business network involves the actors that the management finds useful, that are in its networks.
2.3 Managing coalition portfolios
This level focuses on how a firm governs its exchange coalition. The view of a firm as a network or assets involves the internal control of assets, abilities, or operations in the domain of exchange alliances. Though such affairs are linked to the company’s networks stand, it is valuable to tackle with the related constructs separately. Critical thinking is a vital tool for the efficient management of firm’s customers and suppliers. Various kinds of clients/suppliers need a variety of managerial techniques for profitable operation.
2.4 managing exchange coalition
This level involves analysis of the cooperation and business network theory. This construct is depicted by content affairs like the essential component of exchange coalition and the primary contingent issues affecting the dyadic business relationship. From a process point of view, consideration is given to the forces affecting relationships, mainly how to manage it.
3.0 Network management abilities
The knowledge of individual client and supplier relationship creates a requisite of the administration in the business network levels discussed above. All the management affairs in these levels are related.
3.1 Network conceptualize ability
Network conceptualize capacity refers to the managerial skills and competency in developing viable business partnership and the possibilities of their emergence. That is a fundamental tactical knowledge which leads to the realization of possibilities set in the enterprise coalitions. However, intensive research has not been done on the network conceptualize ability yet. A lot of research is on how business network emerge and how to manage them. The conceptualizing knowledge closely relates to institutional studying construct and is illustrated in an organization capacity to create methodically and analyze the information on various networks, pertinent to the existing and future performance. Generating understanding of network is not challenging since the networks are usually non-transparent. Most importantly, comprehensive knowledge can only be created by being part of the networks or by building coalitions with actors who have knowledge of the systems.
3.2 Network management ability
Network management capacity is the company’s ability to deploy and organize the assets and actions of various players in the web. It’s an essential ability to create and control such profit-developing networks like the client, supplier, and research and development networks. Network management ability is also illustrated in the corporation’s activities when venturing into new systems, such as foreign markets and capacity of controlling network position. Additionally, this ability has gotten slightly scant research attention in marketing. Essentially, initial studies on controlling network position concentrate on public asset context and assess actors and their specific roles. Product creations by networking, entering a new market and controlling network coalitions in various contexts are also vital aspects of business networking.
4.0 Portfolio management capacity
The portfolio management capability involves the corporation’s competency in controlling suppliers and customers portfolios. It comprises systematic issues, such as competence in developing and utilizing database and handling vendors and clients’ evaluations, and coordinating issues like ability to create institutional solutions for tackling exchange coalitions. Thus, controlling of suppliers and customers portfolios research started back in the 1980s.
The notion of controlling suppliers/customers relationship as portfolios regards to the goal of maximizing the firm’s resources. The volume and kind of clients of a particular company can be considered as an asset since they affect present day and future sales, initiative input, cost structures and margin which consequently affect the profits. Active control of customers’ portfolio is the creation and sustenance of client relationship that promises a steady present-day and future profit for the firm. There should be the management of the time allocated to both potential and existing clients to ensure steady cash flow. Client portfolio control has two key levels: analytical portfolios control which emphasis on the allotment and accession of critical assets and pertains to core client kinds; and the operations managerial of crucial client types.
Special treatment should be accorded to these potential customers by whom the company can get useful assets or can reach other technologies, actors or markets. Some clients have knowledge of distributors or different product application that has emerged due to technological advancements. Technical managers regard potential customers as vital since the supply provides a chance for creating the vendor’s product technologies. Also, companies that buy shares or offer partnership deals are equally important. An example of such notable clients relationship includes; timely supply relations, product or process creation relationship, and marketer and distributor-oriented coalitions. Since the establishment and sustenance of such relationship may need assets, the revenue drawn from the customers is small and at times no revenue at all. Nevertheless, long-term relationship yields success through enhanced production technologies, client information, new distributing ability or entering new markets.
Though the notion of maximizing customers and suppliers portfolio seems simple, it has various management difficulties. It assumes that a company can gauge the future worthy of suppliers or clients and the resources required for the creation and sustenance of that cooperation.
The management must also establish any possible dependence before developing customer or supplier relationship. Getting a certain client may have a significant positive effect on getting other buyers through referrals, but it can as well have adverse effects by making some potential client relationship impractical due to stiff competition in the market. A similar case is also true for suppliers. Coalition conditions, such as crucial supplier and customers’ relationship, are mostly hard to evaluate; the partnership can affect the entire trade networks and yield persistent impacts that are hard to predict.
Portfolio management also needs institutional abilities in addition to such systematic cases. Various kinds of clients must be controlled differently, following their demands and value creating possibility. That aspect assumes institutional resolutions that consider these cases. Companies have to develop and control hybrid structures where these corporate decisions such as core account management, sale representative, the Internet and different distributor systems operate parallel.
5.0 Cooperation management capacity
The cooperation management capacity is the company’s proficiency in tackling personal exchange relationship. A significant sub-issue is the analyzing of the value of crucial relationship discussed in different sections. That creates a requisite for the effective control of exchange portfolios. Additionally, the cooperation management capacity is a multi-dimensional affair involving issues of systematic proficiency and institutional expertise. The management of customers and suppliers relationship attracted much research in the early 1980s, which rose in 1990s with the coalition market technique. The rationale of cooperation management capacity mostly resembles the analysis of portfolio management. The key issues comprise concerns how to create client value, how to analyze client lifetime worthy and resources required in a special partnership, and how to control a coalition, that is, to initiate, institute, sustain and at times, dissolve a partnership. Managing a network also bears a strong institutional aspect involving cases such as account management, customers and suppliers’ distinct terms and using client databases.
Early studies into marketing medium relationship try to determine effective management methods of involvement by their operation cost economics and behavior medium theory. The crucial recommendations relate to the potential conditions under which combative and cooperative methods interact are important. With the Internet marketing potential, studies focus on how suppliers and customers’ relationship emerge in with a goal of discovering their processes traits and establish aspects affecting the processes.
The capacity of appeal, engagement, and honesty and direct investment and modifications are also relevant to the study of marketing channels. Also, issues of client’s value reveal multi-dimensionality and cross-relation character of this critical phenomenon.
6.0 Importance of business networks
Ideally, establishing and sustaining networks is a great way to expand firm's operations and also learn from other actors. A company stands to get access to new clients, resources, and technologies. The primary goal of any organization is to get new customers. Thus, most organizations generate referrals from a partnership. Mostly, customers who result from referrals are consistent while others establish a long-term relationship. Networking also creates opportunities. The link between customers, suppliers and personnel, may lead to the creation of joint venture, new partnerships, resource sharing and product development. However, the management should only sign into opportunities that lead to the realization of the set goals and vision.
Firms that participate in network create new connections. These connections may be between powerful distributors, clients or government agencies. A Distributor can help a business to venture into new markets, thus, getting access to end customers. On the other hand, government agencies may help a firm to enter into restricted markets. Firms may learn different applications of a product from clients. Additionally, faithful customers usually refer the people in their social circles. Hence, any business that seeks to succeed in new markets cannot ignore the power of connections.
SMEs and new corporations get advice from successful ventures through networking. Additionally, established organizations still benefit from networks. The goal is to transfer and share new ideas between the players in a particular corporation. Companies raise their profile through networking. Companies that have resources such as new technology or noble ideals can convince other actors to adopt certain ideas. Such a firm places itself as a knowledgeable in the field of specialization.
7.0 Suggestions for developing and sustain business networks
Business partnerships always come with the utilization of resources. Therefore, a firm should be willing to invest time and finance to create a sustainable relationship. Due to the scarcity of resources, a company should endeavor to create maximum partnerships. Nevertheless, that is not possible since the company’s actions are independent of the activities of other players in a network.
Thus, traditional tactical plans are no longer viable. A company should have the ability to mobilize other actors if it desires to establish a strategic business partnership: players tend to comply if a corporation has current and compelling assets to offer or new technologies and markets.
Firms should enter into partnerships with related companies as it helps the actors achieve similar goals. Also, businesses in the same industry utilize similar resources, assets, and means of productions. These companies may also rely on the same distributors. Further, firms offering related services and products can share ideas on how to minimize production cost and maximize profits. However, the management should be keen to avoid sharing a unique idea that ensures competitive advantage. In the past, some companies have shared their patents without their knowledge.
New trends have also been evident where unrelated business enters into partnerships. Examples include firms that form coalitions with universities, government agencies and research institutions. The primary goal of such coalitions is to reach potential customers. Networks between businesses and research institutions aim at discovering new production methods and product applications.
Conclusions
As evident in this paper, traditional marketing techniques are rapidly replaced by business networks. Any single organizations cannot operate independently without involving other players in the market. Notably, firms have established customer and suppliers relationships that help them to achieve set goals. Firms profoundly relate via their joint asset dependence. Each company depends on its clients and suppliers. Hence, companies can’t individually manage their operations or destiny. Business networks position and roles of a firm rely on the partnership that it has with other enterprises. The key business network theory of how individual activities and coalitions are implanted in the large corporations is clearly evident in most high-tech firms. The management should have the knowledge of any network if it desires to sail through. If a firm has a better understating of a partnership, it will be in a position to forecast strategic goals set by the actors including competing firms, major clients, suppliers and governmental agencies. Understanding of the network also enables a company to analyze the impacts of actions initiated by the key players.
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