Relationships' sustainability: the case of German wheat-to-bread chain

Abstract

In recent years there has been a shift in emphasis from transaction-based to more co-operative relationships, as chain members have recognised the need to invest in their supply chain relationships in order to protect their businesses. These non-arm's- length relationships are capable of generating relational rents for chain partners. The main aim of this paper is to investigate why, in spite of the advantages of the non- arm's-length relationships, some relationships do not continue. To enhance the understanding of the termination process, we identify and analyse the factors inducing relationship sustainability (continuation) as well as termination in the case of the German wheat-to- bread chain. The study built on the findings of relationship marketing approach that stresses the importance of building longer-term relationships with customers rather than carrying out individual transactions. In addition, the findings of modern microeconomic theories including transaction costs theory and industrial theory are taken into consideration. The empirical analysis is based on two data sets: First, a quantitative questionnaire survey and second, interviews with stakeholders of the wheat-to-bread chain were conducted, aiming at identifying the role of economic and behavioral dimensions of relationships for their termination. The questionnaire survey provides that businesses assess the relationships in the wheat-to-bread chain, being of high quality and long term duration. The results show that trust, satisfaction and commitment - the behavioural dimensions of relationships quality - are very high in the considered chain. Competitive price, competitive quality and supply continuity were identified as determinants mostly important for buyers' satisfaction as directly influencing relationships' performance. In addition, the results demonstrate that lack of trust is the reason why relationships do not develop or are terminated in the early phases of the relationship. In the long lasting relationships on the other hand, the reasons for termination are mostly of economic nature. The paper shows why sustainable relationships may enhance business' competitiveness and analyses why in spite of it the relationships terminate. As the result of the research we understand the sustainable relationships as those relationships in that the costs for starting the relationship are exceeded by returns gained from the cooperation in time.