Inter-organizational relationship

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.


Soosay et al. (2008) defines collaboration as, "an inter-organizational relationship type in which the participating parties agree to invest resources, mutually achieve goals, share information, resources, rewards and responsibilities as well as jointly make decisions and solve problems."  Collaboration within international supply chain management can be broken into two categories: 1) an international joint venture and 2) the exchange of information throughout the supply chain to minimize the bull-whip effect.  There are several collaborative strategies to consider when entering into an international joint venture are exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries.  The difficulty and cost associated with changing the structure of an international collaboration makes the decision of how to enter a new market critical, Shrader (2001).  International collaborations have additional barriers to overcome with the differences in national cultures, business structure, and language Sheu et al. (2006). 

Wong (1998) examines the failure of the international joint venture (IJV) of Wing On Co Ltd, a Hong Kong retailer, and Seiyu Ltd, a Japan retailer.  The paper notes that although the collaboration initially was very profitable, when Wing On experienced losses resulting from the IJV, both parties became inactive in the collaboration.  The research concluded that collaborations require additional and ongoing negotiations so that the perception of balance within the collaboration is maintained. 

Shrader (2001) examined the performance of seventy United States based newer high-technology manufacturing firms that entered foreign markets.  Twenty of the seventy firms gained entrance to a foreign market through collaboration with a local firm.  The research found a strong negative relationship between performance and the interaction of collaboration and R&D intensity.  However, the research found a positive relationship between performance and R&D intensity without collaboration, suggesting that firms with high R&D intensity should not enter into collaborations when entering foreign markets.  Shrader (2001) found that collaboration with a local firm benefited those firms attempting to differentiate themselves using a high level of advertisement. 

Li et al. (2009) examined the effect that the level of the foreign equity share has on the productivity of the collaboration for 5,192 IJV's over three years.  The research found a positive relationship between productivity and foreign equity share to a point and then the effect becomes negative.  Therefore, the relationship between foreign equity share and productivity has an inverted U-shape, with foreign equity share having a positive effect on productivity up to 57%. 

A successful collaboration requires a partnership committed to continuous improvement and shared benefits, Soosay (2008).  Sheu et al. (2006) stated a successful collaboration requires participates committed to supplying nurturing and financial support.  Further research is needed to better understand the impact of an IJV organization structure and how it differs from the parent companies in determining collaboration success.  Researchers could extend the research of the limited success of IJV with higher R&D intensive firms. 

It is generally accepted that collaborative exchange of demand and supply information will lead to lower inventory costs and improved supply chain responsiveness.  Holweg et al. (2005) identified four type of supply chain collaboration:

Type 0, each level of the supply chain schedules production and places orders without the involvement of other supply chain participants

Type 1, sharing of demand information

Type 2, the supplier is responsible for managing inventory levels and replenishment

Type 3, with external demand linked through the supply chain to raw material achieving a synchronized supply chain

The article identified three key factors to consider when working towards supply chain synchronization: 1) geographical distribution of customers and suppliers, 2) the demand pattern, and 3) product characteristics. 

According to Holweg et al. (2005) the frustration multi-national firms experience with supply chain collaboration is the result of mismatches between supply chain structure, product characteristics, and the type of collaboration.  Multi-national firms should apply Type 3 collaboration with products where the demand and supply are local, Type 2 collaboration has been implemented successfully with slower moving non-perishable products, Type 1 is useful to generate better forecasts.  However the research states, in many cases given the large number of customers and suppliers, moving away from Type 0 supply chain collaboration is not economically viable. 

Frohlich and Westbrook (2001) surveyed 322 firms from around the world classified as manufacturers of fabricated metal products, machinery and equipment to measure their extent of supply chain collaboration and its relationship to marketplace, productivity, and non-productivity indicators.  The article classified the level and direction of supply chain collaboration as inward, periphery, supplier, customer, or outward.  A strong association was found between increased supply chain collaboration and increased performance of the firm.  

Additional areas of research include the level of supply chain collaboration in the service industry, factors contributing to increase supply chain collaboration, and case studies of international supply chain collaboration including at least three levels.  The included research support collaboration as a strategic concept that bridges all fundamental theories of the firm.  International collaborations are multi-organizational structures that must address barriers from institutional to cultural


Adaptation defined in the neo-classical framework is a complement to standardization (itself a consolidation strategy) in designing products to achieve efficiencies in production.  The objective of adaptation is to adjust supply chain design to accommodate market changes.  Methods include tracking economic changes, especially in developing countries; the use of intermediaries to find reliable sourcing in unfamiliar parts of the world; and supply chain differentiation for unique product line requirements.  The best supply chains identify structural shifts, often before they occur, by analyzing the latest data and tracking key patterns, utilizing this knowledge to relocate facilities, re-source supplies and outsource production.  

Adaptation may require collaboration between firms in order to be responsive. In the case of Microsoft hardware supplier Flextronics, and the Europe and North American launch of Xbox, adaptation of production facilities close-to-market (in Hungary and Mexico) resulted in agile technical support, swift engineering modifications, and a stiff challenge to the market leader Sony (Lee, 2004).

In the neo-classical framework, flexible manufacturing enables products to be mixed in assembly without expensive set-ups or re-tooling. This requires considerable investment in productive resources. Jahre (2005) describes the evolution of supply chain adaptation moves outward from local (one activity) to intra-organisational (i.e. cross-departmental inside a company), then to inter-organisational (i.e. supplier-customer relationships), "external" chains (i.e. supply chain), multiple "external" chains (i.e. network) and, finally, to wide social optimisation that deals with safety, social, ethical and ecological objectives. International adaptation may occur at any system level, from an individual activity or resource consideration, to an inter-organizational level.  Canning and Hanmer-Lloyd identify uncertainty and cost as the key driver in implementing an adaptation strategy.  In the area of environmental adaptation, it was observed that in international markets where legislation was proposed or adopted altering the environmental standards of business operations-such as the ban on CFC's--partnership and adaptability was favored in an effort to be proactive; in another case the necessity of adaptation was to reclaim value of electronics at end-of-life as well as to meet environmental waste reduction requirements of other nations.  

A resource highly adapted to provide optimization at a particular level can be seen as problematic at another level. It is less adaptable to other resources, leading to sub-optimisation from the perspective of another system level. Adaptation must consider the significance of the level of shared resources between SC members.  (Jahre, 2005).  

The modern strategy of adaptation has evolved with the advent of computer technology to represent the integration methods of information system and technology for efficiency gains in knowledge work and operations processes.  Yusuf (2004) describes the integration process at Rolls-Royce for adopting ERP, a standard within the Defense and Aerospace industry.  The implementation of SAP at the Rolls-Royce USA facility was a major factor in Rolls' UK facilities implementation.  Rolls-Royce, like many companies that attempt to implement ERP systems, faced the challenge of integrating an organization with various isolated departments and facilities with their own agendas into a system of shared information and standard practices.  (Langenwalter, 2000).  Because over 1500 different systems were used for finance, commerce and procurement, these systems had trouble interfacing with each other due to different file formats and databases, hindered business growth and was not agile enough to keep up with the changing business environment.  (Yusuf).  

Failure to successfully adapt business processes to fit software, such as was the case with Dell's decision to scrap an ERP project due to lack of flexibility for global operations, can result in losses exceeding tens of millions of dollars (Trunick, 1999).  To hedge against risk, Rolls-Royce decided to focus on core competencies of making and developing aerospace engines, and outsourced all IT functions to EDS.  

The primary goal of adaptation is to increase market share by being flexible, swift, dependable and cost efficient. (Tjader, et al., 2004).  Partners adapt behavior to each other over time by developing shared knowledge and a similar mindset; by creating relationship characteristics such as cooperative norms and trust; and by embedding their actions in a shared past and anticipated joint future. (Knoppen and Christiaanse, 2004).  The risk of adaptation is increased as less time is spent on development and assessing business needs. (Yusuf). The Rolls ERP project consisted of a joint-management team that includes members from EDS and SAP consultants, as well as internal Rolls managers with cross-functional understanding of the old business systems.  The internal managers were responsible for communicating working changes and training Rolls' workforce; as well as reporting back to the project team on resistance or acceptance issues.  Overall the project team received high adoption of the system in areas with obvious functionality improvements; the areas facing resistance were facilitated with training on system functionality as well as exposure to company-wide systemic benefits in order to develop cultural acceptance.  The impetus on training and relationship-building fostered the trust required for successful adaptation.

The body of work suggests further research in areas of best practices on how to adapt at each system level, the effect of quality of global workforce, international policy, and the advent of e-business and e-procurement on the evolution of integration among and between firms. While the body of literature reviewed focused on adaptation suggests a predominance of the passive, descriptive, and objective paradigm (see Matrix, Table 1) more research is recommended utilizing active, prescriptive measures for implementing successful adaptation, as well as deeper phenomenological case studies indicating the effect of adaptation on inter-organizational behavior.


Differentiation is the development of product and service specifications that differ from the competitor's products and services in respond to markets tastes and values.  De Fraja and Norman (2004) proposed a model showing the relationship between product differentiation and the location of international production.  The model found that firms that make foreign direct investment in operations will take a more aggressive stance to product differentiation and be more profitable when compare to firms that choose to simply export their product to a foreign market. 

Kemppainen, K. and Vepsalainen, A.P.J. (2007) examined the supply chain of six global firms, including twenty-five organizations, by examining how those organizations differentiated themselves within the supply chain network with respect to the following categories; production, service, organizational resources, and product technology.  The study evaluated each supply chain network at the three separate timeframes; 1990, 2000 and planned 2010.  The research proposed a matrix for each category to illustrate critical issues relevant to differentiation.  The matrix allows firms to compare the organization's status with benchmarks and the competition. Furthermore, the paper shows how the specialization of resources and capabilities allow organizations to focus on core competencies and thereby increasing the efficiency of the supply chain network. 

Product differentiation in the global market can often lead to excessive inventories and costs.  The cost impact of product differentiation can be minimized when implemented in conjunction with postponement. Feitzinger and Lee (1997) examined the successful implementation of mass customization of DeskJet printers by Hewlett-Packard.  By postponing the features that differentiated the printers by market, Hewlett-Packard benefited from production economy of scale and became more responsive to the market needs.  Feitzinger and Lee (1997) stressed that successful implementation of mass customization requires collaboration between the various functional areas within an organization. 

Matraves and Rondi (2007) examined the relationship between vertical and horizontal differentiation and turbulence for the 67 largest manufacturers in Europe.  Thirty of these firms were identified as competing in their respective global market on price alone or horizontally differentiated (Type 1).  The remaining manufacturers produced products that competed in vertically differentiated global markets (Type 2).  The Type 2 firms were further subdivided based on the markets intensity of advertising, R&D, or both.  Market turbulence is determined by the stability of the rankings of the top five firms by market share within a given market category.  The research concluded sustainable competitive advantage can be achieved in markets where vertical product differentiation dominates, and markets with generally heterogeneous products.  Matsubayashi (2007) developed an artificial model to evaluate the influence differentiation had on consumer welfare.  The research concluded when the market is relatively sensitive to price valuation more differentiation within the market (horizontal differentiation) decreases consumer welfare.  However, more differentiation within a market sensitive to quality (vertical differentiation) results in increased consumer welfare. 

The strategic concept of differentiation is rooted in the firms need to satisfy the consumer's taste.  Areas to consider for future research include international application of differentiation in the service industry, factors leading to successful international differentiation in the service industry, and case studies to support the model developed by De Fraja and Norman (2004) and Matsubayashi (2007).


Responsiveness is strongly rooted in the international supply chain's desire to satisfy diverse consumers' needs (Anderson et. al 1998), and can be defined as the ability to respond to schedule changes, process orders in a timely fashion, deliver quickly, and meet scheduled due dates (Handfield and Bechtel 2002), and read, understand, and respond to market-related signals according to changes in end-user demand (Catalan and Kotzab 2003). 

To illustrate responsiveness in an international supply chain, Catalan and Kotzab (2003) use a descriptive, objective, and natural evaluation of the performance efficiency in the mobile phone industry.  The global market for mobile phones is immense, requiring supply chains to respond to a growing number of producers and users and constant technological development.  Four theoretical variables were used to analyze responsiveness - lead time, postponement, bullwhip effect, and information exchange.  After analyzing 17 cases representing players within the Danish mobile phone supply chain, it was identified that global supply chain responsiveness was inhibited by ineffective organizational structures with bureaucracy, high inventory uncertainty, and lack of information systems (Catalan and Kotzab, 2003).  Therefore, in order for positive responsiveness to occur among players, it is conceived that close relationships based on trust are needed.  This will assist improvements in information sharing systems and data exchange, which enable suppliers to respond quickly to global supply chain customers (Catalan and Kotzab, 2003).   

Wong et al. (2006) uses a structural approach to observe and assess the responsiveness of a volatile and seasonal supply chain using a case study in an international toy company.  A structured framework of responsiveness assessment was constructed to aid in defining and assessing the levels of responsiveness:

Choose significant determinants

Develop a framework of responsive assessment

Determine the required level of responsiveness

Assess responsiveness provided by the company's product differentiation model

Propose an improved product differentiation model

Through the assessment of forecast uncertainty, demand variably, contribution margin, and time window of delivery, the factors leading to unpredictable demand were identified as unexpected consumer trends, supply uncertainty, and competition.  In order to respond to this fluctuation, the assessment concluded the need for a physically responsive (make-to-stock) supply chain for "intermediate" products (with medium forecast uncertainty and contribution margins), and a market responsive (make-from-stock) supply chain for "innovative" products (with high contribution margins but low forecast uncertainty) (Wong et al. 2006).

In each case study, international supply chain members required strong, trusting relationships and constructive social interactions in order to successfully implement the responsiveness strategy.  Globalization, information technology, and customer requirements have been identified as the drivers of these evolving trust-driven, global relationships (Handfield and Bechtel 2002).  However, these relationships are hindered by the nature of trust, the type of commodity/service being purchased, and the characteristics of the market channel (Handfield and Bechtel 2002). 

Therefore, it is critical for the responsive global supply chain to understand cultural differences and embrace diversity (Anderson et. al. 1998).  However, future research is needed to better understand and improve relationships among members of the international supply chain, specifically those whose trust is inhibited by culture barriers. 

Additionally, members of the international supply chain must respond to factors such as unpredictable swings in demand (causing excess or insufficient inventory), instability in fuel costs, currency valuation, and information technology (Field 2010).  C. John Langley Jr., professor of supply chain management at the Georgia Institute of Technology, states that "Shipper-3PL relationships are being impacted significantly by the prevailing uncertainty and economic volatility in global markets" (Field 2010).  Most shippers indicated an "IT capability gap," and lack the key performance indicators, alters, and visibility needed to build a more responsive supply chain (Field 2010).  In light of this, it is necessary for future research to focus on issues specifically related to international supply chain; namely responsiveness to currency/economic fluctuations, political/legal constraints, and technology. 

The aforementioned authors support the notation that responsiveness as strongly, positively rooted in the fundamental theories of Satisfying Customer Needs and the Behavioral Models, as well as provide evidence that supports a positive (yet less predominant) impact on the Organizational Knowledge and Social Relationships and Institutions theories.


Table 1. Matrix for Evaluating Literature within the Paradigmatic Framework.